<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 7)*
KINETIC CONCEPTS, INC.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
49460W-01-0
(CUSIP Number)
Murray A. Indick
Richard C. Blum & Associates, L.P.
909 Montgomery Street, Suite 400
San Francisco, CA 94133
(415) 434-1111
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 2, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1
<PAGE> 2
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON STINSON CAPITAL PARTNERS, L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 94-3432358
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]**
(b) [x]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* WC
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION California
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON PN
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2
<PAGE> 3
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON BK CAPITAL PARTNERS IV, L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 94-3139027
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]**
(b) [x]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* WC
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION California
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF -----------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH -----------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
-----------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON PN
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 3
<PAGE> 4
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON THE CARPENTERS PENSION TRUST
FOR SOUTHERN CALIFORNIA
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 94-6042875
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]**
(b) [x]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* WC
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION California
-----------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF -----------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH -----------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
-----------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON EP
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 4
<PAGE> 5
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON UNITED BROTHERHOOD OF CARPENTERS
AND JOINERS OF AMERICA LOCAL UNIONS
AND COUNCILS PENSION FUND
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 35-6075035
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]**
(b) [x]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* WC
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION Washington, DC
----------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON EP
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 5
<PAGE> 6
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON INSURANCE COMPANY SUPPORTED
ORGANIZATIONS PENSION PLAN
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 13-6284703
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]**
(b) [x]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* WC
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION Washington, DC
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON EP
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 6
<PAGE> 7
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON RICHARD C. BLUM & ASSOCIATES, L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 94-3205364
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]**
(b) [x]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* Not Applicable
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION California
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON PN, IA
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 7
<PAGE> 8
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON RICHARD C. BLUM & ASSOCIATES, INC.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 94-2967812
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]**
(b) [x]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* Not Applicable
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION California
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON CO
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 8
<PAGE> 9
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON RICHARD C. BLUM
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON ###-##-####
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]**
(b) [x]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* Not Applicable
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION USA
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON IN
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 9
<PAGE> 10
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON RCBA PURCHASER I, L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]**
(b) [x]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* Not Applicable
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON PN, IA
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 10
<PAGE> 11
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON PRISM PARTNERS I, L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 94-3172939
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]**
(b) [x]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* WC
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION California
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF -----------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH -----------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
-----------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON PN
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 11
<PAGE> 12
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON WEINTRAUB CAPITAL MANAGEMENT
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 94-3151493
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]**
(b) [x]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* Not Applicable
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION California
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON PN, IA
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 12
<PAGE> 13
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON JERALD M. WEINTRAUB
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON ###-##-####
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]**
(b) [x]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* Not Applicable
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION USA
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON IN
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 13
<PAGE> 14
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON FREMONT PARTNERS, L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]**
(b) [ ]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* BK, OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON PN
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 14
<PAGE> 15
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON FP ADVISORS, L.L.C.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]**
(b) [ ]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* BK, OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON OO (limited liability company)
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 15
<PAGE> 16
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON FREMONT GROUP, L.L.C.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]**
(b) [ ]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* BK, OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(c) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON OO (limited liability company)
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 16
<PAGE> 17
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON FREMONT PURCHASER II, INC.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]**
(b) [ ]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* BK, OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON CO
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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<PAGE> 18
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON FREMONT INVESTORS, INC.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]**
(b) [ ]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* BK, OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION Nevada
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER -0-
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON CO
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 18
<PAGE> 19
CUSIP NO. 49460W-01-0 SCHEDULE 13D
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON JAMES R. LEININGER, M.D.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]**
(b) [x]**
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS* Not Applicable
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(c) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION USA
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF ----------------------------------------------------------
SHARES 8. SHARED VOTING POWER 25,453,646**
BENEFICIALLY
OWNED BY EACH ----------------------------------------------------------
PERSON WITH 9. SOLE DISPOSITIVE POWER
----------------------------------------------------------
10. SHARED DISPOSITIVE POWER 25,453,646**
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,453,646**
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.70%**
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON IN
- --------------------------------------------------------------------------------
** See Item 5 below
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 19
<PAGE> 20
CUSIP NO. 49460W-01-0 SCHEDULE 13D
Item 1. Security and Issuer
This Amendment No. 7 amends the Statement on Schedule 13D
(the "Schedule 13D") filed with the Securities and Exchange Commission (the
"Commission") on September 10, 1997 by Stinson Capital Partners, L.P, BK Capital
Partners IV, L.P the Carpenters Pension Trust for Southern California, United
Brotherhood of Carpenters and Joiners of America Local Unions and Councils
Pension Fund, Insurance Company Supported Organizations Pension Plan, Richard C.
Blum & Associates, L.P. ("RCBA"), Richard C. Blum & Associates, Inc., RCBA
Purchaser I, L.P. ("B Purchaser") and Richard C. Blum (referred to herein as the
"Blum Reporting Persons."); Prism Partners I, L.P. ("Prism Partners); Weintraub
Capital Management, and Jerald M. Weintraub (referred to herein as the
"Weintraub Reporting Persons"); and Fremont Partners, L.P. ("Fremont"), FP
Advisors, L.L.C., Fremont Group, L.L.C., Fremont Purchaser II, Inc. ("F
Purchaser") and Fremont Investors Inc. (referred to herein as the "Fremont
Reporting Persons"). The Blum Reporting Persons, the Weintraub Reporting Persons
and the Fremont Reporting Persons are collectively referred to herein as the
"Reporting Persons." This Amendment No. 7 to Schedule 13D relates to shares of
common stock, par value $0.001 per share, (the "Common Stock") of Kinetic
Concepts, Inc. (the "Issuer"). The principal executive office and mailing
address of the Issuer is 8023 Vantage Drive, San Antonio, Texas 78230. This
Amendment is being filed because the Reporting Persons, as previously described
in Amendment No. 6, have formed a group with James R. Leininger, M.D.
("Dr. Leininger") for the purpose and as described below.
Item 2. Identity and Background
Item 2 of the Schedule 13D is hereby amended as follows:
F Purchaser and B Purchaser are each special purpose
entities formed solely for the purpose of entering into the Transaction
Agreement and engaging in the transactions contemplated thereby. F Purchaser's
principal place of business is 50 Fremont Street, Suite 3700, San Francisco,
California 94105. B Purchaser's principal place of business is 909 Montgomery
Street, Suite 400, San Francisco, California 94133.
Dr. Leininger is the founder of the Issuer and has served as
Chairman of the Issuer's Board of Directors since 1976. Dr. Leininger's
principal business address is 8023 Vantage Drive, San Antonio, Texas 78230. Dr.
Leininger is a citizen of the United States of America.
To the best knowledge of the Reporting Persons, Dr. Leininger
has not, during the past five years, been convicted of any criminal proceeding
(excluding traffic violations or similar misdemeanors), nor been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
Item 3 of the Schedule 13D is hereby amended as follows:
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CUSIP NO. 49460W-01-0 SCHEDULE 13D
Dr. Leininger received the securities described in Item 5
below when the Issuer was founded in 1976 and at certain other times after the
Issuer became a public company in 1988. Dr. Leininger has not purchased
additional shares of Common Stock of the Issuer.
Item 4. Purpose of the Transaction
Item 4 of the Schedule 13D is hereby amended as follows:
On September 8, 1997, the Blum Reporting Persons and the
Fremont Reporting Persons submitted a final offer to acquire the Company.
Confidential treatment from the Commission was requested for selected portions
of the September 8, 1997 letter. That request for confidential treatment has
been withdrawn and the complete text of the September 8 letter is attached
hereto as Exhibit B.
Pursuant to the terms and conditions of a Transaction
Agreement (as described below), dated as of October 2, 1997 (the "Transaction
Agreement") among F Purchaser, B Purchaser (together with F Purchaser, the
"Purchasers"), and the Issuer, the Purchasers will acquire the Issuer. Pursuant
to the Transaction Agreement, the Issuer will make a cash tender offer (the
"Offer") to acquire all the outstanding shares of its Common Stock for $19.25
per share (the "Per Share Amount"), net to the seller in cash, upon the terms
and subject to the conditions of the Transaction Agreement and the Offer.
In furtherance of the transaction, the Purchasers will
purchase 8,083,712 shares of Common Stock from the Issuer for the Per Share
Amount immediately prior to the consummation of the Offer (the "Stock
Purchase"). Fremont has provided the Issuer with a guarantee of the
obligations of F Purchaser, subject to certain obligations.
Following the consummation of the Offer, the Purchasers will
merge with and into the Issuer (the "Merger"), with the Issuer being the
surviving corporation. After the Merger, Fremont will own approximately 39.7% of
the Issuer Common Stock, RCBA will own approximately 26.2% of the Issuer Common
Stock and Dr. Leininger will own approximately 33.5% of the Issuer Common Stock.
Certain members of management will own the remaining Issuer Common Stock.
The Transaction Agreement contains customary representations
and warranties, covenants and termination provisions.
The Transaction Agreement may be terminated by the mutual
written consent of each of the Purchasers and the Company or by either Purchaser
or the Company if (i) the Stock Purchase has not been consummated by January 31,
1998 or (ii) the Merger has not been consummated by May 31, 1998. In addition,
the Transaction Agreement may be terminated (i) by either Purchaser or the
Issuer because the Issuer's Board of Directors has (a) withdrawn or modified its
approval or recommendation of the Offer or (b) recommended another proposal or
(ii) by either Purchaser or the Issuer because of a breach by the Issuer of any
of its material representations or warranties in the Transaction Agreement or
the failure to perform any of its material covenants or agreements under the
Transaction Agreement that causes a failure by
Page 21
<PAGE> 22
CUSIP NO. 49460W-01-0 SCHEDULE 13D
the Issuer to commence the Offer, accept any shares for payment or terminate the
Offer. If the Transaction Agreement is terminated by either Purchaser or the
Issuer because (i) any person shall have commenced, publicly proposed or
communicated to the Company a proposal for a tender offer of 20% or more of the
Issuer's outstanding shares, for a price greater than the Per Share Amount and
within 12 months of such termination the transaction described herein shall have
been consummated or (ii) for the reasons listed in clause (i)(a) or (b) in the
previous sentence, then the Issuer will pay Purchasers a fee of $30 million
and expenses not to exceed $2 million.
The Transaction Agreement contains customary conditions to the
Stock Purchase and Merger including the truth and correctness of representations
and warranties, compliance with all covenants and agreements contained in the
agreement and receipt of officer's certificates. Additional conditions to the
Stock Purchase include satisfaction of the conditions to the Offer and
resignations of directors of the Issuer. The consummation of the Stock Purchase
and shareholder approval are also conditions to the Merger.
The Transaction Agreement provides that the obligations of
the Purchasers thereunder shall be joint and several.
The foregoing description is qualified in its entirety by the
Transaction Agreement which is attached hereto as Exhibit C and incorporated by
reference.
If the Merger is consummated as contemplated in the
Transaction Agreement, then (i) each of the outstanding shares of the Issuer
Common Stock (other than shares held in the treasury of the Issuer, shares owned
by any subsidiary of the Issuer, shares owned by the Purchasers, certain shares
held by the Reporting Persons and shares held by shareholders who have demanded
and perfected dissenter's rights, if any, under Texas law) will be converted
into the right to receive cash, (ii) the Issuer's Board of Directors will be
replaced with a new board of directors, consisting of eight members, two of whom
shall be Dr. Leininger and the Issuer's then current Chief Executive Officer,
two of whom shall be directors appointed by F Purchaser, two of whom shall be
directors appointed by B Purchaser and two or more of whom shall be independent
directors who are not affiliated with Fremont or RCBA (see Item 5(c) below),
(iii) the Issuer will not pay a quarterly dividend (other than a quarterly cash
dividend for the third quarter of fiscal year 1997), (iv) the Issuer Common
Stock will no longer be listed on the NASDAQ National Market and (v) the
registration of the Issuer Common Stock under Section 12(b) of the Exchange Act
will be terminated.
Additionally, on October 2, 1997, Dr. Leininger made a gift
of 1,000,000 shares of Issuer Common Stock to Covenant Foundation, Inc. and a
gift of 1,000,000 shares of Issuer Common Stock to JCL Foundation.
Other than as set forth in this statement, none of the
Reporting Persons presently has any present plans or proposals that relate to or
would result in any of the consequences listed in paragraphs (a)-(j) of Schedule
13D, or any agreement regarding such matters, although they may in the future
take actions that would have such consequences.
Item 5. Interest in the Securities of the Issuer
Item 5 of the Schedule 13D is hereby amended as follows:
(a)(b) According to the Issuer, there were 42,636,016
shares of Issuer Common Stock outstanding as of October 2, 1997. Based on such
information Dr. Leininger reports that he has direct ownership of 17,856,366
shares equalling approximately 41.88% of the Issuer's outstanding stock. Of
the directly owned shares, 555,000 are subject to options granted by Dr.
Leininger
Page 22
<PAGE> 23
CUSIP NO. 49460W-01-0 SCHEDULE 13D
Dr. Leininger and the Reporting Persons expressly disclaim
beneficial ownership of 27,572 shares held by him as trustee for the children of
Peter A. Leininger, M.D., 1,160,125 shares held by the JCL Foundation, 107,500
shares held by the PAL Foundation, 40,000 shares held by the Children's Covenant
Foundation and 2,221,833 shares held by the Covenant Foundation. Dr. Leininger
is on the Board of Directors of each of such foundations. However, all of such
shares are reported herein as being beneficially owned (as defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended) by Dr.
Leininger and the Reporting Persons. Accordingly, the total number of shares of
Issuer Common Stock beneficially owned by Dr. Leininger, including those shares
beneficially owned by the Reporting Persons, is 25,453,646, representing
approximately 59.70% of the Issuer's outstanding Common Stock.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
A. Transaction Agreement
On October 2, 1997, the Purchasers and the Issuer
entered into the Transaction Agreement as discussed in Item 4 above. Pursuant to
the Transaction Agreement, prior to the consummation of the Offer, the
Purchasers will consummate the Stock Purchase, generating approximately
$155,611,456 in funds for the Issuer. The Issuer will use these funds to
purchase shares pursuant to the Offer and pay shareholders in the Merger.
Additional funds will be obtained from a senior credit facility in an aggregate
amount of $530,000,000 arranged by the Purchasers on behalf of the Issuer
through Bank of America National Trust and Savings Association and the proceeds
from a subordinated notes offering in an aggregate amount of $200,000,000
underwritten by BT Alex. Brown Incorporated or, in the alternative, funds in an
amount of $200,000,000 in the form of an unsecured senior subordinated bridge
loan arranged by Purchasers on behalf of the Issuer through Bankers Trust New
York Corporation. A copy of the commitment letter delivered to the Issuer with
respect to the senior credit facility is attached hereto as Exhibit D. A copy of
the engagement letter delivered to the Issuer with respect to the subordinated
notes offering is attached hereto as Exhibit E. A copy of the commitment letter
delivered to the Issuer with respect to the unsecured senior subordinated bridge
loan is attached hereto as Exhibit F.
B. Shareholder Support Agreement
On October 2, 1997, the Purchasers, the Issuer and
Dr. Leininger entered into a Shareholder Support Agreement (the "Support
Agreement"). Pursuant to the Support Agreement, Dr. Leininger has agreed to
tender 13,792,211 shares of Issuer Common Stock owned or controlled by him
pursuant to the Offer. In addition, Dr. Leininger has agreed to grant to
Purchasers an option to purchase from Dr. Leininger, at the Per Share Amount,
4,200,000 shares of Issuer Common Stock owned or controlled by Dr. Leininger.
The stock option shall expire upon the earlier of (i) the 180th day following
the termination of the Transaction Agreement if the Transaction Agreement is
terminated because the Issuer (a) withdraws or modifies its approval or
recommendation of the Offer or (b) recommends another proposal or (ii) the
consummation of the Merger.
The Support Agreement further provides that Dr.
Leininger will vote and thereby grants to Purchasers a proxy to vote any shares
owned by him (i) in favor of the adoption of the Transaction Agreement and
approval of the Merger and other transactions contemplated by the Transaction
Agreement,
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<PAGE> 24
CUSIP NO. 49460W-01-0 SCHEDULE 13D
(ii) against any other acquisition proposal and (iii) in favor of any other
matter relating to the consummation of the transactions contemplated by the
Transaction Agreement.
Dr. Leininger's transfer and voting obligations under
the Shareholder Support Agreement shall terminate upon the earlier of (i) the
date of termination of the Transaction Agreement for any reason or (ii) the
consummation of the Merger.
Fremont and RCBA entered into a letter agreement that
provides that if the Transaction Agreement is terminated under certain
circumstances, Fremont and RCBA will be released from any restrictions on
purchasing any assets or securities of the Issuer. The foregoing description is
qualified in its entirety by the letter agreement which is attached hereto as
Exhibit G.
The foregoing description is qualified in its
entirety by the Support Agreement which is attached hereto as Exhibit H and
incorporated herein by reference.
C. Agreement Among Bidders
On October 2, 1997, Fremont and RCBA entered into an
agreement (the "Agreement Among Bidders") governing the respective obligations
and relationship of each party in connection with the Transaction Agreement and
the transactions contemplated thereby. The Agreement Among Bidders provides that
Fremont and RCBA will (i) confer on all decisions relating to the transactions
and reach all decisions jointly, (ii) be responsible for all funding for the
transactions and (iii) assume joint and several liability, if any, relating to
the transactions.
The foregoing description is qualified in its
entirety by the Agreement Among Bidders which is attached hereto as Exhibit I
and incorporated herein by reference.
D. Agreement Among Shareholders
Fremont, RCBA and Dr. Leininger have agreed to enter
into an agreement upon the consummation of the Offer (the "Agreement Among
Shareholders") governing the respective obligations and relationship of each
party as shareholders of the Issuer. The Agreement Among Shareholders provides
that until six months after a public offering of Issuer Common Stock, Fremont,
RCBA and Dr. Leininger will not sell, transfer, pledge or hypothecate any shares
of the Issuer then held by them, subject to certain exceptions. In particular,
Dr. Leininger is permitted to make any transfers of up to 10.5% of the Issuer's
then outstanding Common Stock.
The Agreement Among Shareholders provides that (i) if
either Fremont, RCBA or Dr. Leininger wish to sell shares, then such party shall
offer to include in the proposed sale certain shares of Common Stock designated
by any of the other parties and (ii) if Fremont and RCBA propose to sell all
(but not less than all) of the Common Stock they own, then Fremont and RCBA may
require Dr. Leininger to include in such sale all of the Common Stock held by
him, unless he holds less than 10%. Pursuant to the agreement, the Issuer grants
to each of Fremont, RCBA and Dr. Leininger the preemptive right, exercisable
under certain conditions, to purchase shares of the Issuer on an amount up to
the percentage of all outstanding fully diluted stock of the Issuer owned by
such party.
At any time after the fifth anniversary of the
agreement, if there has not been a public offering of the Issuer's Common Stock,
Fremont, RCBA or Dr. Leininger may request that the Issuer register at least 33%
of the shares of Common Stock held by such party. In addition, each party will
have the right to request additional registration of at least 33% of the shares
of Common Stock then held by such party at any time after one year, but before
three years, following the completion of a public offering of the Issuer's
Common Stock. If the Issuer shall proceed with a filing of a registration
statement in connection with the Issuer's proposed offer and sale of Common
Stock, the Issuer will notify Fremont, RCBA and Dr. Leininger and shall include
in such registration the number of shares requested by such parties.
The Agreement Among Shareholders further provides
that until there is a public offering of Issuer stock, Fremont, RCBA and Dr.
Leininger will take all steps to insure that the Board of Directors of the
Issuer shall have eight members and that the Nominating Committee of the Board
of Directors will consist of Dr. Leininger, one director designated by Fremont
and one director designated by RCBA. The eight-member board will consist of Dr.
Leininger, the Issuer's then current Chief Executive Officer, two persons
designated by Fremont, two persons designated by RCBA and two or more
independent directors designated by the Nominating Committee.
Page 24
<PAGE> 25
CUSIP NO. 49460W-01-0 SCHEDULE 13D
The foregoing description is qualified in its
entirety by the Agreement Among Shareholders which is attached as Exhibit C to
the Transaction Agreement, attached hereto as Exhibit C, and incorporated herein
by reference.
E. Agreement of Prism Partners to Tender Shares
Prism Partners has agreed with the Blum Reporting
Persons and the Fremont Reporting Persons to tender 130,000 shares of Issuer
Common Stock of the 250,000 shares of Issuer Common Stock controlled by Prism
Partners into the Offer. Such agreement has not yet been reduced to writing.
Item 7. Material to be Filed as Exhibits
--------------------------------
Page
====
Exhibit A Joint Filing Undertaking
Exhibit B Letter dated September 8, 1997 from Richard C. Blum &
Associates, L.P. and Fremont Partners to Mr. Mark R.
Klausner, Alex. Brown & Sons, Inc.
Exhibit C Transaction Agreement, dated as of October 2, 1997 among
Fremont Purchaser II, Inc., RCBA Purchaser I, L.P. and the
Issuer.
Exhibit D Commitment Letter, dated October 1, 1997 from Bank of America
National Trust and Savings Association, BancAmerica Robertson
Stephens, Bankers Trust Company and BT Alex. Brown
Incorporated.
Exhibit E Engagement Letter, dated October 1, 1997, from BT Alex. Brown
Incorporated and BancAmerica Robertson Stephens.
Exhibit F Commitment Letter, dated October 1, 1997, from Bankers Trust
New York Corporation and Bank of America National Trust and
Savings Association.
Exhibit G Letter Agreement, dated as of October 2, 1997, among Fremont,
RCBA and the Issuer.
Exhibit H Shareholder Support Agreement, dated as of October 2, 1997
among F Purchaser, B Purchaser and Dr. Leininger.
Exhibit I Agreement Among Bidders, dated as of October 2, 1997 between
Fremont and RCBA.
Page 25
<PAGE> 26
CUSIP NO. 49460W-01-0 SCHEDULE 13D
SIGNATURES
After reasonable inquiry and to the best or our knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: October 6, 1997
RICHARD C. BLUM & ASSOCIATES, L.P. RICHARD C. BLUM & ASSOCIATES, INC.
By /s/ Murray A. Indick By /s/ Murray A. Indick
------------------------------ -----------------------------------
Murray A. Indick Murray A. Indick
Managing Director Managing Director, General Counsel
and General Counsel and Secretary
STINSON CAPITAL PARTNERS, L.P. By /s/ Murray A. Indick
-----------------------------------
BK CAPITAL PARTNERS IV, L.P. RICHARD C. BLUM
By Richard C. Blum & Associates, By Murray A. Indick,
L.P., its General Partner Attorney-in-Fact
By /s/ Murray A. Indick THE CARPENTERS PENSION TRUST FOR
------------------------------ SOUTHERN CALIFORNIA
Murray A. Indick
Managing Director UNITED BROTHERHOOD OF CARPENTERS
and General Counsel AND JOINERS OF AMERICA LOCAL UNIONS
AND COUNCILS PENSION FUND
PRISM PARTNERS I, L.P. INSURANCE COMPANY SUPPORTED
ORGANIZATIONS PENSION PLAN
By Weintraub Capital Management,
its General Partner
By Richard C. Blum & Associates, L.P.,
By /s/ Jerald M. Weintraub its Investment Advisor
------------------------------
Jerald M. Weintraub
Managing General Partner By /s/Murray A. Indick
-----------------------------------
Murray A. Indick
WEINTRAUB CAPITAL MANAGEMENT Managing Director
and General Counsel
By /s/ Jerald M. Weintraub
------------------------------
Jerald M. Weintraub, RCBA PURCHASER I, L.P.
Managing General Partner By Richard C. Blum & Associates, L.P.,
its General Partner
By /s/ Murray A. Indick
/s/ Jerald M. Weintraub -----------------------------------
- ---------------------------------- Managing Director
JERALD M. WEINTRAUB and General Counsel
[CONTINUED ON NEXT PAGE]
Page 26
<PAGE> 27
CUSIP NO. 49460W-01-0 SCHEDULE 13D
FREMONT PARTNERS, L.P.
FP ADVISORS
FREMONT GROUP, L.L.C.
FREMONT INVESTORS, INC.
FREMONT PURCHASER II, INC.
By /s/ R.S. Kopf
--------------------------------
R.S. Kopf
Executive Officer or Executive
Officer of a Partner of each
Fremont Reporting Person
By /s/ James R. Leininger, M.D.
---------------------------------
JAMES R. LEININGER, M.D.
Page 27
<PAGE> 1
CUSIP NO. 49460W-01-0 SCHEDULE 13D
Exhibit A
JOINT FILING UNDERTAKING
The undersigned, being duly authorized thereunto, hereby execute this agreement
as an exhibit to this Schedule 13D to evidence the agreement of the below-named
parties, in accordance with the rules promulgated pursuant to the Securities
Exchange Act of 1934, to file this Schedule jointly on behalf of each such
party.
Dated: October 6, 1997
RICHARD C. BLUM & ASSOCIATES, L.P. RICHARD C. BLUM & ASSOCIATES, INC.
By /s/ Murray A. Indick By /s/ Murray A. Indick
----------------------------- -----------------------------------
Murray A. Indick Murray A. Indick
Managing Director Managing Director, General Counsel
and General Counsel and Secretary
STINSON CAPITAL PARTNERS, L.P. By /s/ Murray A. Indick
BK CAPITAL PARTNERS IV, L.P. ------------------------------------
RICHARD C. BLUM
By Richard C. Blum & Associates, By Murray A. Indick,
L.P., its General Partner Attorney-in-Fact
By /s/ Murray A. Indick THE CARPENTERS PENSION TRUST FOR
------------------------------ SOUTHERN CALIFORNIA
Murray A. Indick
Managing Director
and General Counsel UNITED BROTHERHOOD OF CARPENTERS
AND JOINERS OF AMERICA LOCAL UNIONS
AND COUNCILS PENSION FUND
PRISM PARTNERS I, L.P. INSURANCE COMPANY SUPPORTED
ORGANIZATIONS PENSION PLAN
By Weintraub Capital Management,
its General Partner
By Richard C. Blum & Associates, L.P.,
By /s/ Jerald M. Weintraub its Investment Advisor
------------------------------
Jerald M. Weintraub
Managing General Partner By /s/Murray A. Indick
-----------------------------------
Murray A. Indick
WEINTRAUB CAPITAL MANAGEMENT Managing Director
and General Counsel
By /s/ Jerald M. Weintraub
------------------------------
Jerald M. Weintraub, RCBA PURCHASER I, L.P.
Managing General Partner
By Richard C. Blum & Associates, L.P.,
its General Partner
By /s/ Murray A. Indick
-----------------------------------
/s/ Jerald M. Weintraub Managing Director
- ----------------------------------- and General Counsel
JERALD M. WEINTRAUB
[CONTINUED ON THE NEXT PAGE]
Page 28
<PAGE> 2
CUSIP NO. 49460W-01-0 SCHEDULE 13D
FREMONT PARTNERS, L.P.
FP ADVISORS
FREMONT GROUP, L.L.C.
FREMONT INVESTORS, INC.
FREMONT PURCHASER II, INC.
By /s/ R.S. Kopf
----------------------------------
R.S. Kopf
Executive Officer or Executive
Officer of a Partner of each
Fremont Reporting Person
By /s/ James R. Leininger, M.D.
-----------------------------------
JAMES R. LEININGER, M.D.
Page 29
<PAGE> 1
CUSIP NO. 49450W-01-0
Exhibit B
Richard C. Blum & Associates, L.P. The Fremont Group
909 Montgomery Street, Suite 400 50 Fremont Street, Suite 3700
San Francisco, CA 94133-4625 San Francisco, CA 94105-1895
Fax: (415) 434-3130 Fax: (415) 284-8191
Telephone: (415) 434-1111 Telephone: (415) 264-8792
September 8, 1997
By Facsimile (410-895-4583) & Overnight Mail
- --------------------------------------------
Mr. Mark R. Klausner
Vice President
Alex. Brown & Sons Inc.
One South Street
Baltimore, Maryland 21202
RE: Kinetic Concepts, Inc.
----------------------
Dear Sirs:
Richard C. Blum & Associates ("RCBA") and Fremont Partners, L.L.C.
("Fremont") (collectively, "Buyer"), in accordance with your letter dated
August 29, 1997, are pleased to jointly submit a Final Offer ("Offer") to
acquire the common stock of Kinetic Concepts, Inc. ("KCI" or "Company") in a
leveraged recapitalization transaction through a corporation or partnership to
be organized and controlled by the Buyer or its affiliates.
The Offer is based on information we have received to date from Alex.
Brown & Sons and the Company, including the Descriptive Memorandum, Market
Information, Project Royalty financial projections, information from the
Company's Data Room and other relevant data.
As previously indicated, RCBA and Fremont's investment philosophy has
an operating orientation. Each of RCBA and Fremont have successfully
consummated other successful private equity transactions, and our histories
reflect the type of partner we would be for shareholders, management, and
employees of the Company. We believe that the proposed recapitalization will
allow management to successfully execute its long-term growth plans, including
internal expansion and acquisitions without disrupting the core values upon
which the Company has been based.
Our Offer has been prepared consistent with the objective of maximizing
the cash proceeds received by all shareholders and is predicated on qualifying
for treatment as a
<PAGE> 2
CUSIP NO. 43460W-01-0
Mr. Alex R. Klausner
Alex. Brown & Sons, Inc.
September 8, 1997
Page 2
leveraged recapitalization. The terms of our proposal, which we reserve the
right to withdraw if not accepted by the close of business, September 12, 1997,
are summarized as follows:
Purchase Price
- --------------
The purchase price would be $19.25 per share for the Company's
outstanding common stock, payable in cash at the closing of the transaction (the
"Closing"). This valuation assumes (i) 42,484,394 common shares outstanding,
and (ii) 3,547,772 shares issuable under various option programs, (iii)
Thirty-six Million, Three Hundred Twenty-Nine Thousand One Hundred Eight-Five
Dollars ($36,329,185) of option proceeds to be received, and (iv) additional
cash available of Thirty Three Million Dollars ($33,000,000) within the Company
at Closing.
Our Offer contemplates acquiring, in one transaction, outstanding
common stock of the Company which would result in the Buyer owning up to 90% of
the pre-transaction outstanding common stock. The transaction as previously
noted, would be structured to receive leveraged recapitalization accounting
treatment.
Financing
- ---------
Buyer has received acceptable financing proposals from both Bank of
America and Bankers Trust which when combined with our existing Equity sources
will allow us to successfully close the proposed transaction in a timely manner.
Our Offer includes total funded debt of $515.0 Million and equity
provided by the Buyer of $274.0 Million which when combined with the $81.8
Million in remaining common stock to be retained by public shareholders and
$23.0 Million of the Company's existing cash balances will be adequate to
finance the purchase of $736.0 Million in common stock, to repurchase
outstanding options for $33.0 Million, and to pay fees and expenses of $44.0
Million. These sources and uses of funds are summarized as follows:
<PAGE> 3
CUSIP No. 49450W-01-0
Mr. Alex R. Klausner
Alex. Brown & Sons, Inc.
September 8, 1997
Page 3
<TABLE>
<CAPTION>
Sources Of Funds (in Millions)
- -------------------------------------
<S> <C>
Senior Debt: 315.0
Sr. Subordinated Debt: 200.0
Existing Cash in Company: 23.0
Equity:
RCBA Entities 109.0
Fremont Entities 165.0
Public stub 81.8
------
$893.8
</TABLE>
<TABLE>
<CAPTION>
Uses Of Funds (in Millions)
- -------------------------------------
<S> <C>
"Rollover" Public Stub 81.8
Purchase of Primary Shares 736.0
Net Purchase of Options 32.0
Fees and Expenses 44.0
------
$893.8
</TABLE>
In addition to the funded debt, we have arranged for Revolving Debt capacity to
fund the Company's ongoing working capital requirements, variations from plan,
and strategic acquisitions and growth opportunities. Specifically, $35.0
Million in availability will be maintained for normal working capital
requirements while a $50.0 Million revolving acquisition facility has been
committed to fund the proposed acquisitions.
Please find attached, signed commitment letters from Bank of America and
Bankers Trust outlining the specific terms and conditions of the financing
previously identified. In addition, listed below are the representatives from
these institutions who have served as our primary contacts on this
transaction:
Kevin Morrison or Barry Dunn
Vice President
Leveraged Finance Group
Bank of America
231 South LaSalle
8th Floor
Chicago, IL 60697
(312) 826-3141 Morrison Direct
(312) 828-3023 Dunn Direct
(312) 828-3555 Fax
Kate Cook or Tony Ease
Managing Director
BT Securities Group
Bankers Trust
300 South Grand Avenue
Los Angeles, CA 90071
(213) 620-8248 Cook Direct
(213) 620-8367 Hass Direct
(213) 620-8484 Fax
<PAGE> 4
CUSIP NO. 49460W-01-0
Mr. Alex R. Klausner
Alex. Brown & Sons, Inc.
September 8, 1997
Page 4
Our financing sources have maintained consistent enthusiasm in support
of our Offer and are prepared to quickly devote the necessary resources to
close the transaction.
Conditions
- ----------
(1) Legal Documentation. RCBA's counsel and the Company's outside
counsel spoke at length last week about legal documentation for the proposed
transaction. As you know, our form of agreement is conditioned upon
recapitalization accounting that we expect to be effected through a long-form
merger; however, we will be flexible in responding to any alternative structure
that is preferred by the Company. We anticipate, without regard to the
structure, an agreement standard for transactions of this kind with customary
representations, warranties, covenants, conditions, and other material terms
for the Company's businesses (including the receipt of standard regulatory and
contractual approvals). We expect to discuss the controlling shareholder's
support for the transaction, including a voting agreement and the grant of an
option on his stock. Similarly, we would expect to enter into satisfactory
arrangements with selected senior management of the Company pursuant to which
they would retain or rollover an equity interest in the Company.
(2) Financing. As described above, our proposal is conditioned upon the
financing described above. The commitment letters from our lenders, among other
things, require completion of confirmatory bank due diligence. Our financing
sources have substantially completed their due diligence and are prepared to
complete their confirmatory due diligence on an expedited basis.
* * * * * *
As substantial shareholders in the Company, RCBA maintains its strong
view that the Company's Board of Directors should move quickly and decisively
to complete a transaction. The lengthy process undertaken to date by the Board
provides the definitive valuation of the Company, and RCBA supports a
transition to new ownership.
RCBA and Fremont have completed a substantial amount of due diligence
on the Company over the past one and one-half years and expect to be able to
update and complete this due diligence very quickly. As we indicated in our
indication of interest, we are in an excellent position to meet the other
paramount objectives of speed and certainty of closure.
<PAGE> 1
EXHIBIT C
================================================================================
TRANSACTION AGREEMENT
Among
FREMONT PURCHASER II, INC.,
RCBA PURCHASER I, L.P.
and
KINETIC CONCEPTS, INC.
Dated as of October 2, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE I
THE OFFER
<S> <C>
SECTION 1.01. The Offer....................................................... 2
SECTION 1.02. Company Action.................................................. 3
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares................................. 3
SECTION 2.02. Purchase Price.................................................. 4
SECTION 2.03. Closing......................................................... 4
SECTION 2.04. Closing Deliveries by the Company............................... 4
SECTION 2.05. Closing Deliveries by Purchasers................................ 4
ARTICLE III
THE MERGER
SECTION 3.01. The Merger...................................................... 5
SECTION 3.02. Effective Time; Closing......................................... 5
SECTION 3.03. Effect of the Merger............................................ 6
SECTION 3.04. Articles of Incorporation; By-laws.............................. 6
SECTION 3.05. Directors and Officers.......................................... 6
SECTION 3.06. Conversion of Securities........................................ 6
SECTION 3.07. Employee Stock Options and Other Equity Awards.................. 7
SECTION 3.08. Dissenting Shares............................................... 8
SECTION 3.09. Surrender of Shares; Stock Transfer Books....................... 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01 Organization and Qualification................................... 10
SECTION 4.02 Capitalization................................................... 10
SECTION 4.03 Authorization and Validity of Agreement.......................... 11
SECTION 4.04 Consents and Approvals........................................... 12
SECTION 4.05 No Violation..................................................... 12
SECTION 4.06 SEC Reports; Financial Statements................................ 13
SECTION 4.07 Company Statement; Schedule 13E-3; Schedule 13E-4................ 14
SECTION 4.08 Compliance with Law.............................................. 14
SECTION 4.09 Absence of Certain Changes....................................... 15
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 4.10 No Undisclosed Liabilities....................................... 15
SECTION 4.11 Litigation....................................................... 15
SECTION 4.12 Employee Benefit Matters......................................... 16
SECTION 4.13 Taxes............................................................ 18
SECTION 4.14 Intellectual Property............................................ 19
SECTION 4.15 Other Interests.................................................. 20
SECTION 4.16 Labor Matters.................................................... 20
SECTION 4.17 Brokers and Finders.............................................. 21
SECTION 4.18 Opinions of Financial Advisors................................... 21
SECTION 4.19 Real Property and Leases......................................... 21
SECTION 4.20 Material Contracts............................................... 22
SECTION 4.21 Certain Business Practices....................................... 23
SECTION 4.22 Accounting Treatment............................................. 24
SECTION 4.23 Stock Retention Agreements....................................... 24
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
SECTION 5.01 Organization and Qualification................................... 24
SECTION 5.02 Authorization and Validity of Agreement.......................... 25
SECTION 5.03 Consents and Approvals........................................... 25
SECTION 5.04 No Violation..................................................... 25
SECTION 5.05 Offer Documents; Company Statement; Schedule 13E-3;
Schedule 13E-4............................................... 26
SECTION 5.06 Financing........................................................ 26
SECTION 5.07 Brokers and Finders.............................................. 27
SECTION 5.08 Operations of Purchasers......................................... 27
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of the Business of the Company Pending the Merger........ 27
SECTION 6.02 Access; Confidentiality.......................................... 29
SECTION 6.03 Preparation of Company Statement; Shareholders' Meeting;
Further Actions.............................................. 29
SECTION 6.04 Public Announcements............................................. 31
SECTION 6.05 Recapitalization................................................. 31
SECTION 6.06 Acquisition Proposals............................................ 31
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 6.07 D&O Indemnification and Insurance................................ 32
SECTION 6.08 Employee Benefits................................................ 33
SECTION 6.09 Fees and Expenses................................................ 34
SECTION 6.10 Debt Financing................................................... 34
SECTION 6.11 Headquarters of the Company...................................... 35
SECTION 6.12 Available Cash................................................... 35
SECTION 6.13 Options.......................................................... 35
ARTICLE VII
CONDITIONS
SECTION 7.01. Conditions to the Stock Purchase................................ 35
SECTION 7.02. Conditions to the Merger........................................ 37
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination..................................................... 39
SECTION 8.02. Effect of Termination........................................... 40
SECTION 8.03. Fees............................................................ 40
SECTION 8.04. Amendment....................................................... 41
SECTION 8.05. Waiver.......................................................... 41
ARTICLE X
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements................................................... 41
SECTION 9.02. Notices......................................................... 41
SECTION 9.03. Certain Definitions............................................. 43
SECTION 9.04. Severability.................................................... 44
SECTION 9.05. Entire Agreement; Assignment.................................... 44
SECTION 9.06. Parties in Interest............................................. 44
SECTION 9.07. Specific Performance............................................ 44
SECTION 9.08. Governing Law................................................... 45
SECTION 9.09. Joint and Several Obligations................................... 45
SECTION 9.10. Headings........................................................ 45
SECTION 9.11. Counterparts.................................................... 45
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
<S> <C>
ANNEX A Conditions to the Offer
EXHIBIT A Amended and Restated Articles of Incorporation of Kinetic Concepts,
Inc.
EXHIBIT B Amended and Restated By-Laws of Kinetic Concepts, Inc.
EXHIBIT C Agreement Among Shareholders
</TABLE>
<PAGE> 6
Glossary of Defined Terms
<TABLE>
<CAPTION>
Defined Term Location of Definition
- ------------ ----------------------
<S> <C>
1987 Plan...................................................................... Section 3.07(a)
1995 Plan...................................................................... Section 3.07(a)
1997 Plan...................................................................... Section 3.07(a)
Acquisition Proposal........................................................... Section 6.07
Action......................................................................... Section 6.08(e)
affiliate...................................................................... Section 9.03(a)
Agreement...................................................................... Preamble
Agreement Among Shareholders................................................... Section 2.04(d)
BT Alex. Brown................................................................. Section 1.02(a)
Articles of Merger............................................................. Section 3.02
beneficial owner............................................................... Section 9.03(b)
B Purchase Price............................................................... Section 2.02(b)
B Purchaser.................................................................... Preamble
B Shares....................................................................... Section 2.01(b)
Board.......................................................................... Preamble
business day................................................................... Section 9.03(c)
Certificate of Merger.......................................................... Section 3.02
Certificates................................................................... Section 3.09(b)
Closing........................................................................ Section 2.03
Closing Date................................................................... Section 2.03
Code........................................................................... Section 4.12(a)
Company........................................................................ Preamble
Company Benefit Plans.......................................................... Section 4.12(a)
Company Disclosure Schedule.................................................... Section 4.01
Company SEC Documents.......................................................... Section 4.06
Company Statement.............................................................. Section 4.07
control........................................................................ Section 9.03(d)
Costs.......................................................................... Section 6.08(a)
Debt Financing................................................................. Section 5.06
Delaware Law................................................................... Recitals
Directors Plan................................................................. Section 3.07(a)
Dissenting Shares.............................................................. Section 3.08(a)
D&O Insurance.................................................................. Section 6.08(c)
Effective Time................................................................. Section 3.02
Environmental Laws............................................................. Section 4.08
Equity Financing............................................................... Section 6.09
EP Date........................................................................ Section 3.07(a)
ERISA.......................................................................... Section 4.12(a)
ESPP........................................................................... Section 4.12(f)
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
Defined Term Location of Definition
- ------------ ----------------------
<S> <C>
Exchange Act................................................................... Section 3.07(a)
Expenses....................................................................... Section 8.03(b)
Fee............................................................................ Section 8.03(a)
F Purchase Price............................................................... Section 2.02(a)
F Purchaser.................................................................... Preamble
F Shares....................................................................... Section 2.01(a)
Foreign Benefit Plan........................................................... Section 4.12(e)
Governmental Entity............................................................ Section 6.03(d)
Governmental Order............................................................. Section 4.08
HMO............................................................................ Section 4.12(d)
Houlihan Lokey................................................................. Section 1.02(a)
HSR Act........................................................................ Section 4.04
Indemnified Parties............................................................ Section 6.08(a)
Intellectual Property.......................................................... Section 4.14(d)
IRS............................................................................ Section 4.12(a)
Knowledge...................................................................... Section 9.03(e)
Law............................................................................ Section 4.08
Licensed Intellectual Property................................................. Section 4.14(a)
Liens.......................................................................... Section 4.19(b)
Material Adverse Effect........................................................ Section 9.03(f)
Material Contracts............................................................. Section 4.20(a)
Maximum Number................................................................. Recitals
Merger......................................................................... Recitals
Merger Consideration........................................................... Section 3.06(a)
Minimum Condition.............................................................. Section 1.01(a)
Notice Date.................................................................... Section 3.07(a)
Offer.......................................................................... Recitals
Offer Documents................................................................ Section 1.01(c)
Offer to Purchase.............................................................. Section 1.01(c)
Option Plans................................................................... Section 3.07(a)
Options........................................................................ Section 3.07(a)
Original Expiration Date....................................................... Section 1.01(b)
Owned Intellectual Property.................................................... Section 4.14(b)
Paying Agent................................................................... Section 3.10(a)
Permits........................................................................ Section 4.08
Permitted Liens................................................................ Section 4.19(b)
Per Share Amount............................................................... Recitals
Person......................................................................... Section 9.03(g)
Preferred Stock................................................................ Section 4.02(a)
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
Defined Term Location of Definition
- ------------ ----------------------
<S> <C>
Purchase Date.................................................................. Section 4.12(f)
Purchaser Disclosure Schedule.................................................. Section 5.04
Purchaser Parties.............................................................. Section 6.08(e)
Purchasers..................................................................... Preamble
Schedule 13E-3................................................................. Section 1.01(c)
Schedule 13E-4................................................................. Section 1.01(c)
Scheduled Intellectual Property................................................ Section 4.14(a)
SEC............................................................................ Section 1.01(c)
Securities Act................................................................. Section 4.06(a)
Shareholder.................................................................... Recitals
Shareholder Support Agreement.................................................. Recitals
Shares......................................................................... Recitals
Shareholders' Meeting.......................................................... Section 6.03(c)
Stock Purchase................................................................. Recitals
Stock Retention Agreement...................................................... Section 4.23
subsidiary..................................................................... Section 9.03(h)
Surviving Corporation.......................................................... Section 3.01
Tax............................................................................ Section 4.13(a)
Texas Law...................................................................... Recitals
Transactions................................................................... Section 1.01(c)
</TABLE>
<PAGE> 9
TRANSACTION AGREEMENT, dated as of October 2, 1997 (this
"Agreement"), among FREMONT PURCHASER II, INC., a Delaware corporation ("F
Purchaser"), RCBA PURCHASER I, L.P., a Delaware limited partnership ("B
Purchaser" and, together with F Purchaser, "Purchasers") and KINETIC CONCEPTS,
INC., a Texas corporation (the "Company").
WHEREAS, the Board of Managers or Directors, as the case may be, of
each Purchaser and the Company has each determined that it is in the best
interests of its members or shareholders, as the case may be, for Purchasers to
acquire the Company upon the terms and subject to the conditions set forth
herein; and
WHEREAS, in furtherance of such acquisition, it is proposed that the
Company shall make a cash tender offer (the "Offer") to acquire all of the
shares of Common Stock, par value $.001 per share, of the Company (shares of
Common Stock of the Company being collectively referred to as "Shares") for
$19.25 per Share (such amount, or any greater amount per Share paid pursuant to
the Offer, being referred to herein as the "Per Share Amount") net to the seller
in cash, upon the terms and subject to the conditions of this Agreement and the
Offer; and
WHEREAS, the Board of Directors of the Company (the "Board") has
unanimously approved the making of the Offer and resolved and agreed to
recommend that holders of Shares tender their Shares pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the Board of
Managers or Directors, as the case may be, of each Purchaser and the Company has
each approved the purchase by Purchasers and the sale by the Company (the "Stock
Purchase") of 8,083,712 Shares for the Per Share Amount immediately prior to the
consummation of the Offer; and
WHEREAS, also in furtherance of such acquisition, the Board of
Managers or Directors, as the case may be, of each Purchaser and the Company has
each approved the merger (the "Merger") of Purchasers with and into the Company
in accordance with the General Corporation Law and the Revised Uniform Limited
Partnership Act of the State of Delaware ("Delaware Law") and the Texas Business
Corporation Act ("Texas Law") following the consummation of the Offer and upon
the terms and subject to the conditions set forth herein; and
WHEREAS, F Purchaser and B Purchaser have entered into a support
agreement with James Leininger (the "Shareholder"), dated as of the date hereof
(the "Shareholder Support Agreement"), providing, subject to certain conditions,
for (i) the grant by the Shareholder to F Purchaser of an option on up to
2,529,197 Shares at the Per Share Amount, subject to the conditions set forth
therein, (ii) the grant by the Shareholder to B Purchaser of an option on up to
1,670,803 Shares at the Per Share Amount, subject to the conditions set forth
therein, (iii) the tender of 13,792,211 Shares owned or controlled by the
Shareholder pursuant to the Offer and (iv) the voting by the Shareholder of all
Shares owned
<PAGE> 10
2
or controlled by the Shareholder at the time of the Shareholders' Meeting in
favor of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Purchasers and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. The Offer. (a) Provided that this Agreement shall not
have been terminated in accordance with Section 8.01 and none of the events set
forth in Annex A hereto shall have occurred or be existing, the Company shall
commence the Offer as promptly as reasonably practicable after the date hereof.
The obligation of the Company to accept for payment and pay for Shares tendered
pursuant to the Offer shall be subject to the condition (the "Minimum
Condition") that at least 27,500,000 Shares shall have been validly tendered and
not withdrawn prior to the expiration of the Offer and also shall be subject to
the satisfaction of the other conditions set forth in Annex A hereto. The Per
Share Amount shall, subject to applicable withholding of taxes, be net to the
seller in cash, upon the terms and subject to the conditions of the Offer.
Subject to the terms and conditions of the Offer (including, without limitation,
the Minimum Condition), the Company shall pay, as promptly as practicable after
expiration of the Offer, for all Shares validly tendered and not withdrawn.
(b) Notwithstanding any other provision contained herein,
including, without limitation, Section 1.01(a), the Company shall, at the
direction of Purchasers, extend the Offer one or more times for a period not to
exceed 10 business days in aggregate.
(c) As soon as reasonably practicable on the date of commencement
of the Offer, the Company shall file with the Securities and Exchange Commission
(the "SEC") an Issuer Tender Offer Statement on Schedule 13E-4 (together with
all amendments and supplements thereto, the "Schedule 13E-4") with respect to
the Offer, and the Company, the Shareholder and Purchasers shall file with the
SEC a Rule 13e-3 Transaction Statement on Schedule 13E-3 (together with all
amendments and supplements thereto, the "Schedule 13E-3") with respect to the
Offer, the Stock Purchase, the Merger and the other transactions contemplated by
this Agreement (collectively, the "Transactions"). The Schedule 13E-4 and the
Schedule 13E-3 shall contain or shall incorporate by reference an offer to
purchase (the "Offer to Purchase") and forms of the related letter of
transmittal, any related summary advertisement and any other documents related
to the Offer (the Schedule 13E-4, the Schedule 13E-3, the Offer to Purchase and
such other documents, together with all supplements and amendments thereto,
being referred to herein collectively as the "Offer Documents"). Each Purchaser
and the Company agree to correct promptly any
<PAGE> 11
3
information provided by it for use in the Offer Documents which shall have
become false or misleading, and Purchasers and the Company further agree to take
all steps necessary to cause the Schedule 13E-4 and the Schedule 13E-3 as so
corrected to be filed with the SEC and the other Offer Documents as so corrected
to be disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws.
SECTION 1.02. Company Action. (a) The Company hereby approves of and
agrees to undertake the Offer and represents that (i) the Board, at a meeting
duly called and held on October 1, 1997, has unanimously (A) determined that
this Agreement and the Transactions are fair to and in the best interests of the
holders of Shares, (B) approved and adopted this Agreement and the Merger and
(C) recommended that the shareholders of the Company accept the Offer and
approve and adopt this Agreement and the Merger, (ii) BT Alex. Brown
Incorporated ("BT Alex. Brown") has delivered to the Board an opinion to the
effect that, as of the date of this Agreement, the cash consideration to be
received in the Offer and the Merger by the holders of Shares (other then B
Purchaser and its affiliates and any other holders of Shares who will retain
Shares following consummation of the Offer and the Merger) is fair from a
financial point of view to such holders and (iii) Houlihan Lokey Howard & Zukin
("Houlihan Lokey") has delivered to the Board and Purchasers an opinion that the
Company will be solvent following the purchase of Shares pursuant to the Offer
and related matters. The Company agrees to include in the Offer Documents the
recommendation of the Board described in the immediately preceding sentence. The
Company has been advised by each of its directors and executive officers (other
than the Shareholder and as otherwise provided in any Stock Retention Agreement)
that they intend either to tender all Shares beneficially owned by them to the
Company pursuant to the Offer or to vote such Shares in favor of the approval
and adoption by the shareholders of the Company of this Agreement and the
Merger. The Company has been advised by the Shareholder that the Shareholder
intends to tender 13,792,211 Shares pursuant to the Offer and to vote any Shares
then owned or controlled by him in favor of approval and adoption of this
Agreement and the Merger.
(b) The Company shall take all action as may be necessary to
effect the Offer as contemplated by this Agreement, including, without
limitation, promptly mailing the Offer Documents to the record holders and
beneficial owners of the Shares.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. (a) Upon the terms
and subject to the conditions of this Agreement, at the Closing, the Company
shall sell to F
<PAGE> 12
4
Purchaser, and F Purchaser shall purchase from the Company, 7,179,066 Shares
(the "F Shares").
(b) Upon the terms and subject to the conditions of this
Agreement, at the Closing, the Company shall sell to B Purchaser, and B
Purchaser shall purchase from the Company, 904,646 Shares (the "B Shares").
(c) In the event the Equity Financing is reduced pursuant to
Section 5.06, the number of F Shares and B Shares to be purchased at the Closing
shall be adjusted accordingly.
SECTION 2.02. Purchase Price. (a) The aggregate purchase price for
the F Shares shall be the number of F Shares multiplied by the Per Share Amount
(the "F Purchase Price").
(b) The aggregate purchase price for the B Shares shall be the
number of B Shares multiplied by the Per Share Amount (the "B Purchase Price).
SECTION 2.03. Closing. Upon the terms and subject to the conditions
of this Agreement, the sale and purchase of the F Shares and the B Shares
contemplated by this Agreement shall take place at a closing (the "Closing") to
be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York,
New York at 10:00 A.M. New York time on the day the Offer is scheduled to
expire, or at such other place or at such other time or on such other date as
the Company and Purchasers may mutually agree upon in writing (the day on which
the Closing takes place being the "Closing Date").
SECTION 2.04. Closing Deliveries by the Company. At the Closing, the
Company shall deliver or cause to be delivered to Purchasers:
(a) stock certificates evidencing the F Shares and the B Shares,
respectively;
(b) a receipt for the F Purchase Price and the B Purchase Price;
(c) the certificates and other documents required to be delivered
pursuant to Section 7.01(c)(iii); and
(d) an executed copy of the Agreement Among Shareholders in the
form attached as Exhibit C (the "Agreement Among Shareholders").
SECTION 2.05. Closing Deliveries by Purchasers. (a) At the Closing,
F Purchaser shall deliver to the Company:
<PAGE> 13
5
(i) the F Purchase Price by wire transfer in immediately available
funds as directed in writing by the by the Company at least three business
day prior to the Closing;
(ii) the certificates and other documents required to be delivered
pursuant to Section 7.01(b)(iii); and
(iii) an executed copy of the Agreement Among Shareholders.
(b) At the Closing, B Purchaser shall deliver to the Company:
(i) the B Purchase Price by wire transfer in immediately available
funds as directed in writing by the Company at least three business day
prior to the Closing;
(ii) the certificates and other documents required to be delivered
pursuant to Section 7.01(b)(iii); and
(iii) an executed copy of the Agreement Among Shareholders.
ARTICLE III
THE MERGER
SECTION 3.01. The Merger. Upon the terms and subject to the
conditions set forth in Article VII, and in accordance with Delaware Law and
Texas Law, at the Effective Time (as hereinafter defined), each Purchaser shall
be merged with and into the Company. As a result of the Merger, the separate
corporate existence of Purchasers shall cease and the Company shall continue as
the surviving corporation of the Merger (the "Surviving Corporation").
SECTION 3.02. Effective Time; Closing. As promptly as practicable
after the satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "Certificate of Merger") with the Secretary
of State of the State of Delaware and articles of merger (the "Articles of
Merger") with the Secretary of the State of Texas, in such form or forms as is
required by, and executed in accordance with the relevant provisions of,
Delaware Law and Texas Law, respectively (the date and time of the later of such
filings being the "Effective Time"). Prior to such filing, a closing shall be
held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New
York, 10022, or such other place as the parties shall agree, for the purpose of
confirming the satisfaction or waiver, as the case may be, of the conditions set
forth in Article VII.
<PAGE> 14
6
SECTION 3.03. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of
Delaware Law and Texas Law, including, without limitation, Article 5.06 of Texas
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of the Company and each Purchaser shall vest in the Surviving Corporation, and
all debts, liabilities, obligations, restrictions, disabilities and duties of
the Company and Purchasers shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 3.04. Articles of Incorporation; By-laws. (a) At the
Effective Time, the Articles of Incorporation attached hereto as Exhibit A shall
be the Articles of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Articles of Incorporation.
(b) At the Effective Time, the By-laws attached hereto as Exhibit
B shall be the By-laws of the Surviving Corporation until thereafter
amended as provided by law and such By-laws.
SECTION 3.05. Directors and Officers. The directors of the Company
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 3.06. Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of either Purchaser, the
Company or the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled pursuant to Section
3.06(b), any Shares to remain outstanding pursuant to Section 3.06(c) and
any Dissenting Shares) shall be cancelled and shall be converted
automatically into the right to receive an amount equal to the Per Share
Amount in cash (the "Merger Consideration") payable, without interest, to
the holder of such Share, upon surrender, in the manner provided in
Section 3.08, of the certificate that formerly evidenced such Share;
(b) (i) Each Share held in the treasury of the Company and each
Share owned by any direct or indirect wholly owned subsidiary of the
Company and each Share owned by the Purchasers immediately prior to the
Effective Time shall be cancelled without any conversion thereof and no
payment or distribution shall be made with respect thereto;
<PAGE> 15
7
(ii) Each (A) share of common stock of the F Purchaser outstanding
immediately prior to the Effective Time shall be converted and exchanged
for a number of validly issued, fully paid and nonassessable shares of
Common Stock, par value $.001 per share, of the Surviving Corporation
equal to the quotient obtained by dividing the number of F Shares by the
number of outstanding shares of common stock of the F Purchaser and (B)
limited or general partnership interest of B Purchaser shall be converted
and exchanged for a number of validly issued, fully paid and nonassessable
shares of common stock, par value $.001 per share, of the Surviving
Corporation equal to the quotient obtained by dividing the number of B
Shares by the number of partnership interests; and
(c) The 6,064,155 of the Shares held by and registered in the name
of the Shareholder at the Effective Time, 3,837,890 of the Shares held by
and registered in the names of Stinson Capital Partners, L.P., BK Capital
Partners IV, L.P., the Carpenters Pension Trust for Southern California,
United Brotherhood of Carpenters and Joiners of America Local Unions and
Councils Pension Fund, Insurance Company Supported Organizations Pension
Plan, Richard C. Blum & Associates, L.P., Richard C. Blum & Associates,
Inc., Richard C. Blum, Prism Partners I, L.P., Weintraub Capital
Management, Fremont Partners L.P., FP Advisors, L.L.C., Fremont Group,
L.L.C., and Fremont Investors Inc. and the aggregate number of Shares
owned by senior management pursuant to Stock Retention Agreements, shall
not be cancelled as provided above, but shall remain outstanding.
SECTION 3.07. Employee Stock Options and Other Equity Awards. (a)
Except to the extent payment has been made as provided in Section 6.13 or as may
otherwise be agreed by Purchasers and any holder of any outstanding employee or
director options to purchase Shares, including any tandem stock appreciation
right ("Options"), granted under the Company's 1997 Stock Incentive Plan, (the
"1997 Plan"), 1995 Senior Executive Stock Option Plan (the "1995 Plan"), 1988
Directors Stock Option Plan (the "Directors Plan") the 1987 Key Contributor
Stock Option Plan (the "1987 Plan") and, together with the 1997 Plan, the 1995
Plan and the Directors Plan, the "Option Plans"), (i) each of such holder's
Options under the Option Plans shall become fully exercisable, according to its
terms, as of the time provided in the notice from the Company, (ii) each of such
holder's Options under the Options Plans shall be exercisable until the last day
provided in such notice (the "Notice Date"), which will be prior to the last day
of the Offer, (iii) each of such holder's Options may be surrendered prior to
the Notice Date for the right to receive cash in an amount determined in
accordance with the applicable Option Plan, provided, however, that Options
granted under the 1997 Plan may be so surrendered on or prior to the last day in
the applicable 90 day Change of Control Exercise Period, as defined in the 1997
Plan (the "EP Date"), and (iv) all Options remaining unexercised that have not
been surrendered as of the Effective Time (or, in the case of Options granted
under the 1997 Plan, the EP Date) shall be canceled provided, further, that
<PAGE> 16
8
with respect to any Person subject to Section 16 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), the Company shall use its reasonable
efforts to ensure that any such amount shall be paid as soon as practicable
after the first date payment can be made without liability to such Person under
Section 16(b) of the Exchange Act but in no event shall Purchasers or the
Company be required to indemnify such Person for any loss, cost or damages
sustained by such Person as a result of Section 16(b) of the Exchange Act. All
applicable withholding taxes attributable to payments made hereunder or to
distributions contemplated hereby shall be deducted from the amounts payable
under this Section 3.07 and all such taxes attributable to the exercise of
Options shall be withheld from the proceeds received in respect of the Shares
issuable upon such exercise.
(b) Except as provided herein or as otherwise agreed to by the
parties and to the extent permitted by the Option Plans, the Option Plans shall
terminate as of the Effective Time and any rights under any provisions in any
other plan, program or arrangement providing for the issuance or grant by the
Company of any interest in respect of the capital stock of the Company shall be
cancelled as of the Effective Time.
SECTION 3.08. Dissenting Shares. (a) Notwithstanding any provision
of this Agreement to the contrary, Shares that are outstanding immediately prior
to the Effective Time and that are held by shareholders who shall not have voted
in favor of the Merger or consented thereto in writing and who shall have
properly perfected dissenter's rights for such Shares in accordance with Article
5.12 of Texas Law (collectively, the "Dissenting Shares") shall not be converted
into or represent the right to receive the Merger Consideration unless and until
such shareholders shall have withdrawn or lost such shareholder's dissenter's
rights. Such shareholders shall be entitled to receive payment of the appraised
value of such Shares held by them in accordance with the provisions of Article
5.12 of Texas Law, except that all Dissenting Shares held by shareholders who
shall have withdrawn or lost such dissenter's rights under Article 5.12 of Texas
Law shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the Merger
Consideration, without any interest thereon, upon surrender, in the manner
provided in Section 3.08, of the certificate or certificates that formerly
evidenced such Shares.
(b) The Company shall give Purchasers (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to Texas Law and received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under Texas Law. The Company shall not, except with the
prior written consent of each Purchaser (which consent shall not be unreasonably
withheld), make any payment with respect to Dissenting Shares or offer to settle
or settle any claims or demands with respect to Dissenting Shares.
<PAGE> 17
9
SECTION 3.09. Surrender of Shares; Stock Transfer Books. (a) Prior
to the Effective Time, Purchasers shall designate a bank or trust company (which
bank or trust company shall be reasonably acceptable to the Company) to act as
agent (the "Paying Agent") for the holders of Shares in connection with the
Merger to receive the funds to which holders of Shares shall become entitled
pursuant to Section 3.06(a). Such funds shall be invested by the Paying Agent as
directed by the Surviving Corporation, provided that such investments shall be
in obligations of or guaranteed by the United States of America or of any agency
thereof and backed by the full faith and credit of the United States of America,
in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors
Services, Inc. or Standard & Poor's Corporation, respectively, or in deposit
accounts, certificates of deposit or banker's acceptances of, repurchase or
reverse repurchase agreements with, or Eurodollar time deposits purchased from,
commercial banks with capital, surplus and undivided profits aggregating in
excess of $1.0 billion (based on the most recent financial statements of such
bank which are then publicly available at the SEC or otherwise).
(b) Promptly after the Effective Time, the Surviving Corporation
or the Company, as the case may be, shall cause to be mailed to each Person who
was, at the Effective Time, a holder of record of Shares entitled to receive the
Merger Consideration pursuant to Section 3.06(a), a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the certificates evidencing Shares (the "Certificates") shall
pass, only upon proper delivery of the Certificates to the Paying Agent) and
instructions for use in effecting the surrender of the Certificates pursuant to
such letter of transmittal. Upon surrender to the Paying Agent of a Certificate,
together with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration for each Share
formerly evidenced by such Certificate, and such Certificate shall then be
cancelled. No interest shall accrue or be paid on the Merger Consideration
payable upon the surrender of any Certificate for the benefit of the holder of
such Certificate. If payment of the Merger Consideration is to be made to a
Person other than the Person in whose name the surrendered Certificate is
registered on the stock transfer books of the Company, it shall be a condition
of payment that the Certificate so surrendered shall be endorsed properly or
otherwise be in proper form for transfer and that the Person requesting such
payment shall have paid all transfer and other taxes required by reason of the
payment of the Merger Consideration to a Person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such taxes either have been paid or are not
applicable.
(c) At any time following the sixth month after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in
<PAGE> 18
10
respect of all funds made available to it), and thereafter such holders shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat and other similar laws) only as general creditors thereof with respect
to any Merger Consideration that may be payable upon due surrender of the
Certificates held by them. Notwithstanding the foregoing, neither the Surviving
Corporation nor the Paying Agent shall be liable to any holder of a Share for
any Merger Consideration delivered in respect of such Share to a public official
pursuant to any abandoned property, escheat or other similar law.
(d) At the close of business on the day of the Effective Time, the
stock transfer books of the Company shall be closed and thereafter there shall
be no further registration of transfers of Shares on the records of the Company.
From and after the Effective Time, the holders of Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares except as otherwise provided herein or by applicable law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchasers as follows:
SECTION 4.01 Organization and Qualification. The Company and each of
its subsidiaries (a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, (b) has the requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted and (c) is in good standing
and duly qualified to do business in each jurisdiction in which the transaction
of its business makes such qualification necessary, except where the failure to
be so organized, existing, qualified and in good standing or to have such power
or authority would not have a Material Adverse Effect. True and complete copies
of the Articles or Certificates of Incorporation and the by-laws of the Company
and each of its subsidiaries have been made available to Purchasers. A true and
complete list of all of the Company's subsidiaries, together with the
jurisdiction of incorporation of each such subsidiary and the percentage of the
outstanding capital stock of each such subsidiary owned by the Company and its
subsidiaries, is set forth in Section 4.01 of the Company's disclosure schedule
delivered to Purchasers in connection with this Agreement (the "Company
Disclosure Schedule").
SECTION 4.02 Capitalization. (a) The authorized capital stock of the
Company consists of 100,000,000 Shares and 20,000,000 shares of preferred stock,
par value $.001 per share (the "Preferred Stock"). As of the date of this
Agreement, (i) 42,636,016 Shares were issued and outstanding and 186,824 Shares
were held in treasury, (ii) 3,629,133
<PAGE> 19
11
Shares were reserved for issuance pursuant to outstanding Options and 2,672,300
Shares were reserved for issuance in respect of future grants of Options, and
(iii) no shares of Preferred Stock were issued and outstanding. All outstanding
Shares are validly issued, fully paid and nonassessable and are not subject to
preemptive rights. Except as set forth in this Section 4.02(a) or as disclosed
in the Company SEC Documents or in Section 4.02(a) of the Company Disclosure
Schedule, there are no outstanding subscriptions, options, warrants, calls,
rights, commitments or any other agreements to which the Company is a party or
by which the Company is bound which obligate the Company to (i) issue, deliver
or sell or cause to be issued, delivered or sold any additional Shares or any
other capital stock of the Company or any other securities convertible into, or
exercisable or exchangeable for, or evidencing the right to subscribe for, any
such Shares or (ii) purchase, redeem or otherwise acquire any Shares and any
other capital stock of the Company. All Shares subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable. There are no outstanding contractual obligations of the
Company or any of its subsidiaries to repurchase, redeem or otherwise acquire
any Shares or any capital stock of any such subsidiary or to provide funds to,
or make any investment (in the form of a loan, capital contribution or
otherwise) in, any subsidiary (other than a wholly owned subsidiary of the
Company) or any other Person. Each outstanding share of capital stock of each of
the Company's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and each such share owned by the Company and its subsidiaries is
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on the Company's or such other
subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever, except for liens arising by operation of law that are not in the
aggregate material.
(b) Except as provided in the Company SEC Documents or in Section
4.02(b) of the Company Disclosure Schedule, there are no voting trusts or
shareholder agreements to which the Company is a party with respect to the
voting of the capital stock of the Company.
SECTION 4.03 Authorization and Validity of Agreement. The Company
has the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the Transactions in accordance with the terms hereof
(subject to the approval and adoption of this Agreement and the Merger by the
holders of two-thirds of the outstanding Shares, if required by applicable law,
and the filing and recordation of appropriate merger documents as required by
Delaware Law and Texas Law). The Board has duly authorized the execution,
delivery and performance of this Agreement by the Company, and no other
corporate action or other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or the Transactions (other than the
approval and adoption of this Agreement and the Merger by the holders of
two-thirds of the outstanding Shares, if required by applicable law). This
Agreement has been duly and
<PAGE> 20
12
validly executed and delivered by the Company and, assuming this Agreement
constitutes the legal, valid and binding obligation of Purchasers, constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof may be
limited by any bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws affecting the enforcement of creditors' rights
generally or by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The Board has
taken all necessary actions such that the provisions of the Texas Business
Combination Law, Articles 13.01 - 13.08 of Texas Law, do not apply to the
Transactions.
SECTION 4.04 Consents and Approvals. Neither the execution and
delivery of this Agreement by the Company nor the performance of this Agreement
by the Company and the consummation by the Company of the Transactions will
require on the part of the Company or any of its subsidiaries any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except (i) in connection with the
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (ii) pursuant to the applicable requirements
of the Exchange Act and the SEC's rules and regulations promulgated thereunder
and state takeover laws (iii) the filing and recordation of the Certificate of
Merger pursuant to Delaware Law and the Articles of Merger pursuant to Texas Law
and appropriate documents with the relevant authorities of other states in which
the Company is authorized to do business, (iv) as set forth in Section 4.04 of
the Company Disclosure Schedule or (v) where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, would
not, individually or in the aggregate, have a Material Adverse Effect or
restrict or prevent the consummation of the Transactions.
SECTION 4.05 No Violation. Except as set forth in Section 4.05 of
the Company Disclosure Schedule, assuming the Merger has been duly approved by
the holders of two-thirds of the outstanding Shares, if required by applicable
law, neither the execution and delivery of this Agreement by the Company nor the
performance of this Agreement by the Company and the consummation by the Company
of the Transactions will (a) conflict with or violate the Certificate or
Articles of Incorporation of the Company or the By-laws of the Company or any of
its subsidiaries, (b) result in a violation or breach of, constitute a default
(with or without notice or lapse of time, or both) under, give rise to any right
of termination, cancellation or acceleration of, or result in the imposition of
any lien, charge or other encumbrance on any assets or property of the Company
or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective assets
or properties are bound, except for such violations, breaches and defaults (or
rights of termination, cancellation or acceleration or lien or other charge or
encumbrance) as to which requisite waivers or consents have been obtained or
which would not individually
<PAGE> 21
13
or in the aggregate have a Material Adverse Effect or materially restrict or
prevent the consummation of the Transactions or (c) assuming the consents,
approvals, authorizations or permits and filings or notifications referred to in
Section 4.04 and this Section 4.05 are duly and timely obtained or made and the
approval of the Merger by the holders of two-thirds of the outstanding Shares
has been obtained if required by applicable law, conflict with or violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company, any of its subsidiaries or any of their respective assets and
properties, except for such violations which would not, individually or in the
aggregate, have a Material Adverse Effect or materially restrict or prevent the
consummation of the Transactions.
SECTION 4.06 SEC Reports; Financial Statements. (a) Except as set
forth on Section 4.06 of the Company Disclosure Schedule, since January 1, 1994
the Company has filed with the SEC all forms, reports, schedules, statements and
other documents required to be filed by it with the SEC pursuant to the
Securities Act of 1933, as amended (the "Securities Act") and the SEC's rules
and regulations promulgated thereunder and the Exchange Act and the SEC's rules
and regulations promulgated thereunder (any such documents filed prior to the
date hereof being collectively, the "Company SEC Documents"). The Company SEC
Documents including, without limitation, any financial statements or schedules
included therein, at the time filed, or in the case of registration statements
on their respective effective dates, (i) complied as to form in all material
respects with the applicable requirements of and the SEC's rules and regulations
promulgated thereunder and the Exchange Act and the SEC's rules and regulations
promulgated thereunder and (ii) did not at the time filed (or, in the case of
registration statements, at the time of effectiveness), contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. No
subsidiary of the Company is required to file any form, report or other document
with the SEC.
(b) Each of the consolidated financial statements of the Company
(including any related notes thereto) included in the Company SEC Documents
(excluding the Company SEC Documents described in Section 4.07) comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the period involved (except as may be indicated in
such financial statements or in the notes thereto or, in the case of unaudited
financial statements, as permitted by the requirements of Form 10-Q) and present
fairly, in all material respects (subject, in the case of the unaudited
statements, to normal year-end adjustments which such adjustments in the
aggregate would not have a Material Adverse Effect and the absence of
footnotes), the financial position of the Company as of the dates thereof and
the results of the Company's operations and cash flows for the periods presented
therein.
<PAGE> 22
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(c) The Company has heretofore furnished or made available to
Purchasers complete and correct copies of all amendments and modifications that
have not been filed by the Company with the SEC to all agreements, documents and
other instruments that previously had been filed by the Company with the SEC and
are currently in effect.
SECTION 4.07 Company Statement; Schedule 13E-3; Schedule 13E-4. The
proxy statement to be sent to the shareholders of the Company in connection with
the Shareholders' Meeting (such proxy statement, as amended or supplemented,
being referred to herein as the "Company Statement"), as of the date first
mailed to the shareholders of the Company and at the time of the Shareholders'
Meeting, the Schedule 13E-3 and the Schedule 13E-4 at the time filed with the
SEC will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading. The Company Statement, the Schedule 13E-3 and the Schedule
13E-4 will, when filed by the Company with the SEC, comply as to form in all
material respects with the applicable provisions of the Exchange Act and the SEC
rules and regulations promulgated thereunder. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to the statements made
in any of the foregoing documents based on written information supplied by or on
behalf of either Purchaser or any of their respective affiliates specifically
for inclusion therein.
SECTION 4.08 Compliance with Law. Except as set forth in the Company
SEC Documents or in Section 4.08 of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries is in violation of any applicable federal,
state, local or foreign statute, rule, regulation, decree, ordinance, code
requirement or order of any governmental or regulatory authority or rule of
common law, including, without limitation, all federal and state antitrust law
(whether statutory or otherwise) (collectively, "Law") applicable to the Company
or any of its subsidiaries, or any of the products produced, distributed
marketed or sold by the Company or any of its subsidiaries, except for
violations which would not have a Material Adverse Effect. Section 4.08 of the
Company Disclosure Schedule sets forth a brief description of each order, writ,
judgment, injunction, decree, stipulation, determination or award (including,
without limitation, recalls, field notifications or seizures) entered by or with
any governmental or regulatory authority (each, a "Governmental Order")
applicable to the Company and any of its subsidiaries. No such Governmental
Order has had or is likely to have a Material Adverse Effect. Without limiting
the foregoing, except for matters which would not, individually or in the
aggregate, have a Material Adverse Effect and those matters disclosed in the
Company SEC Documents or in Section 4.08 of the Company Disclosure Schedule, to
the Knowledge of the Company, (a) the business of the Company and each of its
subsidiaries is being conducted in compliance with applicable Environmental
Laws, (b) the business of the Company and each of its subsidiaries has not, and
no other Person has, made, caused or contributed to any material release of any
hazardous or toxic waste or substance on, at or under any of the Company's
<PAGE> 23
15
or its subsidiaries' properties, and (c) neither the Company nor any of its
subsidiaries is subject to any compliance, remediation or settlement agreement
from an alleged violation of Environmental Laws. For purposes hereof,
"Environmental Laws" shall mean all applicable Laws relating to pollution or
protection of human health or the environment, including the Resource
Conservation and Recovery Act, the Clean Air Act, the Water Pollution Control
Act, the Toxic Substances Control Act and the Comprehensive Environmental
Response, Compensation and Liability Act and analogous state Law. The Company
and each of its subsidiaries hold all permits, licenses, exemptions, orders and
approvals of governmental, administrative, and regulatory authorities,
(collectively, "Permits") necessary for the conduct of their respective
businesses, including, without limitation, all Permits issued by any
governmental, administrative and regulatory authorities that are concerned with
the safety, efficacy, reliability or manufacturing of medical products, as now
being conducted and the same are in full force and effect, except where the
failure to hold Permits, or for such Permits to be in full force and effect,
would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 4.09 Absence of Certain Changes. Except as disclosed in the
Company SEC Documents or in Section 4.09 of the Company Disclosure Schedule,
since December 31, 1996, the Company and each of its subsidiaries have conducted
its businesses only in the ordinary course of business and consistent with past
practice and (a) there has not been any Material Adverse Effect and (b) the
Company has not taken any of the actions set forth in paragraphs (a) through (i)
of Section 6.01.
SECTION 4.10 No Undisclosed Liabilities. Except (a) for liabilities
incurred in the ordinary course of business and consistent with past practice,
(b) liabilities incurred in connection with the Transactions, (c) liabilities
which would not, individually or in the aggregate, have a Material Adverse
Effect and (d) as disclosed in the Company SEC Documents or as set forth in
Section 4.10 of the Company Disclosure Schedule, from December 31, 1996, neither
the Company nor any of its subsidiaries has incurred any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
which would be required to be reflected in or reserved against on a consolidated
balance sheet, or in the notes thereto, of the Company prepared in accordance
with generally accepted accounting principles consistent with past practice.
SECTION 4.11 Litigation. Except as disclosed in the Company SEC
Documents or in Section 4.11 of the Company Disclosure Schedule and except for
regulatory proceedings of which the Company has not yet been notified (except to
the extent the Company has Knowledge of any such regulatory proceeding), there
are no claims, actions, proceedings or governmental, administrative or
regulatory investigations pending, nor has the Company or any of its
subsidiaries received notice of any threatened claims, actions, proceedings or
governmental, administrative or regulatory investigations, against the Company
or any of its subsidiaries by or before any court, arbitrator or administrative
or
<PAGE> 24
16
governmental or regulatory body, domestic or foreign, which, if adversely
determined, would, individually or in the aggregate, have a Material Adverse
Effect or seek to delay or prevent the consummation of the Transactions. None of
the Company, its subsidiaries, nor any of their respective assets is subject to
any outstanding and unsatisfied order, writ, judgment, injunction,
determination, award or decree which would, individually or in the aggregate,
have a Material Adverse Effect.
SECTION 4.12 Employee Benefit Matters. (a) All employee benefit
plans and other benefit arrangements covering employees of the Company and its
subsidiaries are listed in Section 4.12 of the Company Disclosure Schedule (the
"Company Benefit Plans"). True and complete copies of the Company Benefit Plans
have been provided to Purchasers. Except as set forth in Section 4.12(a) of the
Company Disclosure Schedule and to the extent applicable, the Company Benefit
Plans comply in all material respects with the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Internal
Revenue Code of 1986, as amended (the "Code"), and any Company Benefit Plan
intended to be qualified under Section 401(a) of the Code has been determined by
the Internal Revenue Service (the "IRS") to be so qualified. Except as set forth
in Section 4.12(a) of the Company Disclosure Schedule, no Company Benefit Plan
is covered by Title IV of ERISA or Section 412 of the Code. Except as set forth
in Section 4.12(a) of the Company Disclosure Schedule, neither the Company nor
any of its subsidiaries has incurred any liability or penalty under Section 4975
of the Code or Section 502(i) of ERISA with respect to any Company Benefit Plan.
Each Company Benefit Plan has been maintained and administered in all material
respects in compliance with its terms and with all applicable laws including,
but not limited to, ERISA and the Code to the extent applicable thereto. Except
as set forth in Section 4.12(a) of the Company Disclosure Schedule, to the
Knowledge of the Company, there are no pending, nor has the Company or any of
its subsidiaries received notice of any threatened, claims against or otherwise
involving any of the Company Benefit Plans. No Company Benefit Plan is under
audit or investigation by the IRS, the Department of Labor or the Pension
Benefit Guaranty Corporation, and to the Knowledge of the Company, no such audit
or investigation is pending or threatened. All material contributions required
to be made as of the date of this Agreement to the Company Benefit Plans have
been made or provided for. Neither the Company nor any entity under "common
control" with the Company within the meaning of Section 4001 of ERISA has
contributed to, or been required to contribute to, any "multi-employer plan" (as
defined in Sections 3(37) and 4001(a)(3) of ERISA).
(b) Except as set forth in Section 4.12(b) of the Company
Disclosure Schedule, the consummation of the Transactions will not (either alone
or upon the occurrence of any additional or subsequent events) (i) constitute an
event under any Company Benefit Plan, trust, or loan that will or may result in
any payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any Company employee, or (ii) result
<PAGE> 25
17
in the triggering or imposition of any restrictions or limitations on the right
of the Company or either Purchaser to amend or terminate any Company Benefit
Plan and receive the full amount of any excess assets remaining or resulting
from such amendment or termination, subject to applicable taxes. No payment or
benefit which will or may be made by the Company, any of its subsidiaries,
either Purchaser or any of their respective affiliates with respect to any
employee of the Company or its subsidiaries will be characterized as an "excess
parachute payment," within the meaning of Section 280G(b)(1) of the Code.
(c) Except as set forth in Section 4.12(c) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries (i)
maintains or contributes to any Company Benefit Plan which provides, or has any
liability to provide, life insurance, medical, severance or other employee
welfare benefits to any employee upon his retirement or termination of
employment, except as may be required by Section 4980B of the Code; or (ii) has
ever represented, promised or contracted (whether in oral or written form) to
any employee (either individually or to employees as a group) that such
employee(s) would be provided with life insurance, medical, severance or other
employee welfare benefits upon their retirement or termination of employment,
except to the extent required by Section 4980B of the Code.
(d) With respect to each Company Benefit Plan which is an
"employee welfare benefit plan" within the meaning of Section 3(1) of ERISA, all
material claims incurred (including claims incurred but not reported) by
employees thereunder for which the Company is, or will become, liable are (i)
insured pursuant to a contract of insurance whereby the insurance company bears
any risk of loss with respect to such claims; (ii) covered under a contract with
a health maintenance organization (an "HMO") pursuant to which the HMO bears the
liability for such claims, or (iii) reflected as a liability or accrued for in
Section 4.12(d) of the Company Disclosure Schedule.
(e) Except as set forth in Section 4.12(e) of the Company
Disclosure Schedule or except as would not have a Material Adverse Effect, with
respect to each Company Benefit Plan that is not subject to United States Law
("Foreign Benefit Plan"): (i) all employer and employee contributions to each
Foreign Benefit Plan required by law or by the terms of such Foreign Benefit
Plan have been made or, if applicable, accrued in accordance with normal
accounting practices; (ii) the fair market value of the assets of each funded
Foreign Benefit Plan, the liability of each insurer for any Foreign Benefit
Plan, funded through insurance or the book reserve established for any Foreign
Benefit Plan, together with any accrued contributions, is sufficient to procure
or provide for the accrued benefit obligations, as of the Effective Time, with
respect to all current and former participants in such plan according to the
actuarial assumptions and valuations most recently used to determine employer
contributions to such Foreign Benefit Plan and no transaction contemplated by
this Agreement shall cause such assets or insurance obligations to be less than
such benefit obligations; and (iii) each Foreign Benefit Plan required to be
registered
<PAGE> 26
18
has been registered and has been maintained in good standing with the
appropriate regulatory authorities.
(f) The Company shall take such actions as are necessary to cause
the Employee Stock Purchase Plan to terminate prior to the termination of the
Offer. The Company shall take such actions as are necessary to cause any offer
to purchase Shares pursuant to the Company's Employee Stock Purchase Plan (the
"ESPP") to expire on or prior to the termination of the Offer. On such date, the
Company shall apply the funds credited as of such date under the ESPP within
each participant's payroll withholdings to the purchase of whole Shares in
accordance with the terms of the ESPP.
SECTION 4.13 Taxes. (a) For purposes of this Agreement, "Tax" or
"Taxes" means any and all taxes, fees, levies, duties, tariffs, imposts, and
other charges of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any governmental or taxing authority including, without limitation, taxes or
other charges on or with respect to income, franchises, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs' duties, tariffs, and similar charges.
(b) Except as disclosed in the Company SEC Documents or in Section
4.13(b) of the Company Disclosure Schedule, the Company and each of its
subsidiaries (i) have filed all federal, state, local and foreign Tax returns
required to be filed by the Company or any of its subsidiaries for tax years
ended prior to the date of this Agreement, except for those Tax returns the
failure of which to file would not, individually or in the aggregate, have a
Material Adverse Effect or for which requests for extensions have been timely
filed, and all such returns are complete in all material respects, (ii) have
paid or accrued all Taxes shown to be due and payable on such returns, (iii)
have accrued all such Taxes for such periods subsequent to the periods covered
by such returns, (iv) have "open" years for federal income tax returns only as
set forth in the Company SEC Documents or in Section 4.13(b) of the Company
Disclosure Schedule and (v) have not participated in or cooperated with an
international boycott within the meaning of Section 999 of the Code. There are
no liens for Taxes on the assets of the Company or any of its subsidiaries,
except for liens that would not, individually or in the aggregate, have a
Material Adverse Effect, liens for Taxes not yet due and payable, and except as
set forth in the Company SEC Documents or in Section 4.13 of the Company
Disclosure Schedule, there is no pending, nor has the Company or any of its
subsidiaries received notice of any threatened Tax audit, examination, refund
litigation or adjustment in controversy which, if determined adversely, would,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth
<PAGE> 27
19
in Section 4.13(b) of the Company Disclosure Schedule, neither the Company nor
any of its subsidiaries is a party to any agreement providing for the allocation
or sharing of Taxes.
SECTION 4.14 Intellectual Property. (a) Section 4.14(a) of the
Company Disclosure Schedule sets forth a true and complete list of all
Intellectual Property owned by the Company for which registrations have been
made or applied for, including all patents, trademarks, copyrights, mask works
and other forms of registrable Intellectual Property (the "Scheduled
Intellectual Property"). Except as would not individually or in the aggregate
have a Material Adverse Effect and except as set forth in Section 4.14(a) of the
Company Disclosure Schedule, the Company is the sole and exclusive owner of the
Scheduled Intellectual Property, free and clear of any Encumbrance. Except as
would not individually or in the aggregate have a Material Adverse Effect and
except as set forth in Section 4.14(a) of the Company Disclosure Schedule, the
registrations made for the Scheduled Intellectual Property are current,
outstanding and valid, and the Company has complied with all requirements to
maintain such Intellectual Property in full force and effect.
(b) The Scheduled Intellectual Property, together with all other
Intellectual Property owned by the Company (collectively, the "Owned
Intellectual Property"), constitute all of the Intellectual Property requisite
and necessary for the conduct of the businesses of the Company. Except as set
forth in Section 4.14(b) of the Company Disclosure Schedule, the Company does
not have, nor does it require, any license (other than licenses generally
available to the public at reasonable cost) from another in or to any material
Intellectual Property that is material to the businesses of the Company. As a
result of the Transaction, as of the Effective Date, the Company shall own all
right, title and interest in and to all material Intellectual Property requisite
and necessary for the conduct of the businesses of the Company. Except as
provided on Section 4.14(b) of the Company Disclosure Schedule, the Company has
not granted a license to another in or to any of the Owned Intellectual
Property.
(c) Except as provided on Section 4.14(c) of the Company
Disclosure Schedule, to the Knowledge of the Company, no actions or proceedings
involving the Company are pending or threatened, (i) which challenge the
ownership, validity or enforceability of any of the Owned Intellectual Property,
(ii) which seek to restrict the use by the Company of any of the Owned
Intellectual Property, or (iii) which allege that the Company infringes or
violates the Intellectual Property of another. No pending or threatened action
or proceeding, including but not limited to those on Section 4.14(c) of the
Company Disclosure Schedule, would have a material effect on the businesses of
the Company if decided adversely to the Company. To the Knowledge of the
Company, the Company is aware of no infringement or violation of the Owned
Intellectual Property by another.
(d) For the purpose of this Section 4.14, the Company means the
Company and its subsidiaries, and the Intellectual Property means (i)
inventions, whether or not
<PAGE> 28
20
patentable, whether or not reduced to practice, and whether or not yet made the
subject of a pending patent application or applications, (ii) ideas and
conceptions of potentially patentable subject matter, including, without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a pending patent application or
applications, (iii) national (including the United States) and multinational
statutory invention registrations, patents, patent registrations and patent
applications (including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all rights therein
provided by international treaties or conventions and all improvements to the
inventions disclosed in each such registration, patent or application, (iv)
trademarks, service marks, trade dress, logos, trade names and corporate names,
whether or not registered, including all common law rights, and registrations
and applications for registration thereof, including, but not limited to, all
marks registered in the United States Patent and Trademark Office, the Trademark
Offices of the States and Territories of the United States of America, and the
Trademark Offices of other nations throughout the world, and all rights therein
provided by international treaties or conventions, (v) copyrights (registered or
otherwise) and registrations and applications for registration thereof, and all
rights therein provided by international treaties or conventions, (vi) computer
software, including, without limitation, source code, operating systems and
specifications, data, data bases, files, documentation and other materials
related thereto, data and documentation, (vii) trade secrets and confidential,
technical and business information (including ideas, formulas, compositions,
inventions, and conceptions of inventions whether patentable or unpatentable and
whether or not reduced to practice), (viii) whether or not confidential,
technology (including know-how and show-how), manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information, (ix) copies
and tangible embodiments of all the foregoing, in whatever form or medium, (x)
all rights to obtain and rights to apply for patents, and to register trademarks
and copyrights, and (xi) all rights to sue or recover and retain damages and
costs and attorneys' fees for present and past infringement of any of the
foregoing.
SECTION 4.15 Other Interests. Except as set forth in Section 4.15 of
the Company Disclosure Schedule or in the Company SEC Documents, the Company
does not own, directly or indirectly, any interest or investment (whether equity
or debt) in any corporation, partnership, joint venture, business, trust or
entity (other than investments in short-term investment securities).
SECTION 4.16 Labor Matters. Except as set forth in Section 4.16 of
the Company Disclosure Schedule, neither the Company nor any of its subsidiaries
is presently, nor has in the past been, a party to, or bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor union organization. There is no unfair labor practice or labor
arbitration proceeding pending or, to the
<PAGE> 29
21
Knowledge of the Company, threatened against the Company or any of its
subsidiaries relating to their respective businesses except for any such
proceeding which would not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 4.17 Brokers and Finders. No broker, finder or investment
bank has acted directly or indirectly for the Company, nor has the Company
incurred any obligation to pay any brokerage, finder's or other fee or
commission in connection with the transactions contemplated hereby, other than
BT Alex. Brown and Houlihan Lokey, the fees and expenses of which shall be borne
by the Company. The Company has furnished to Purchasers a complete and correct
copy of all agreements between the Company and BT Alex. Brown and Houlihan Lokey
pursuant to which such firm would be entitled to any payment relating to the
transactions contemplated by this Agreement.
SECTION 4.18 Opinions of Financial Advisors. (a) BT Alex. Brown has
delivered its opinion, dated the date of this Agreement, to the Board to the
effect that, as of such date, the cash consideration to be received in the Offer
and the Merger by the holders of Shares (other than B Purchaser and its
affiliates and any other holders of Shares who will retain Shares following
consummation of the Offer and the Merger) is fair from a financial point of view
to such holders and such opinion has not been withdrawn or modified in any
material respect prior to consummation of the Offer.
(b) Houlihan Lokey has delivered its opinion and report to the
Board and Purchasers with respect to solvency and related matters, and such
opinion has not been withdrawn or modified.
SECTION 4.19 Real Property and Leases. (a) The Company and each of
its subsidiaries has sufficient title to all of its properties and assets to
conduct its businesses as currently conducted or as contemplated to be
conducted, except as would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) Each parcel of real property owned or leased by the Company or
any of its subsidiaries (i) is owned or leased free and clear of all mortgages,
pledges, liens, security interests, conditional and installment sale agreements,
encumbrances, charges or other claims of third parties of any kind
(collectively, "Liens"), other than (A) Liens for current taxes and assessments
not yet past due, (B) inchoate mechanics' and materialmen's Liens for
construction in progress, (C) workmen's, repairmen's, warehousemen's and
carriers' Liens arising in the ordinary course of business of the Company or
such subsidiary consistent with past practice, and (D) all matters of record,
Liens and other imperfections of title and encumbrances which would not,
individually or in the aggregate, have a Material Adverse Effect (collectively,
"Permitted Liens"), and (ii) is neither subject to any governmental decree or
order to be sold nor is being condemned, expropriated or otherwise taken by any
public authority with or without payment of compensation therefor, nor, has
<PAGE> 30
22
any notice been received by the Company stating that any such condemnation,
expropriation or taking been proposed.
(c) All leases of real property leased for the use or benefit of
the Company or any of its subsidiaries to which the Company or any of its
subsidiaries is a party requiring rental payments in excess of $100,000 on an
annualized basis during the period of the lease, and all amendments and
modifications thereto are in full force and effect and have not been modified or
amended, and there exists no default under any such lease by the Company or any
of its subsidiaries, nor any event which with notice or lapse of time or both
would constitute a default thereunder by the Company or any of its subsidiaries,
except as would not, individually or in the aggregate, have a Material Adverse
Effect.
SECTION 4.20 Material Contracts. (a) Section 4.20(a) of the Company
Disclosure Schedule lists each of the following contracts and agreements
(including, without limitation, oral arrangements to the extent legally binding)
of the Company and each of its subsidiaries (such contracts and agreements,
together with all contracts and agreements disclosed in Section 4.14 of the
Disclosure Schedule, being "Material Contracts"):
(i) each contract, agreement and other arrangement for the
purchase of inventory, spare parts, other materials or personal property
with any supplier or for the furnishing of services to the Company and
each of its subsidiaries or otherwise related to the businesses of the
Company and each of its subsidiaries under the terms of which the Company
or any of its subsidiaries: (A) are likely to pay or otherwise give
consideration of more than $3,000,000 in the aggregate during the calendar
year ended December 31, 1997 or (B) are likely to pay or otherwise give
consideration of more than $10,000,000 in the aggregate over the remaining
term of such contract;
(ii) each contract, agreement and other arrangement for the sale of
inventory or other personal property or for the furnishing of services by
the Company or any of its subsidiaries which: (A) is likely to involve
consideration of more than $3,000,000 in the aggregate during the calendar
year ended December 31, 1997 or (B) is likely to involve consideration of
more than $10,000,000 in the aggregate over the remaining term of the
contract;
(iii) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing, consulting and advertising contracts and agreements to which
the Company or any of its subsidiaries is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the Company
or any of its subsidiaries
<PAGE> 31
23
is a party and which are not cancelable without penalty or further payment
in excess of $50,000 and without more than 90 days' notice;
(v) all contracts and agreements relating to indebtedness of the
Company or any of its subsidiaries or to any direct or indirect guaranty
by the Company or any of its subsidiaries of indebtedness of any other
Person;
(vi) all contracts, agreements, commitments, written understandings
or other arrangements with any Governmental Entity, to which the Company
or any of its subsidiaries is a party (other than arrangements entered
into in the ordinary course of business with hospitals or other medical
facilities owned or operated by any such Governmental Entity);
(vii) all contracts and agreements that limit or purport to limit
the ability of the Company or any of its subsidiaries to compete in any
line of business or with any Person or in any geographic area or during
any period of time; and
(viii) all other contracts and agreements, whether or not made in
the ordinary course of business, which are material to the Company and its
subsidiaries, taken as a whole, or the conduct of the business of the
Company and its subsidiaries, taken as a whole, or the absence of which
would, in the aggregate, have a Material Adverse Effect.
(b) Except as disclosed in Section 4.20(b) of the Company
Disclosure Schedule, each Material Contract: (i) is legal, valid and binding on
the Company or its respective subsidiary party thereto and, to the Knowledge of
the Company, the other parties thereto, and is in full force and effect and (ii)
upon consummation of the transactions contemplated by this Agreement, except to
the extent that any consents set forth in Section 4.04 of the Company Disclosure
Schedule are not obtained, shall continue in full force and effect without
penalty or other adverse consequence. Neither the Company nor any of its
subsidiaries is in breach of, or default under, any Material Contract.
(c) No other party to any Material Contract is, to the Knowledge
of the Company, in material breach thereof or default thereunder.
(d) Except as disclosed in Section 4.20(d) of the Company
Disclosure Schedule, there is no contract, agreement or other arrangement
granting any Person any preferential right to purchase any of the properties or
assets of the Company or any of its subsidiaries.
SECTION 4.21 Certain Business Practices. Neither the Company nor any
of its subsidiaries nor any of their respective directors, officers, agents,
representatives or
<PAGE> 32
24
employees (in their capacity as directors, officers, agents, representatives or
employees) has: (a) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (b)
directly or indirectly, paid or delivered any fee, commission or other sum of
money or item of property, however characterized, to any finder, agent, or other
party acting on behalf of or under the auspices of a governmental official or
Governmental Entity, in the United States or any other country, which is in any
manner related to the business or operations of the Company or any of its
subsidiaries, that was illegal under any federal, state or local laws of the
United States or any other country having jurisdiction; or (c) made any payment
to any customer or supplier of the Company or any of its subsidiaries or any
officer, director, partner, employee or agent of any such customer or supplier
for the unlawful sharing of fees or to any such customer or supplier or any such
officer, director, partner, employee or agent for the unlawful rebating of
charges, or engaged in any other unlawful reciprocal practice, or made any other
unlawful payment or given any other unlawful consideration to any such customer
or supplier or any such officer, director, partner, employee or agent, in
respect of the business of the Company and its subsidiaries.
SECTION 4.22 Accounting Treatment. The Company has received from
Ernst & Young LLP a letter in form and substance reasonably satisfactory to
Purchasers that the Transactions will receive recapitalization accounting
treatment and such letter has not been withdrawn or modified.
SECTION 4.23 Stock Retention Agreements. Certain employees have, on
the date hereof, and the Company shall use all reasonable efforts to have
certain employees listed in Section 4.23 of the Company Disclosure Schedule
enter into agreements pursuant to which such employees will retain stock or
options in the Surviving Corporation (each such agreement being a "Stock
Retention Agreement"). The Company shall not enter into any Stock Retention
Agreement without the prior consent of Purchasers.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Purchasers hereby represent and warrant, jointly and severally, to
the Company as follows:
SECTION 5.01 Organization and Qualification. Each Purchaser is (a)
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the requisite power and authority to
own, lease and operate its properties and to carry on its business as it is now
being conducted and (c) is in good standing and duly qualified to do business in
each jurisdiction in which the transaction of its business makes such
qualification necessary, except where the failure to be so organized,
<PAGE> 33
25
existing, qualified and in good standing or to have such power or authority
would not materially restrict or prevent the consummation of the Transaction.
SECTION 5.02 Authorization and Validity of Agreement. Each Purchaser
has the requisite power and authority to execute and deliver this Agreement and
to consummate the Transactions in accordance with the terms hereof. The Board of
Managers of each Purchaser has duly authorized the execution, delivery and
performance of this Agreement by such Purchaser, and no other action or other
proceedings on the part of either Purchaser is necessary to authorize this
Agreement or the Transactions. This Agreement has been duly and validly executed
and delivered by each Purchaser and, assuming this Agreement constitutes the
legal, valid and binding obligation of the Company, constitutes the legal, valid
and binding obligation of each Purchaser, enforceable against such Purchaser in
accordance with its terms, except as enforcement thereof may be limited by any
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally or
by general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
SECTION 5.03 Consents and Approvals. Neither the execution and
delivery of this Agreement by Purchasers nor the performance of this Agreement
by Purchasers or the consummation by Purchasers of the Transactions will require
on the part of either Purchaser or any of its respective affiliates any consent,
approval, authorization or permit of, or filing with, or notification to, any
governmental or regulatory authority, except (a) in connection with the
applicable requirements of the HSR Act, (b) pursuant to the applicable
requirements of the Exchange Act and the SEC's rules and regulations promulgated
thereunder and state takeover laws, (c) the filing and recordation of the
Certificate of Merger pursuant to Delaware Law and the Articles of Merger
pursuant to Texas Law, (d) as set forth in Section 5.03 of Purchasers'
disclosure schedule delivered to the Company in connection with this Agreement
(the "Purchaser Disclosure Schedule") or (e) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not materially restrict or prevent the consummation of the
Transactions.
SECTION 5.04 No Violation. Except as set forth in Section 5.04 of
the Purchaser Disclosure Schedule, neither the execution and delivery of this
Agreement by Purchasers nor the performance of this Agreement by Purchasers or
the consummation by Purchasers of the Transactions will (a) conflict with or
violate the organizational documents of either Purchaser, (b) result in a
violation or breach of, constitute a default (with or without notice or lapse of
time, or both) under, give rise to any right of termination, cancellation or
acceleration of, or result in the imposition of any lien, charge or other
encumbrance on any assets or property of either of Purchasers pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which either of Purchasers is a
party or by which either of Purchasers or any of their respective assets or
properties are bound, except for such
<PAGE> 34
26
violations, breaches and defaults (or rights of termination, cancellation or
acceleration or lien or other charge or encumbrance) as to which consents have
been obtained or which would not individually or in the aggregate materially
restrict or prevent the consummation of the transactions contemplated hereby or
(c) assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 5.03 and this Section 5.04 are duly and
timely obtained or made, conflict with or violate any order, writ, injunction,
decree, statute, rule or regulation applicable to either Purchaser, except for
such violations which would not restrict prevent the consummation of the
Transactions.
SECTION 5.05 Offer Documents; Company Statement; Schedule 13E-3;
Schedule 13E-4. No information supplied by or on behalf of Purchasers
specifically for inclusion in the Company Statement, Schedule 13E-3 or Schedule
13E-4 will, at the respective times filed with the SEC or other governmental
entity, or at any time thereafter when the information included therein is
required to be updated pursuant to applicable law, or, in the case of the
Company Statement, at the date mailed to the Company's shareholders and at the
time of the Shareholders' Meeting, contain any untrue statement of a material
act or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Schedule 13E-3
will, when filed by Purchasers with the SEC or other governmental entity, comply
as to form in all material respects with the provisions of the Exchange Act and
the SEC's rules and regulations promulgated thereunder.
SECTION 5.06 Financing. Purchasers have provided the Company with
complete and correct copies of (a) a commitment letter dated the date hereof
from Bank of America National Trust and Savings Association pursuant to which it
has committed, subject to the terms and conditions set forth therein, to provide
a senior credit facility in an aggregate amount of $300,000,000 and a tender
facility in an aggregate amount of $130,000,000 to finance the Transactions and
(b) a letter dated the date hereof from BT Alex. Brown pursuant to which it has
indicated that it is highly confident of its ability to underwrite in the public
markets, subordinated notes in an aggregate amount of $200,000,000 to finance
the Transactions. The financing to be provided pursuant to the foregoing
arrangements is hereinafter referred to as the "Debt Financing". As of the date
hereof, the commitment letter and the highly confident letter relating to the
Debt Financing referred to above have not been withdrawn. At the Closing, F
Purchaser will have available $17,414,435.50 and B Purchaser will have available
$138,197,020.50 for purposes of consummating the Closing (the "Equity
Financing"), reduced by an amount equal to the sum of (i) the number of shares
purchased by B Purchaser between the date hereof and the expiration of the Offer
multiplied by the Per Share Amount, (ii) the number of Shares retained by
management pursuant to Stock Retention Agreements entered into after the date
hereof multiplied by the Per Share Amount and (iii) the number of Options
retained by management pursuant to Stock Retention Agreements entered into after
the date hereof multiplied by the excess of the Per Share Amount over the
exercise price of such Options.
<PAGE> 35
27
SECTION 5.07 Brokers and Finders. No broker, finder or investment
bank has acted directly or indirectly for either Purchaser, nor has either
Purchaser incurred any obligation to pay any brokerage, finder's or other fee or
commission in connection with the Transactions.
SECTION 5.08 Operations of Purchasers. Purchasers have been formed
solely for the purpose of engaging in the Transactions and prior to the Closing
Date will have engaged in no other business activities.
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of the Business of the Company Pending the
Merger. From the date hereof until the Effective Time, the Company shall conduct
the business of the Company and each of its subsidiaries in all material
respects only in the ordinary course consistent with past practice, shall use
all reasonable efforts to preserve intact the business organization of the
Company and keep available the services of its present key officers and
employees (provided, however, that to satisfy the foregoing obligation, the
Company shall not be required to make any payments or enter into or amend any
contractual arrangements or understandings, except in the ordinary course of
business consistent with past practice) and shall use all reasonable efforts to
preserve the current relationships of the Company and each of its subsidiaries
with customers and suppliers with which the Company or such subsidiary has
significant business relations and, except as otherwise required by applicable
law or as set forth in Section 6.01 of the Company Disclosure Schedule, the
Company shall not, without the prior consent of Purchasers (which consent shall
not be unreasonably withheld):
(a) amend its Articles of Incorporation or By-Laws;
(b) declare, set aside or pay any dividend or other distribution
or payment in cash, stock or property in respect of its capital stock
(other than a quarterly cash dividend of $.0375 per Share for the third
quarter of fiscal year 1997), and not reclassify, combine, split,
subdivide or redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock;
(c) issue, grant, sell, dispose of, encumber or pledge or agree to
or authorize the issuance, grant, sale, disposition, encumbrance of or
pledge of any shares of, or rights of any kind to acquire any shares of,
the capital stock of any class of or any other ownership interest in the
Company or any of its subsidiaries (other than pursuant to the
Transactions);
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(d) acquire, sell, transfer, lease or encumber any material assets
except in the ordinary course of business and consistent with past
practice;
(e) adopt a plan of complete or partial liquidation or adopt
resolutions providing for the complete or partial liquidation,
dissolution, consolidation, merger, restructuring or recapitalization of
the Company or any of its subsidiaries;
(f) grant any severance or termination pay to, or enter into any
employment agreement with, any executive officer or director of the
Company, other than in the ordinary course of business and consistent with
past practice;
(g) except in the ordinary course of business, increase the
compensation payable or to become payable to its officers or employees,
enter into any contract or other binding commitment in respect of any such
increase (other than pursuant to a Company Benefit Plan or policy or
agreement existing as of the date hereof) to, or enter into any severance
agreement with any director, executive officer or other employee of the
Company or establish, adopt, enter into, make any new grants or awards
under or amend, any Company Benefit Plan, except as required by applicable
law, to maintain tax-qualified status or as may be required by any Company
Benefit Plan as of the date hereof;
(h) settle or compromise any material claims or litigation or,
except in the ordinary course of business and consistent with past
practice, modify, amend or terminate any Material Contracts or waive,
release or assign any material rights or claims, or make any payment,
direct or indirect, of any material liability of the Company before the
same becomes due and payable in accordance with its terms;
(i) take any action, other than in the ordinary course of business
and consistent with past practice with respect to accounting policies or
procedures (including tax accounting policies and procedures); except as
may be required by law or generally accepted accounting principles;
(j) make any Tax election or permit any material insurance policy
naming it as a beneficiary or a loss payable payee to be cancelled or
terminated without notice to Purchasers, except in the ordinary course of
business and consistent with past practice;
(k) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof or any
material amount of assets; (ii) incur any indebtedness for borrowed money
or issue any debt securities or assume, guarantee or endorse, or otherwise
as an accommodation become responsible for, the obligations of
<PAGE> 37
29
any Person, or make any loans or advances, except in the ordinary course
of business and consistent with past practice; (iii) enter into any
contract or agreement other than in the ordinary course of business and
consistent with past practice; or (iv) authorize any single capital
expenditure which is in excess of $2,000,000 or capital expenditures which
are, in the aggregate, in excess of $9,000,000 for the Company and its
subsidiaries taken as a whole; or
(l) authorize or enter into an agreement to do any of the
foregoing.
SECTION 6.02 Access; Confidentiality. (a) From the date of this
Agreement until the Effective Time, upon reasonable prior notice to the Company,
the Company shall give Purchasers and their authorized representatives, and
Persons providing or committing to provide Purchasers with financing for the
Transactions and their representatives, reasonable access to its officers,
properties, books and records and shall furnish Purchasers and each of their
authorized representatives with such financial and operating data and other
information concerning the business and properties of the Company as Purchasers
from time to time may reasonably request.
(b) Purchasers will hold and will cause their respective
affiliates, agents and other representatives to keep all documents and
information concerning the Company furnished to Purchasers or their respective
representatives in connection with the Transactions confidential in accordance
with a confidentiality agreement dated March 10, 1997, between the Company and
Fremont Group L.L.C. and a confidentiality agreement dated March 11, 1997
between the Company and Richard C. Blum & Associates, L.P., which
confidentiality agreements shall remain in full force and effect until the
termination of this Agreement or otherwise in accordance with its terms.
SECTION 6.03 Preparation of Company Statement; Shareholders'
Meeting; Further Actions. (a) The Company shall file the Offer Documents and, if
required by law, the Company Statement with the SEC. Each Purchaser shall
cooperate with the Company in connection with the preparation of the Offer
Documents and the Company Statement including, but not limited to, furnishing to
the Company any and all information regarding such Purchaser and any of its
affiliates as may be required to be disclosed therein. The Company shall use its
commercially reasonable efforts to cause the Offer Documents and the Company
Statement to be mailed to the Company's shareholders as promptly as practicable
after the date hereof in the case of the Offer Documents or after the
consummation of the Offer in the case of the Company Statement.
(b) The Company shall as promptly as practicable notify Purchasers
of the receipt of any comments from the SEC. All filings by the Company with the
SEC and all mailings to the Company's shareholders in connection with the
Transactions, including the
<PAGE> 38
30
Offer Documents and the Company Statement, shall be subject to the prior review,
comment and approval of Purchasers (such approval not to be unreasonably
withheld or delayed).
(c) If required by applicable law in order to consummate the
Merger, the Company, acting through the Board, shall, in accordance with
applicable law and the Company's Articles of Incorporation and By-laws, (i) duly
call, give notice of, convene and hold an annual or special meeting of its
shareholders as soon as practicable following consummation of the Offer for the
purpose of considering and taking action on this Agreement and the Merger (the
"Shareholders' Meeting") and (ii) subject to its fiduciary duties under
applicable law as advised in writing by outside counsel, (A) include in the
Company Statement the unanimous recommendation of the Board that the
shareholders of the Company approve and adopt this Agreement and the Merger and
(B) use its best efforts to obtain such approval and adoption. At the
Shareholders' Meeting, Purchasers shall cause all Shares then owned by them and
their subsidiaries to be voted in favor of the approval and adoption of this
Agreement and the Merger.
(d) Subject to the terms and conditions of this Agreement and
applicable law, each of the parties shall act in good faith and use commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the Transactions as soon as practicable, including such actions
or things as any other party may reasonably request in order to cause any of the
conditions to such other party's obligation to consummate the Transactions to be
fully satisfied. Without limiting the foregoing, the parties shall (and shall
cause their respective subsidiaries, and use commercially reasonable efforts to
cause their respective affiliates, directors, officers, employees, agents,
attorneys, accountants and representatives, to) consult and fully cooperate with
and provide assistance to each other in (i) obtaining all necessary consents,
approvals, waivers, licenses, permits, authorizations, registrations,
qualifications, or other permission or action by, and giving all necessary
notices to and making all necessary filings with and applications and
submissions to any court, administrative agency or commission or other
governmental authority, or instrumentality, domestic or foreign (collectively,
"Governmental Entity") or other Person or entity as soon as reasonably
practicable after filing; (ii) make promptly its respective filings, and
thereafter make any other required submissions, under, seeking early termination
of any waiting period under, the HSR Act; (iii) providing all such information
concerning such party, its subsidiaries and its officers, directors, partners
and affiliates and making all applications and filings as may be necessary or
reasonably requested in connection with any of the foregoing; (iv) consummating
and making effective the transactions contemplated hereby; and (v) in the event
and to the extent required, amending this Agreement so that this Agreement and
the Offer and the Merger comply with Delaware Law and Texas Law. Prior to making
any application to or filing with any Governmental Entity or other Person or
entity in connection with this Agreement (other than filing under the HSR Act),
each party shall provide the other party with drafts thereof and afford the
other party a reasonable opportunity
<PAGE> 39
31
to comment on such drafts. If at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall use
their commercially reasonable efforts to take all such action.
SECTION 6.04 Public Announcements. The Company and Purchasers will
obtain the consent of one another prior to issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated hereby and shall not issue any such press release or make any
public statement prior to obtaining such consent, except as may be required by
applicable law or pursuant to the rules and regulations of the NASDAQ National
Market
SECTION 6.05 Recapitalization. The Company shall cooperate with any
reasonable requests of Purchasers or the SEC related to the reporting of the
Transactions as a recapitalization for financial reporting purposes including,
without limitation, to assist Purchasers and their affiliates with any
presentation to the SEC with regard to such reporting and to include appropriate
disclosure with regard to such reporting in all filings with the SEC and
mailings to the shareholders of the Company made in connection with the Offer or
the Merger. In furtherance of the foregoing, the Company shall provide to
Purchasers for the prior review of Purchasers' advisors any description of
Transactions which is meant to be disseminated.
SECTION 6.06 Acquisition Proposals. Neither the Company nor any of
its subsidiaries shall, directly or indirectly, through any officer, director,
agent or otherwise, solicit, initiate or encourage the submission of any
proposal or offer from any Person relating to any acquisition or purchase of all
or (other than in the ordinary course of business) any portion of the assets of,
or any equity interest in, the Company or any of its subsidiaries or any
recapitalization, business combination or similar transaction with the Company
or any of its subsidiaries (any communication with respect to the foregoing
being an "Acquisition Proposal") or participate in any negotiations regarding,
or furnish to any other Person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to do or seek any of the foregoing;
provided, however, that, at any time prior to the purchase of Shares by the
Company pursuant to the Offer, the Company may furnish information to, and
negotiate or otherwise engage in discussions with, any party who delivers a
written Acquisition Proposal which was not solicited or encouraged after the
date of this Agreement if the Board determines in good faith by a majority vote
(i) after consultation with and receipt of advice from its outside legal
counsel, that failing to take such action is reasonably determined to constitute
a breach of the fiduciary duties of the Board under applicable Law, (ii) after
consultation with and receipt of advice from a nationally recognized investment
banking firm, that such proposal is more favorable to the Company's Shareholders
from a financial point of view than the Transactions (including any adjustment
to the terms and conditions proposed by
<PAGE> 40
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Purchasers in response to such Acquisition Proposal), (iii) that sufficient
commitments have been obtained with respect to such Acquisition Proposal that
the Board reasonably expects a transaction pursuant to such Acquisition Proposal
could be consummated and (iv) that such Acquisition Proposal is not subject to
any regulatory approvals that could reasonably be expected to prevent
consummation. The Company will immediately cease all existing activities,
discussions and negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. From and after the execution of this Agreement, the
Company shall immediately advise Purchasers in writing of the receipt, directly
or indirectly, of any inquiries, discussions, negotiations, or proposals
relating to an Acquisition Proposal (including the specific terms thereof and
the identity of the other party or parties involved) and furnish to Purchasers
within 48 hours of such receipt an accurate description of all material terms
(including any changes or adjustments to such terms as a result of negotiations
or otherwise) of any such written proposal in addition to any information
provided to any third party relating thereto. In addition, the Company shall
immediately advise Purchasers, in writing, if the Board shall make any
determination as to any Acquisition Proposal as contemplated by the proviso to
the first sentence of this Section 6.06. Notwithstanding the foregoing, the
Company shall be permitted to take such actions as may be required to comply
with Rule 14e-2 of the Exchange Act.
SECTION 6.07 D&O Indemnification and Insurance. (a) From the
Effective Time through the sixth anniversary of the date on which the Effective
Time occurs, Purchasers shall cause the Surviving Corporation to indemnify and
hold harmless each present and former officer, director, employee or agent of
the Company, including, without limitation, each Person controlling any of the
foregoing Persons (the "Indemnified Parties"), against all claims, losses,
liabilities, damages, judgments, fines, fees, costs or expenses, including,
without limitation, attorneys' fees and disbursements (collectively, "Costs"),
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time (including, without limitation, this Agreement and the
transactions and actions contemplated hereby and giving effect to the
consummation of such transactions and actions), whether asserted or claimed
prior to, at or after the Effective Time, to the fullest extent permitted under
the Articles of Incorporation or By-Laws of the Company or indemnification
agreements in effect on the date hereof, including provisions relating to
advancement of expenses incurred in the defense of any claim, action, suit,
proceeding or investigation. Without limiting the foregoing, in the event that
any claim, action, suit, proceeding or investigation is brought against an
Indemnified Party (whether arising before or after the Effective Time), the
Indemnified Party may retain counsel satisfactory to such Indemnified Party and
Purchasers shall, or shall cause the Surviving Corporation to, advance the fees
and expenses of such counsel for the Indemnified Party in accordance with the
Articles of Incorporation or By-Laws of the Company in effect on the date of
this Agreement.
<PAGE> 41
33
(b) For a period of six years from the Effective Time, Purchasers
shall, or shall cause the Surviving Corporation to, keep in effect provisions in
its Articles of Incorporation and By-Laws of the Company providing for
exculpation of director and officer liability and its indemnification of the
Indemnified Parties to the fullest extent permitted under Texas Law, which
provisions shall not be amended except as required by applicable law or except
to make changes permitted by law that would enlarge the Indemnified Parties'
right to indemnification.
(c) Purchasers shall cause the Surviving Corporation to maintain,
at no expense to the beneficiaries, directors' and officers' liability insurance
("D&O Insurance") for the Indemnified Parties with respect to matters occurring
at or prior to the Effective Time, issued by a carrier or carriers assigned a
claims-paying ability rating by A.M. Best & Co. of "A (Excellent)" or higher,
providing at least the same coverage as the D&O Insurance currently maintained
by the Company and containing terms and conditions which are not materially less
favorable to the beneficiaries, for a period of at least six years from the
Effective Time; provided, however, that in no event shall the Surviving
Corporation be required to expend pursuant to this Section 6.07(c) more than an
amount per year equal to 200% of current annual premiums paid by the Company for
such insurance (which premiums the Company represents to be $134,480 per year in
aggregate). In the event any claim is made against present or former directors,
officers or employees of the Company that is covered or potentially covered by
insurance, neither the Surviving Corporation nor Purchasers shall do anything
that would forfeit, jeopardize, restrict or limit the insurance coverage
available for that claim until the final disposition thereof.
(d) Notwithstanding anything herein to the contrary, if any claim,
action, suit, proceeding or investigation (whether arising before, at or after
the Effective Time) is made against any Indemnified Party, on or prior to the
sixth anniversary of the Effective Time, the provisions of this Section 6.07
shall continue in effect until the final disposition of such claim, action,
suit, proceeding or investigation.
(e) In the event that the Surviving Corporation or Purchasers or
any of their respective successors or assigns (i) consolidates with or merges
into any other Person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
6.07, proper provision shall be made so that the successors and assigns of the
Surviving Corporation or Purchasers shall succeed to the obligations set forth
in this Section 6.08 and none of the actions described in clauses (i) or (ii)
shall be taken until such provision is made.
SECTION 6.08 Employee Benefits. (a) From and after the Effective
Time, Purchasers and the Surviving Corporation and their respective affiliates
will honor in
<PAGE> 42
34
accordance with their terms all existing employment, severance, consulting and
salary continuation agreements between the Company and any current or former
officer, director, employee or consultant of the Company.
(b) In the event that the Surviving Corporation or Purchasers or
any of their respective successors or assigns (i) consolidates with or merges
into any other Person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
6.08, proper provision shall be made so that the successors and assigns of the
Surviving Corporation or Purchasers shall succeed to the obligations set forth
in this Section 6.08 and none of the actions described in clauses (i) or (ii)
shall be taken until such provision is made.
SECTION 6.09 Fees and Expenses. (a) In the event the Merger is
consummated, all costs and expenses incurred by each party hereto in connection
with this Agreement and the Transactions (including, without limitation, fees
and disbursements of counsel, financial advisors and accountants) and
transaction fees of $5,119,000 to F Purchaser and $3,381,000 to B Purchaser
shall be paid by the Company or the Company shall promptly reimburse such party,
as the case may be.
(b) In the event the Fee is paid by the Company to Purchasers
pursuant to Section 8.03 the Company shall promptly reimburse Purchasers for all
costs and expenses incurred by Purchasers in connection with this Agreement and
the Transactions (including, without limitation, fees and disbursements of
counsel, financial advisors and accountants) in an amount not to exceed
$2,000,000.
(c) In all events other than those expressly described in Section
6.09(a) and (b), all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants) shall be borne by the party which incurs such cost or expense,
provided that all costs and expenses related to the preparation, printing,
filing and mailing (as applicable) of the Offer Documents, the Company Statement
and all SEC and other regulatory filing fees incurred in connection with the
Company Statement shall be borne equally by the Company, on the one hand, and
Purchasers, on the other hand.
SECTION 6.10 Debt Financing. Purchasers shall use their reasonable
best efforts to obtain Debt Financing or other alternative financing on
substantially comparable or more favorable terms. The Company shall use its
reasonable best efforts to cooperate with Purchasers in obtaining the Debt
Financing, including, without limitation, by participating in roadshows and
meeting with, and providing information to, potential sources of financing
identified by Purchasers.
<PAGE> 43
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SECTION 6.11 Headquarters of the Company. Purchasers shall use their
reasonable efforts to ensure that the headquarters of the Company shall be
situated in San Antonio, Texas until the third anniversary of the date of this
Agreement.
SECTION 6.12 Available Cash. As of the Closing, the assets of the
Company shall include $33,000,000 in cash of which $23,000,000 will be in
immediately available cash held by the Company or any of its direct or indirect
subsidiaries incorporated in the United States in an account at a commercial
bank located in the United States and available for use in consummating the
Offer as adjusted to reflect any amounts paid by the Company pursuant to any
agreement entered into by the Company to purchase the assets of RIK Medical,
L.L.C. and RIK Medical East, L.L.C. net of any cash included in such assets.
SECTION 6.13 Options. To the extent that any holders of Options
elect to surrender such Options for payment in accordance with Section 3.07, the
parties agree that proceeds of the Debt and Financing and the Equity Financing
shall be used to make such payments to the holders of Options who so elect.
ARTICLE VII
CONDITIONS
SECTION 7.01. Conditions to the Stock Purchase. (a) The respective
obligations of each party to effect the Stock Purchase shall be subject to the
satisfaction at or prior to the Closing Date of the following condition:
(i) No Order. No United States or state governmental authority or
other agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in
effect and has the effect of making the acquisition of Shares by
Purchasers or any affiliate of any of them illegal or otherwise
restricting, preventing or prohibiting consummation of the Transactions.
(ii) Offer. The conditions to the Offer set forth in Annex A shall
have been satisfied and the Company shall simultaneously with the Closing
purchase all Shares validly tendered and not withdrawn pursuant to the
Offer.
(b) The obligation of the Company to effect the Stock Purchase is
also subject to the satisfaction at or prior to the Closing Date of each of the
following additional conditions, unless waived by the Company:
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36
(i) Accuracy of Representations and Warranties. All
representations and warranties made by Purchasers herein shall be true and
correct in all material respects (except for representations qualified by
materiality or Material Adverse Effect which shall be correct in all
respects) on the Closing Date, with the same force and effect as though
such representations and warranties had been made on and as of the Closing
Date, except for changes permitted or contemplated by this Agreement and
except for representations and warranties that are made as of a specified
date or time, which shall be true and correct in all material respects
(except for representations qualified by materiality or Material Adverse
Effect which shall be correct in all respects) only as of such specific
date or time.
(ii) Compliance with Covenants. Each Purchaser shall have
performed in all material respects all obligations and agreements, and
complied in all material respects with covenants, contained in this
Agreement to be performed or complied with by it prior to or on the
Closing Date.
(iii) Officer's Certificates. The Company shall have received
such certificates of each Purchaser, dated as of the Closing Date, signed
by an executive officer of such Purchaser to evidence satisfaction of the
conditions set forth in this Article VII (insofar as it relates to
Purchasers) as may be reasonably requested by the Company.
(c) The obligation of Purchasers to effect the Stock Purchase is
also subject to the satisfaction at or prior to the Closing Date of each of the
following additional conditions, unless waived by Purchasers:
(i) Accuracy of Representations and Warranties. All
representations and warranties made by the Company herein shall be true
and correct in all material respects (except for representations qualified
by materiality or Material Adverse Effect which shall be correct in all
respects) on the Closing Date, with the same force and effect as though
such representations and warranties had been made on and as of the Closing
Date, except for changes permitted or contemplated by this Agreement and
except for representations and warranties that are made as of a specified
date or time, which shall be true and correct in all material respects
(except for representations qualified by materiality or Material Adverse
Effect which shall be correct in all respects) only as of such specific
date or time.
(ii) Compliance with Covenants. The Company shall have
performed in all material respects all obligations and agreements, and
complied in all material respects with covenants, contained in this
Agreement to be performed or complied with by it prior to or on the
Closing Date.
<PAGE> 45
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(iii) Officer's Certificates. Each Purchaser shall have
received such certificates of the Company, dated as of the Closing Date,
signed by an executive officer of the Company to evidence satisfaction of
the conditions set forth in this Article VII (insofar as it relates to the
Company) as may be reasonably requested by the Company.
(iv) Directors Resignations. All Directors of the Company
shall have tendered their resignations effective as of the Closing and
shall have been replaced by nominees acceptable to Purchasers.
SECTION 7.02. Conditions to the Merger. (a) The respective
obligations of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(i) Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the
affirmative vote of the shareholders of the Company to the extent required
by Texas Law and the Articles of Incorporation of the Company;
(ii) No Order. No United States or state governmental
authority or other agency or commission or United States or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any law, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent) which is then
in effect and has the effect of making the acquisition of Shares by
Purchasers or any affiliate of any of them illegal or otherwise
restricting, preventing or prohibiting consummation of the Transactions;
and
(iii) Stock Purchase. Purchasers shall have purchased,
respectively, the F Shares and the B Shares pursuant to the Stock
Purchase.
(b) The obligation of the Company to effect the Merger is also
subject to the satisfaction at or prior to the Closing Date of each of the
following additional conditions, unless waived by the Company:
(i) Accuracy of Representations and Warranties. All
representations and warranties made by Purchasers herein shall be true and
correct in all material respects (except for representations qualified by
materiality or Material Adverse Effect which shall be correct in all
respects) at the Effective Time, with the same force and effect as though
such representations and warranties had been made on and as of the
Effective Time, except for changes permitted or contemplated by this
Agreement and except for representations and warranties that are made as
of a specified date or time, which shall be true and correct in all
material respects (except
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38
for representations qualified by materiality or Material Adverse Effect
which shall be correct in all respects) only as of such specific date or
time.
(ii) Compliance with Covenants. Each Purchaser shall have
performed in all material respects all obligations and agreements, and
complied in all material respects with covenants, contained in this
Agreement to be performed or complied with by it prior to or as of the
Effective Time.
(iii) Officer's Certificates. The Company shall have received
such certificates of Purchasers, dated as of the Effective Time, signed by
an executive officer of each Purchaser to evidence satisfaction of the
conditions set forth in this Article VII (insofar as it relates to
Purchasers) as may be reasonably requested by the Company.
(c) The obligation of Purchasers to effect the Merger is also
subject to the satisfaction at or prior to the Closing Date of each of the
following additional conditions, unless waived by Purchasers:
(i) Accuracy of Representations and Warranties. All
representations and warranties made by the Company herein shall be true
and correct in all material respects (except for representations qualified
by materiality or Material Adverse Effect which shall be correct in all
respects) as of the Effective Time, with the same force and effect as
though such representations and warranties had been made on and as of the
Effective Time, except for changes permitted or contemplated by this
Agreement and except for representations and warranties that are made as
of a specified date or time, which shall be true and correct in all
material respects (except for representations qualified by materiality or
Material Adverse Effect which shall be correct in all respects) only as of
such specific date or time.
(ii) Compliance with Covenants. The Company shall have
performed in all material respects all obligations and agreements, and
complied in all material respects with covenants, contained in this
Agreement to be performed or complied with by it prior to or as of the
Effective Time.
(iii) Officer's Certificates. Each Purchaser shall have
received such certificates of the Company, dated as of the Effective Time,
signed by an executive officer of the Company to evidence satisfaction of
the conditions set forth in this Article VII (insofar as it relates to the
Company) as may be reasonably requested by the Company.
ARTICLE VIII
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TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the
Transactions may be abandoned at any time prior to the Effective Time, as the
case may be, notwithstanding any requisite approval and adoption of this
Agreement and the transactions contemplated hereby by the shareholders of the
Company:
(a) By mutual written consent duly authorized by the Board of
Directors or Managers of each Purchaser and the Company; or
(b) By either Purchaser or the Company if (i) the Closing
shall not have occurred by January 31, 1998 or (ii) the Effective Time
shall not have occurred on or before May 31, 1998; provided, however,
that the right to terminate this Agreement under this Section 8.01(b)
shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in,
the failure of the Closing or the Effective Time, as the case may be,
to occur on or before such dates or (ii) any court of competent
jurisdiction in the United States or other United States governmental
authority shall have issued an order, decree, ruling or taken any other
action restraining, enjoining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
nonappealable; or
(c) By either Purchaser if (i) due to an occurrence or
circumstance that would result in a failure to satisfy any condition
set forth in Annex A hereto, the Company shall have (A) failed to
commence the Offer within 10 business days following the date of this
Agreement, (B) terminated the Offer without having accepted any Shares
for payment thereunder or (C) failed to pay for Shares pursuant to the
Offer within 60 days following the commencement of the Offer, unless
such failure to pay for Shares shall have been caused by or resulted
from the failure of Purchasers to perform in any material respect any
material covenant or agreement of either of them contained in this
Agreement or the material breach by Purchasers of any material
representation or warranty of either of them contained in this
Agreement or (ii) prior to the purchase of Shares pursuant to the
Offer, the Board or any committee thereof shall have withdrawn or
modified in a manner adverse to Purchasers its approval or
recommendation of the Offer, this Agreement, the Transactions or shall
have recommended another transaction pursuant to any Acquisition
Proposal, or shall have resolved to do any of the foregoing; or
(d) By the Company, upon approval of the Board, if (i) due to
an occurrence or circumstance that would result in a failure to satisfy
any of the conditions set forth in Annex A hereto, the Company shall
have (A) failed to commence the Offer within 10 business days following
the date of this Agreement,
<PAGE> 48
40
(B) terminated the Offer without having accepted any Shares for payment
thereunder or (C) failed to pay for Shares pursuant to the Offer within 60
days following the commencement of the Offer, unless such failure to pay
for Shares shall have been caused by or resulted from the failure of the
Company to perform in any material respect any material covenant or
agreement of it contained in this Agreement or the material breach by the
Company of any material representation or warranty of it contained in this
Agreement or (ii) prior to the purchase of Shares pursuant to the Offer,
the Board shall have withdrawn or modified in a manner adverse to
Purchasers its approval or recommendation of the Offer, this Agreement or
the Transactions in order to approve the execution by the Company of a
definitive agreement concerning a transaction pursuant to an Acquisition
Proposal.
SECTION 8.02. Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 8.01, this Agreement shall forthwith
become void, and there shall be no liability on the part of any party hereto,
except (i) as set forth in Sections 6.02(b), 8.03 and 9.01 and (ii) nothing
herein shall relieve any party from liability for any breach hereof.
SECTION 8.03. Fees. Notwithstanding the provisions of Section 6.10,
in the event that
(a) any Person shall have commenced, publicly proposed or
communicated to the Company a proposal that is publicly disclosed for a
tender or exchange offer for 20% or more (or which, assuming the maximum
amount of securities which could be purchased, would result in any Person
beneficially owning 20% or more) of the then outstanding Shares or
otherwise for the direct or indirect acquisition of the Company or all or
substantially all of its assets for per Share consideration having a value
greater than the Per Share Amount and (w) the Offer shall have remained
open for at least 20 business days, (x) the Minimum Condition shall not
have been satisfied, (y) this Agreement shall have been terminated
pursuant to Section 8.01 and (z) within 12 months of any such termination
a transaction such as the transaction contemplated by this Section 8.03(a)
shall have been consummated or definitive documentation shall have been
entered into with respect thereto; or
(b) this Agreement is terminated pursuant to Section
8.01(c)(ii) or 8.01(d)(ii);
then, in any such event, the Company shall pay Purchasers (i) prior to such
consummation or entering into of definitive documentation in the case of
paragraph (a) or (ii) prior to such withdrawal or modification in the case of
termination pursuant to paragraph (b), a fee of $30 million (the "Fee").
<PAGE> 49
41
SECTION 8.04. Amendment. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; provided, however, that,
after the approval and adoption of this Agreement and the transactions
contemplated hereby by the shareholders of the Company, no amendment may be made
which would reduce the amount or change the type of consideration into which
each Share shall be converted upon consummation of the Merger. This Agreement
may not be amended except by an instrument in writing signed by the parties
hereto.
SECTION 8.05. Waiver. At any time prior to the Effective Time, any
party hereto may (i) extend the time for the performance of any obligation or
other act of any other party hereto, (ii) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any agreement or condition
contained herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
ARTICLE X
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.01, as the case may be, except that the agreements set
forth in Article III and Sections 6.08 and 6.09 shall survive the Effective Time
indefinitely and those set forth in Sections 6.02(b) and 8.03 shall survive
termination indefinitely.
SECTION 9.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 9.02):
<PAGE> 50
42
if to F Purchaser:
Fremont Purchasers II, Inc.
50 F Street, Suite 3700
San Francisco, California 94105-1895
Facsimile No: (415) 284-8191
Attention: General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Facsimile No: (212) 848-7179
Attention: David W. Heleniak, Esq.
if to B Purchaser:
RCBA Purchaser I, L.P.
909 Montgomery Street, Suite 400
San Francisco, California 94133-4625
Facsimile No.: (415) 434-3130
Attention: Murray Indick, Esq., General Counsel
with a copy to:
Wilmer Cutler & Pickering
2445 M Street, NW
Washington, DC 20037
Facsimile No.: (202) 663-6363
Attention: Michael Klein, Esq.
if to the Company:
Kinetic Concepts, Inc.
8023 Vantage Drive
San Antonio, Texas 78230-4726
Facsimile No.: (210) 255-6993
Attention: Dennis E. Noll, Esq., General Counsel
<PAGE> 51
43
with a copy to:
Cox & Smith
112 East Pecan Street, Suite 1800
San Antonio, Texas 78205-1521
Facsimile No.: (210) 226-8395
Attention: Stephen Seidel, Esq.
SECTION 9.03. Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a specified Person means a Person who
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such specified Person;
(b) "beneficial owner" with respect to any Shares means a
Person who shall be deemed to be the beneficial owner of such Shares (i)
which such Person or any of its affiliates or associates (as such term is
defined in Rule 12b-2 of the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such Person or any of its affiliates or associates
has, directly or indirectly, (A) the right to acquire (whether such right
is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other Persons with whom such Person or any of its
affiliates or associates or Person with whom such Person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any Shares;
(c) "business day" means any day on which the principal
offices of the SEC in Washington, D.C. are open to accept filings, or, in
the case of determining a date when any payment is due, any day on which
banks are not required or authorized to close in the City of New York;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "Knowledge" means the actual knowledge, after due
investigation, of the officers of the Company with a title of vice
president or higher;
<PAGE> 52
44
(f) "Material Adverse Effect" means any change or effect or
any event or circumstance which is, or is reasonably likely to be,
materially adverse to the assets, liabilities, business, financial
condition or results of operations of the Company and its subsidiaries
taken as a whole;
(g) "Person" means an individual, corporation, partnership,
limited partnership, syndicate, person (including, without limitation, a
"person" as defined in Section 13(d)(3) of the Exchange Act), trust,
association or entity or government, political subdivision, agency or
instrumentality of a government; and
(h) "subsidiary" or "subsidiaries" of the Company, the
Surviving Corporation, either of Purchasers or any other person means an
affiliate controlled by such person, directly or indirectly, through one
or more intermediaries.
SECTION 9.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05. Entire Agreement; Assignment. This Agreement and the
Shareholder Support Agreement constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement shall not be assigned by
operation of law or otherwise, except that Purchasers may assign all or any of
their rights and obligations hereunder to any affiliate or affiliates of either
of Purchasers provided that no such assignment shall relieve the assigning party
of its obligations hereunder if such assignee does not perform such obligations.
SECTION 9.06. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.07 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
SECTION 9.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not
<PAGE> 53
45
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.08. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware applicable
to contracts executed in and to be performed in that State. All actions and
proceeding arising out of or relating to this Agreement shall be heard and
determined in any Delaware state or federal court. THE COMPANY AND PURCHASERS
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVER ANY RIGHT THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENT (VERBAL OR WRITTEN) OR ACTION OF THE COMPANY OR PURCHASERS.
SECTION 9.09. Joint and Several Obligations. The obligations of
Purchasers under this Agreement shall be joint and several except that neither
Purchaser shall have any obligation or liability with respect to the portion of
the Equity Financing to be provided by the other Purchaser in accordance with
Section 5.06.
SECTION 9.10. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.11. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
<PAGE> 54
46
IN WITNESS WHEREOF, Purchasers and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
FREMONT PURCHASER II, INC.
By /s/ R. S. Kopf
--------------------------------
Title:
RCBA PURCHASER I, L.P.
By /s/ N. Colin Lind
--------------------------------
Title: Managing Director
KINETIC CONCEPTS, INC.
By /s/ Raymond R. Hannigan
--------------------------------
Title: President and Chief
Executive Officer
<PAGE> 55
ANNEX A
Conditions to the Offer
Notwithstanding any other provision of the Offer, the Company shall
not be required to accept for payment or pay for any Shares tendered pursuant to
the Offer, if (v) the Minimum Condition shall not have been satisfied, (w) any
applicable waiting period under the HSR Act shall not have expired or been
terminated prior to the expiration of the Offer, (x) the Debt Financing shall
not have been obtained, (y) the Closing shall not have occurred or (z) at any
time on or after the date of this Agreement, and prior to the acceptance for
payment of Shares, any of the following conditions shall exist:
(a) there shall be instituted or be pending any action or
proceeding before any court or governmental, administrative or regulatory
authority or agency, domestic or foreign, in each case that has a
reasonable likelihood of success notwithstanding the reasonable efforts of
the Company and Purchasers to dismiss or otherwise terminate such action
or proceeding, (i) challenging or seeking to make illegal, materially
delay or otherwise directly or indirectly restrain or prohibit or make
materially more costly the making of the Offer, the acceptance for payment
of, or payment for, any Shares by the Company, Purchasers or any affiliate
of either of Purchasers, or the consummation of any other Transaction, or
seeking to obtain material damages in connection with any Transaction;
(ii) seeking to prohibit or limit materially the ownership or operation by
the Company, Purchasers or any of their affiliates of all or any material
portion of the business or assets of the Company, Purchasers or any of
their affiliates, or to compel the Company, Purchasers or any of their
affiliates to dispose of or hold separate all or any material portion of
the business or assets of the Company, Purchasers or any of their
affiliates, as a result of the Transactions; (iii) seeking to impose or
confirm limitations on the ability of Purchasers or any of their
affiliates to exercise effectively full rights of ownership of any Shares,
including, without limitation, the right to vote any Shares acquired by
Purchaser pursuant to the Stock Purchase or the Shareholder Support
Agreement or otherwise on all matters properly presented to the Company's
shareholders, including, without limitation, the approval and adoption of
this Agreement and the transactions contemplated hereby; or (iv) seeking
to require divestiture by Purchasers or any of their affiliates;
(b) there shall have been any action taken, or any statute,
rule, regulation, legislation, interpretation, judgment, order or
injunction enacted, entered, enforced, promulgated, amended, issued or
deemed applicable to (i) Purchasers, the Company or any of their
affiliates or (ii) any Transaction, by any legislative body,
<PAGE> 56
A-2
court, government or governmental, administrative or regulatory
authority or agency, domestic or foreign, other than the routine
application of the waiting period provisions of the HSR Act to the
Offer, which is reasonably likely to result, directly or indirectly, in
any of the consequences referred to in clauses (i) through (v) of
paragraph (a) above;
(c) there shall have occurred any change, condition, event or
development that has a Material Adverse Effect on the Company;
(d) there shall have occurred (i) any general suspension of,
or limitation on prices for, trading in securities on any national
securities exchange, the NASDAQ National Market, or the
over-the-counter market in the United States, (ii) any decline,
measured from the date hereof, in the Standard & Poor's 500 Index by an
amount in excess of 15%, (iii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States,
(iv) any limitation (whether or not mandatory) by any government or
governmental, administrative or regulatory authority or agency,
domestic or foreign, on, or other event that, in the reasonable
judgment of Purchasers, might affect, the extension of credit by banks
or other lending institutions, (v) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States or (vi) in the case of any of
the foregoing existing on the date hereof, a material acceleration or
worsening thereof;
(e) (i) it shall have been publicly disclosed or Purchasers
shall have otherwise learned that beneficial ownership (determined for
the purposes of this paragraph as set forth in Rule 13d-3 of the
Exchange Act) of 20% or more of the then outstanding Shares has been
acquired by any person, other than Purchasers or any of either of their
affiliates or (ii) (A) the Board or any committee thereof shall have
withdrawn or modified in a manner adverse to Purchasers the approval or
recommendation of the Offer or the Transactions, or approved or
recommended any takeover proposal or any other acquisition of Shares
other than pursuant to the Transactions or (B) the Board or any
committee thereof shall have resolved to do any of the foregoing;
(f) the Merger Agreement shall have been terminated in
accordance with its terms;
(g) Purchasers and the Company shall have agreed that the
Company shall terminate the Offer or postpone the acceptance for
payment of or payment for Shares thereunder; or
<PAGE> 57
A-3
(h) The Company shall have received Houlihan Lokey's written
opinion, which opinion shall not have been withdrawn, addressed to the
Board and the Purchasers with respect to solvency and related matters in
form and substance reasonably satisfactory to the Board and Purchasers.
The parties acknowledge that the Conditions to the Offer set forth above in this
Annex A are for the benefit of the Purchasers and the Company and that the
Company shall not assert failure of, or waive, any such condition without the
prior written consent of each Purchaser (which consent shall not be unreasonably
withheld).
<PAGE> 58
EXHIBIT A
RESTATED ARTICLES OF INCORPORATION
(WITH AMENDMENTS)
OF KINETIC CONCEPTS, INC.
ARTICLE ONE
Kinetic Concepts, Inc., pursuant to the provisions of Article 4.07
of the Texas Business Corporation Act ("TBCA"), hereby adopts restated articles
of incorporation that accurately copy the articles of incorporation and all
amendments thereto that are in effect to date and as further amended by such
restated articles of incorporation as hereinafter set forth and that contain no
other change in any provisions thereof.
ARTICLE TWO
The articles of incorporation of the corporation are amended by the
restated articles of incorporation as follows:
Article Three of the Articles of Incorporation is amended by the restated
articles of incorporation of the corporation to read as follows:
"ARTICLE THREE
The purpose for which the Corporation is organized is to transact
any or all lawful business for which corporations may be organized under
the Texas Business Corporation Act; provided, however, that the
corporation shall not transact any business in this state that is
prohibited by Article 2.01-B of the Texas Business Corporation Act."
Article Four of the Articles of Incorporation is amended by the restated
articles of incorporation of the corporation to read as follows:
"ARTICLE FOUR
The total number of shares of all classes of stock that the
Corporation is authorized to issue is [one hundred fifty million
(150,000,000) shares], all of which shall be shares of Common Stock, par
value $.001 per share."
Article Six has been redesignated Article Ten and amended by the restated
articles of incorporation of the corporation to read as follows:
<PAGE> 59
2
"ARTICLE TEN
The street address of the registered office of the Corporation is
[ ], and the name of the registered agent of the Corporation at such
address is [ ]."
Article Seven has been redesignated as paragraph (2) of Article Eight and
amended by the restated articles of incorporation of the corporation to
read as follows:
"(2) To the extent permitted by the Texas Business Corporation Act
as it now exists and as it may hereafter be amended, a Director of the
Corporation shall not be personally liable to the Corporation or its
shareholders for monetary damages for an act or omission in the Director's
capacity as a director, except for liability for (a) a breach of the
Director's duty of loyalty to the Corporation or its shareholders, (b) an
act or omission not in good faith that constitutes a breach of duty of the
Director to the Corporation or an act or omission that involves
intentional misconduct or a knowing violation of the law, (c) a
transaction from which the Director received an improper benefit, whether
or not the benefit resulted from an action taken within the scope of the
Director's office, or (d) an act or omission for which the liability for
the Director is expressly provided for by statute."
Article Eight has been redesignated Article Nine and amended by the
restated articles of incorporation of the corporation to read as follows:
"ARTICLE NINE
The current board of directors of the Corporation [at the time of
filing] [at the time of execution] of these Amended and Restated Articles
of Incorporation consists of eight (8) directors. The names and address of
the persons who are acting [at the time of filing] [at the time of
execution] of these Amended and Restated Articles of Incorporation in the
capacity of directors until the selection of their successors are:
NAME ADDRESS
[ ] [ ]
[ ] [ ]
[ ] [ ]
<PAGE> 60
3
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]"
Article Nine has been redesignated Article Six and amended by the restated
articles of incorporation of the corporation to read as follows:
"ARTICLE SIX
No shareholder or other holder of securities of the Corporation
shall have any preemptive right to acquire additional, unissued or
treasury shares of the Corporation, or securities of the Corporation
convertible into or carrying a right to subscribe to or acquire shares,
except as provided by any agreement between the Corporation and its
shareholders."
Articles Ten and Eleven have been deleted in their entirety by the
amendments effected by the restated articles of incorporation of the
corporation .
The Articles of Incorporation are further amended by the restated articles
of incorporation of the corporation by adding new Article Seven and
paragraph (1) to Article Eight to read as follows:
"ARTICLE SEVEN
(1) With respect to any matter for which, but for this provision,
the affirmative vote of the holders of two-thirds of the shares entitled
to vote is required by the Act, the act of the shareholders on that matter
shall be the affirmative vote of a majority of the shares entitled to vote
on that matter rather than the affirmative vote otherwise required by the
Act. With respect to any matter for which, but for this provision, the
affirmative vote of the holders of two-thirds of the shares of any class
or series is required by the Act, the act of the shareholders on that
matter shall be the affirmative vote of a majority of the shares of that
class or series rather than the affirmative vote of the holders of shares
of that class or series otherwise required by the Act.
(2) Any action required by the Texas Business Corporation Act to be
taken at any annual or special meeting of shareholders, or any action
which
<PAGE> 61
4
may be taken at any annual or special meeting of shareholders, may be
taken without a meeting, without prior notice, and without a vote, if a
consent or consents in writing, setting forth the action so taken shall be
signed by the holder or holders of all shares entitled to vote on the
action were present and voted.
ARTICLE EIGHT
(1) Elections of directors of the Corporation need not be by written
ballot, except and to the extent provided in the By-laws of the
Corporation."
The Articles of Incorporation are further amended by the restated articles
of incorporation of the corporation by adding new Articles Eleven and
Twelve to read as follows:
"ARTICLE ELEVEN
(1) The Corporation reserves the right to amend, alter, change or
repeal any provision of these Articles of Incorporation, in the manner now
or hereafter prescribed by law, and all rights conferred on shareholders
in these Articles of Incorporation are subject to this reservation.
(2) The By-laws of the Corporation may be amended, repealed or
adopted by the affirmative vote of the holders of a majority of shares
then entitled to vote on such action. The Board of Directors shall not
have the power to amend, repeal or adopt any By-law of the Corporation.
<PAGE> 62
5
ARTICLE TWELVE
The Corporation shall indemnify its directors to the fullest extent
provided by the Texas Business Corporation act, as amended."
ARTICLE THREE
Each such amendment made by the restated articles of incorporation
has been effected in conformity with the provisions of the Texas Business
Corporation Act and such restated articles of incorporation and each such
amendment made by the restated articles of incorporation were duly adopted by
the shareholders of the corporation on the ___ day of ________, 199_.
ARTICLE FOUR
The number of shares outstanding was ________, and the number of
shares entitled to vote on the restated articles of incorporation as so amended
was ________. All of the shareholders have signed a written consent to the
adoption of such restated articles of incorporation as so amended pursuant to
Article 9.10(A) of the TBCA and any written notice required by Article 9.10(A)
of the TBCA has been given.
ARTICLE FIVE
The articles of incorporation and all amendments and supplements
thereto are hereby superseded by the following restated articles of
incorporation which accurately copy the entire text thereof and as amended as
above set forth:
"AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
KINETIC CONCEPTS, INC.
ARTICLE ONE
The name of the corporation (which is hereinafter called the
"Corporation") is Kinetic Concepts, Inc.
ARTICLE TWO
The period of duration of the Corporation is perpetual.
<PAGE> 63
6
ARTICLE THREE
The purpose for which the Corporation is organized is to transact
any or all lawful business for which corporations may be organized under the
Texas Business Corporation Act; provided, however, that the corporation shall
not transact any business in this state that is prohibited by Article 2.01-B of
the Texas Business Corporation Act.
ARTICLE FOUR
The total number of shares of all classes of stock that the
Corporation is authorized to issue is [one hundred fifty million (150,000,000)
shares], all of which shall be shares of Common Stock, par value $.001 per
share.
ARTICLE FIVE
The Corporation will not commence business until it has received for
the issuance of its shares consideration of the value of at least One Thousand
Dollars ($1,000.00), consisting of money, labor done or property actually
received.
ARTICLE SIX
No shareholder or other holder of securities of the Corporation
shall have any preemptive right to acquire additional, unissued or treasury
shares of the Corporation, or securities of the Corporation convertible into or
carrying a right to subscribe to or acquire shares, except as provided by any
agreement between the Corporation and its shareholders.
ARTICLE SEVEN
(1) With respect to any matter for which, but for this provision,
the affirmative vote of the holders of two-thirds of the shares entitled to vote
is required by the Act, the act of the shareholders on that matter shall be the
affirmative vote of a majority of the shares entitled to vote on that matter
rather than the affirmative vote otherwise required by the Act. With respect to
any matter for which, but for this provision, the affirmative vote of the
holders of two-thirds of the shares of any class or series is required by the
Act, the act of the shareholders on that matter shall be the affirmative vote of
a majority of the shares of that class or series rather than the affirmative
vote of the holders of shares of that class or series otherwise required by the
Act.
(2) Any action required by the Texas Business Corporation Act to be
taken at any annual or special meeting of shareholders, or any action which may
be taken at any annual or special meeting of shareholders, may be taken without
a meeting, without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so
<PAGE> 64
7
taken shall be signed by the holder or holders of shares having not less than
the minimum number of votes that would be necessary to take such action at a
meeting at which the holders of all shares entitled to vote on the action were
present and voted.
ARTICLE EIGHT
(1) Elections of directors of the Corporation need not be by written
ballot, except and to the extent provided in the By-laws of the Corporation.
(2) To the extent permitted by the Texas Business Corporation Act as
it now exists and as it may hereafter be amended, a Director of the Corporation
shall not be personally liable to the Corporation or its shareholders for
monetary damages for an act or omission in the Director's capacity as a
director, except for liability for (a) a breach of the Director's duty of
loyalty to the Corporation or its shareholders, (b) an act or omission not in
good faith that constitutes a breach of duty of the Director to the Corporation
or an act or omission that involves intentional misconduct or a knowing
violation of the law, (c) a transaction from which the Director received an
improper benefit, whether or not the benefit resulted from an action taken
within the scope of the Director's office, or (d) an act or omission for which
the liability for the Director is expressly provided for by statute.
[Any repeal or modification of all or part of this article Eight by
the shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.]
ARTICLE NINE
The current board of directors of the Corporation [at the time of
filing] [at the time of execution] of these Amended and Restated Articles of
Incorporation consists of eight (8) directors. The names and address of the
persons who are acting [at the time of filing] [at the time of execution] of
these Amended and Restated Articles of Incorporation in the capacity of
directors until the selection of their successors are:
NAME ADDRESS
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
<PAGE> 65
8
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
ARTICLE TEN
The street address of the registered office of the Corporation is
[ ], and the name of the registered agent of the Corporation at such address
is [ ].
ARTICLE ELEVEN
(1) The Corporation reserves the right to amend, alter, change or repeal
any provision of these Articles of Incorporation, in the manner now or hereafter
prescribed by law, and all rights conferred on shareholders in these Articles of
Incorporation are subject to this reservation.
(2) The By-laws of the Corporation may be amended, repealed or adopted by
the affirmative vote of the holders of a majority of shares then entitled to
vote on such action. The Board of Directors shall not have the power to amend,
repeal or adopt any By-law of the Corporation.
ARTICLE TWELVE
The Corporation shall indemnify its directors to the fullest extent
provided by the Texas Business Corporation act, as amended.
--------------------------
Name:
Title:"
<PAGE> 66
EXHIBIT B
AMENDED AND RESTATED
BY-LAWS
OF
KINETIC CONCEPTS, INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of the Corporation
shall be in the City of San Antonio, Texas.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Texas as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
SHAREHOLDERS
Section 1. Time and Place of Meeting. All meetings of the
shareholders shall be held at such time and at such place within or without the
State of Texas as shall be determined by the Board of Directors.
Section 2. Annual Meetings. The annual meeting of shareholders of
the Corporation for the election of directors of the Corporation, and for the
transaction of such other business as may properly come before such meeting,
shall be held at such place, date and time as shall be fixed by the Board and
designated in the notice or waiver of notice of such annual meeting.
Section 3. Special Meetings. Special meetings of the shareholders
may be called at any time by the President or the Board of Directors, and shall
be called by the President or Secretary at the request in writing of the holders
of not less than fifty percent (50%) of all the shares issued, outstanding and
entitled to vote at the meeting. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at special meetings shall
be confined to the purposes stated in the notice of the meeting.
Section 4. Notice. Written or printed notice stating the place, day
and hour of any shareholders' meeting, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President,
Secretary, or the officer or person calling the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be
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2
delivered when deposited in the United States mail, postage prepaid, to the
shareholder at his address as it appears on the stock transfer books of the
Corporation.
Section 5. Record Date. The Board of Directors may fix in advance a
record date for the purpose of determining shareholders entitled to notice of or
to vote at a meeting of shareholders, such record date to be not less than ten
(10) nor more than sixty (60) days prior to such meeting, or the Board of
Directors may close the stock transfer books for such purpose for a period of
not less than ten (10) nor more than sixty (60) days prior to such meeting. In
the absence of any action by the Board of Directors, the date upon which the
notice of the meeting is mailed shall be the record date.
Section 6. List of Shareholders. The officer or agent of the
Corporation having charge of the share transfer records for shares of the
Corporation shall make, at least ten (10) days before each meeting of the
shareholders, a complete list of the shareholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of voting shares held by each, which list, for a
period of ten (10) days prior to such meeting, shall be kept on file at the
registered office of the Corporation and shall be subject to inspection by any
such shareholder at any time during the usual business hours. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole time of the
meeting. The original share transfer records shall be prima facie evidence as to
who are the shareholders entitled to examine such list or transfer books or to
vote at any meetings of shareholders.
Section 7. Quorum. Except as otherwise provided by law or the
Articles of Incorporation, the holders of a majority of the issued and
outstanding shares and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by the
Texas Business Corporation Act (herein called the "Act"). If, however, such
quorum shall not be present or represented at any meeting of the shareholders,
the shareholders entitled to vote, present in person or represented by proxy,
shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented. When any adjourned meeting is reconvened and a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. Once a quorum is constituted,
the shareholders present or represented by proxy at a meeting may continue to
transact business until adjournment, notwithstanding the subsequent withdrawal
therefrom of such number of shareholders as to leave less than a quorum.
Section 8. Voting. When a quorum is present at any meeting, the vote
of the holders of a majority of the shares present or represented by proxy at
such meeting and
<PAGE> 68
3
entitled to vote shall be the act of the shareholders, unless the vote of a
different number is required by the Act, the Articles of Incorporation or these
By-Laws.
Section 9. Proxy. Each shareholder shall at every meeting of the
shareholders be entitled to one vote in person or by proxy for each share having
voting power held by such shareholder. Every proxy must be executed in writing
by the shareholder or by his duly authorized attorney-in-fact, and shall be
filed with the Secretary of the Corporation prior to or at the time of the
meeting. No proxy shall be valid after eleven months from the date of its
execution unless otherwise provided therein. Each proxy shall be revocable
unless expressly provided therein to be irrevocable and unless otherwise made
irrevocable by law.
Section 10. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof, and such consent shall have the same force and effect as a
unanimous vote of shareholders.
Section 11. Meetings by Conference Telephone. Shareholders may
participate in and hold meetings of shareholders by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in such a
meeting shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transactions of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE III
DIRECTORS
Section 1. Numbers of Directors. The Corporation shall have no less
than one and no more than ten directors as may be provided from time to time by
a resolution of the Board of Directors or by a vote of the holders of a majority
of shares then entitled to vote in the election of Directors, but no decrease
shall have the effect of reducing the term of any incumbent Director. Directors
shall be elected at the annual meeting of the shareholders, except as provided
in Section 2 of this Article, and each director shall hold office until his
successor is elected and qualified. Directors need not be shareholders of the
Corporation or residents of the State of Texas. Except as otherwise provided by
any agreement between the Corporation and its shareholders, any or all of the
Directors may be removed, with or without cause, by the shareholders, at any
time, by a vote of the holders of a majority of the shares then entitled to vote
in the election of Directors, provided that notice of the meeting states that
one of the purposes of the meeting is the removal of a director or directors.
<PAGE> 69
4
Section 2. Vacancies. Except as otherwise provided by any agreement
between the Corporation and its shareholders, the affirmative vote of the
holders of a majority of the shares then entitled to vote in the election of
Directors may fill any vacancy occurring in the Board of Directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office. Any directorship to be filled by reason of an increase in
the number of directors shall be filled by a vote of the holders of a majority
of the shares then entitled to vote in the election of Directors at an annual
meeting or at a special meeting of shareholders called for that purpose. Except
as otherwise provided by any agreement between the Corporation and its
shareholders, at any annual meeting of shareholders, or any special meaning
called for such purpose, any director may be removed from office, with or
without cause, though his term may not have expired.
Section 3. General Powers. The business and affairs of the
Corporation shall be managed by its Board of Directors, which may exercise all
powers of the Corporation and do all such lawful acts and things as are not by
the Act, the Articles of Incorporation or by these By-Laws directed or required
to be exercised or done by the shareholders.
Section 4. Place of Meetings. The directors of the Corporation may
hold their meetings, both regular and special, either within or without the
State of Texas.
Section 5. Annual Meetings. The first meeting of each newly elected
Board of Directors shall be held without further notice immediately following
the annual meeting of the shareholders, and at the same place, unless by
unanimous consent of the directors then elected and serving such time or place
shall be changed.
Section 6. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of
Directors may be called by the President on two days' notice to each director,
either personally or by mail or by telegram. Special meetings shall be called by
the President or Secretary in like manner and on like notice on the written
request of any two directors.
Section 8. Quorum. At all meetings of the Board of Directors, the
presence of a majority of the number of directors fixed by Section 1 of this
Article shall be necessary and sufficient to constitute a quorum for the
transaction of business, and the affirmative vote of at least a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by the
Act, the Articles of Incorporation or these By-Laws. If a quorum shall not be
present at any meeting of directors, the directors present thereat may adjourn
the meeting from time to time without notice other than announcement at the
meeting, until a quorum shall be present.
<PAGE> 70
5
Section 9. Executive Committee. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate an Executive
Committee, to consist of two or more directors, one of whom shall be designated
as chairman, who shall preside at all meetings of such Committee. To the extent
provided in the resolution of the Board of Directors, the Executive Committee
shall have and may exercise all of the authority of the Board of Directors in
the management of the business and affairs of the Corporation, except where
action of the Board of Directors is required by the Act or by the Articles of
Incorporation, and shall have the power to authorize the seal of the Corporation
to be affixed to all papers which may require it. The Executive Committee shall
keep regular minutes of its proceedings and report the same to the Board of
Directors when required. Any member of the Executive Committee may be removed,
for or without cause, by the affirmative vote of a majority of the whole Board
of Directors. If any vacancy or vacancies occur in the Executive Committee, such
vacancy or vacancies shall be filled by the affirmative vote of a majority of
the whole Board of Directors.
Section 10. Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate other committees,
each committee to consist of two or more directors, which committees shall have
such power and authority and shall perform such functions as may be provided in
such resolution. Such committee or committees shall have such name or names as
may be designated by the Board of Directors and shall keep regular minutes of
their proceedings and report the same to the Board of Directors when required.
Section 11. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors;
provided that nothing herein contained shall be construed to preclude any
directors from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the Executive Committee may, by resolution of
the Board of Directors, be allowed like compensation for attending Executive
Committee meetings.
Section 12. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee designated by the Board of Directors may be taken without a meeting if
a written consent, setting forth the action so taken, is signed by all the
members of the Board of Directors or of such committee, and such consent shall
have the same force and effect as a unanimous vote at a meeting.
Section 13. Meetings by Conference Telephone. Members of the Board
of Directors or members of any committee designated by the Board of Directors
may participate in and hold a meeting of such Board or committee by means of
conference telephone or simi-
<PAGE> 71
6
lar communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in such a meeting shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transactions of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the Act,
the Articles or Incorporation or these By-Laws, notice is required to be given
to any director or shareholder, and no provision is made as to how such notice
shall be given, it shall not be construed to mean personal notice, but any such
notice may be given in writing, by mail, postage prepaid, addressed to such
director or shareholder at such address as appears on the books of the
Corporation. Any notice required or permitted to be given by mail shall be
deemed to be given at the time when the same be thus deposited, postage prepaid,
in the United States mail as aforesaid.
Section 2. Waiver. Whenever any notice is required to be given to
any director or shareholder of the Corporation, under the provisions of the Act,
the Articles of Incorporation or these By-Laws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated in such notice, shall be deemed equivalent to the giving of such
notice.
ARTICLE V
OFFICERS
Section 1. In General. The officers of the Corporation shall be
elected by the Board of Directors and shall be a President, a Secretary and a
Treasurer. The Board of Directors may also, if it chooses to do so, elect a
Chairman of the Board, additional Vice Presidents, one or more Assistant
Secretaries and one or more Assistant Treasurers, all of whom shall also be
officers. Two or more offices may be held by the same person.
Section 2. Election. The Board of Directors at its first meeting
after such annual meeting of the shareholders shall elect a President and, if it
so chooses, may elect a Chairman of the Board, both of whom shall be members of
the Board, but the other officers need not be members of the Board. The Board of
Directors may appoint such other officers and agents as it shall deem necessary
and may determine the salaries of all officers and agents from time to time. The
officers shall hold office until their successors are chosen and qualified. Any
officer elected or appointed by the Board of Directors may be removed, for or
without cause, at any time by a majority vote of the whole Board. Election or
appointment of an officer or agent shall not of itself create contract rights.
<PAGE> 72
7
Section 3. Chairman. The Chairman of the Board of Directors, if
there be a Chairman, shall preside at all meetings of the shareholders and the
Board of Directors and shall have such other powers as may from time to time be
assigned by the Board of Directors.
Section 4. President. The President shall preside at all meetings of
the shareholders and the Board of Directors, if a Chairman of the Board has not
been elected, and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President shall execute all contracts
requiring a seal and shall also execute mortgages, conveyances or other legal
instruments in the name of and on behalf of the Corporation, but this provision
shall not prohibit the delegation of such powers by the Board of Directors to
some other officer, agent or attorney-in-fact of the Corporation.
Section 5. Vice Presidents. The Vice President or, if there be more
than one, the Vice Presidents in the order of their seniority or in any other
order determined by the Board of Directors, shall, in the absence or disability
of the Senior Vice President, perform the duties and exercise the powers of the
Senior Vice President, and shall generally assist the President and Senior Vice
Presidents and perform such other duties as the Board of Directors shall
prescribe.
Section 6. Secretary. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the shareholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for any other committees of the Board when required. He
shall give, or cause to be given, notice of all meetings of the shareholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, under whose
supervision he shall be. He shall keep in safe custody the seal of the
Corporation.
Section 7. Assistant Secretaries. Any Assistant Secretary shall, in
the absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements of the Corporation, and shall deposit all monies and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the President and
directors at the regular meetings of the Board or whenever they may require it,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation,
<PAGE> 73
8
and shall perform such other duties as may be prescribed by the Board of
Directors or the President.
Section 9. Assistant Treasurers. Any Assistant Treasurer shall, in
the absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
ARTICLE VI
CERTIFICATES OF REPRESENTING SHARES
Section 1. Form of Certificates. The Corporation shall deliver
certificates representing shares to which shareholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the holder's name, the number,
class of shares, and the par value of the shares or a statement that the shares
are without par value. They shall be signed by the President or a Vice President
and the Secretary or an Assistant Secretary, and may be sealed with the seal of
the Corporation or a facsimile thereof if the Corporation shall then have a
seal. If any certificate is countersigned by a transfer agent or registered by a
registrar, either of which is other than the Corporation or an employee of the
Corporation, the signatures of the Corporation's officers may be facsimiles. In
case any officer or officers who have signed, or whose facsimile signature or
signatures have been used on such certificate or certificates, shall cease to be
such officer or officers of the Corporation, whether because of death,
resignation or otherwise, before such certificate or certificates have been
delivered by the Corporation or its agents, such certificate or certificates may
nevertheless be adopted by the Corporation and be issued and delivered as though
the person or persons who signed the certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
such officer or officers of the Corporation.
Section 2. Lost Certificates. The Board of Directors may direct that
a new certificate be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate to be lost or
destroyed. When authorizing the issue of a new certificate, the Board of
Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost or destroyed, certificate, or his
legal representative, to advertise the same in such manner as it shall require
and/or give the Corporation a bond in such form, in such sum, and with such
surety or sureties as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost or destroyed.
<PAGE> 74
9
Section 3. Transfer of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney and, upon surrender to the Corporation or to the
transfer agent of the Corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 4. Registered Shareholders. The Corporation shall be
entitled to recognize the holder of record of any share or shares of stock as
the holder in fact thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the Act and of the Articles of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the Corporation, provided that all such declarations and payments
of dividends shall be in strict compliance with all applicable laws and the
Articles of Incorporation. The Board of Directors may fix in advance a record
date for the purposes of determining shareholders entitled to receive payment of
any dividend, such record date to be not more than sixty (60) days prior to the
payment of such dividend, or the Board of Directors may close the stock transfer
books for such purpose for a period of not more than fifty (60) days prior to
the payment date of such dividend. In the absence of any action by the Board of
Directors, the date upon which the Board of Directors adopts the resolution
declaring such dividend shall be the record date.
Section 2. Reserves. There may be created by resolution of the Board
of Directors out of the earned surplus of the Corporation such reserve or
reserves as the Board of Directors from time to time, in its discretion, deems
proper to provide for contingencies or to equalize dividends, or to repair or
maintain any property of the Corporation, or for such other purpose as the Board
shall deem beneficial to the Corporation, and the Board may modify or abolish
any reserve in the same manner in which it was created.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
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10
Section 4. Annual Statement. The Board of Directors shall present at
each annual meeting and when called for by vote of the shareholders at any
special meeting of the shareholders, a full and clear statement of the business
and condition of the Corporation.
Section 5. Disallowed Payments. Any payments made to an officer of
the Corporation such as a salary, commission, bonus, interest, or rent, or
entertainment expense incurred by him, which shall be disallowed in whole or in
part as a deductible expense by the Internal Revenue Service, shall be
reimbursed by such officer to the Corporation to the full extent of such
disallowance. It shall be the duty of the Directors, as a Board, to enforce
payment by the officer, subject to the determination of the Directors,
proportionate amounts may be withheld from his future compensation payments
until the amount owed to the Corporation has been recovered.
ARTICLE VIII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. As utilized in this Article, the following terms shall
have the meanings indicated:
(a) The term "corporation" includes any domestic or foreign
predecessor entity of the corporation in a merger, consolidation or other
action in which the liabilities of the predecessor are transferred to the
corporation by operation of law and in any other transaction in which the
corporation assumes the liabilities of the predecessor, but does not
specifically exclude liabilities that are the subject matter of this
Article.
(b) The term "director" means any person who is or was a director of
the corporation and any person who, while a director of the corporation,
is or was serving at the request of the corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit
plan or other enterprise.
(c) The term "expenses" include court costs and attorneys' fees.
(d) The term "official capacity" means: (i) when used with respect
to a director, the office of director in the corporation, and (ii) when
used with respect to a person other than a director, the elective or
appointive office in the corporation held by the officer or the employment
or agency relationship undertaken by the employee or agent on behalf of
the corporation, but (iii) in both (i) and (ii) above does not include
service for any other foreign or domestic corporation or any partnership,
joint venture, sole proprietorship, trust, employee benefit plan or other
enterprise.
<PAGE> 76
11
(e) The term "proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, any appeal in such an action, suit or
proceeding and any inquiry or investigation that could lead to such an
action, suit or proceeding.
Section 2. The corporation shall indemnify a person who was, is or
is threatened to be made a named defendant or respondent in a proceeding because
the person is or was a director only if it is determined, in accordance with
Section 6 of this Article that the person (a) conducted himself or herself in
good faith; (b) reasonably believed: (1) in the case of conduct in the official
capacity as a director of the corporation, that the conduct was in the
corporation's best interests, and (ii) in all other cases, that the conduct was
at least not opposed to the corporation's best interests; and (iii) in the case
of any criminal proceeding, had no reasonable cause to believe the conduct was
unlawful.
Section 3. A director shall not be indemnified by the corporation as
provided in Section 2 of this Article for obligations resulting from a
proceeding (a) in which the director is found liable on the basis that a
personal benefit was improperly received by the director, whether or not the
benefit resulted from an action taken in the person's official capacity, or (b)
in which the person is found liable to the corporation, except to the extent
permitted in Section 5 of this Article.
Section 4. The termination of a proceeding by judgment, order,
settlement or conviction or on a plea of nolo contendere or its equivalent is
not of itself determinative that the person did not meet the requirements set
forth in Section 2 of this Article. A person shall be deemed to have been found
liable in respect of any claim, issue or matter only after the person shall have
been so adjudged by a court of competent jurisdiction after exhaustion of all
appeals therefrom.
Section 5. A person may be indemnified by the corporation as
provided in Section 2 of this Article against judgements, penalties (including
excise and similar taxes), fines, settlements and reasonable expenses actually
incurred by the person in connection with the proceeding; but if the person is
found liable to the corporation or is found liable on the basis that a personal
benefit was improperly received by the person, the indemnification (a) shall be
limited to reasonable expenses actually incurred by the person in connection
with the proceeding, and (b) shall not be made in respect of any proceeding in
which the person shall have been found liable for willful or intentional
misconduct in the performance of the person's duty to the corporation.
Section 6. A determination of indemnification under Section 2 of
this Article shall be made (a) by a majority vote of a quorum consisting of
directors who at the time of the vote are not named defendants or respondents in
the proceeding; (b) if such a quorum cannot be obtained, by a majority vote of a
committee of the board of directors, designated
<PAGE> 77
12
to act in the matter by a majority vote of all directors, consisting solely of
two (2) or more directors who at the time of the vote are not named defendants
or respondents in the proceeding (c) by special legal counsel selected by the
board of directors or a committee thereof by a vote as set forth in subsection
(a) or (b) of this Section 6, or, if such a quorum cannot be obtained and such a
committee cannot be established, by a majority vote of all directors; or (d) by
the shareholders in a vote that excludes the shares held by directors who are
named defendants or respondents in the proceeding.
Section 7. Authorization of indemnification and determination as to
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible, except that if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of expenses shall be
made in the manner specified by subsection (c) of Section 6 of this Article for
the selection of special legal counsel. A provision contained in the articles of
incorporation, the bylaw, a resolution of shareholders or directors, or an
agreement that makes mandatory the indemnification described in Section 2 of
this Article shall be deemed to constitute authorization of indemnification in
the manner required herein, even though such provision may not have been adopted
or authorized in the same manner as the determination that indemnification is
permissible.
Section 8. The corporation shall indemnify a director against
reasonable expenses incurred by the director in connection with a proceeding in
which the director is a named defendant or respondent because the person is or
was a director if the director has been wholly successful, on the merits or
otherwise, in the defense of the proceeding.
Section 9. If upon application of a director, a court of competent
jurisdiction determines, after giving any notice the court considers necessary,
that the director is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances, whether or not the director has met the
requirements set forth in Section 2 of this Article or has been found liable in
the circumstances described in Section 3 of this Article, the corporation shall
indemnify the director to such further extent as the court shall determine; but
if the person is found liable to the corporation or is found liable on the basis
that personal benefit was improperly received by the person, the indemnification
shall be limited to reasonable expenses actually incurred by the person in
connection with the proceeding.
Section 10. Reasonable expenses incurred by a director who was, is
or is threatened to be made a named defendant or respondent in a proceeding may
be paid or reimbursed by the corporation in advance of the final disposition of
the proceeding and without the defemination specified in Section 6 of this
Article or the authorization or determination specified in Section 7 of this
Article, after the corporation receives a written affirmation by the director of
a good faith belief that the standard of conduct necessary for indemnification
under this Article has been met and a written undertaking by or on behalf of
<PAGE> 78
13
the director to repay the amount paid or reimbursed if it is ultimately
determined that he has not met that standard or if it is ultimately determined
that indemnification of the director against expenses incurred by him in
connection with that proceeding is prohibited by Section 5 of this Article. A
provision contained in the articles of incorporation, these bylaws, a resolution
of the shareholders or directors, or an agreement that makes mandatory the
payment or reimbursement permitted under this Section shall be deemed to
constitute authorization of that payment or reimbursement.
Section 11. The written undertaking required by Section 10 of this
Article shall be an unlimited general obligation of the director, but need not
be secured. It may be accepted without reference to financial ability to make
repayment.
Section 12. Notwithstanding any other provision of this Article, the
corporation may pay or reimburse expenses incurred by a director in connection
with an appearance as a witness or other participation in a proceeding at a time
when he is not a named defendant or respondent. in the proceeding.
Section 13. An officer of the corporation shall be indemnified by
the corporation as and to the same extent provided by Sections 7, 8 and 9 of
this Article for a director and is entitled to seek indemnification under those
sections to the same extent as a director. The corporation may indemnify and
advance expenses to an officer, employee or agent of the corporation to the same
extent that it may indemnify and advance expenses to directors under this
Article.
Section 14. The corporation may indemnify and advance expenses to
persons who are not or were not officers, employees or agents of the corporation
but who are or were serving at the request of the corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other enterprise,
to the same extent that it may indemnify and advance expenses to directors under
this Article.
Section 15. The corporation may indemnify and advance expenses to an
officer, employee, agent or person identified in Section 14 of this Article and
who is not a director to such further extent, consistent with law, as may be
provided by the articles of incorporation, these bylaws, general or specific
action of the board of directors or contract or as permitted or required by
common law.
Section 16. The corporation may purchase and maintain insurance or
another arrangement on behalf of any person who is or was a director, officer,
employee or agent of the corporation or who is or was serving at the request of
the corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of
<PAGE> 79
14
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise, against any
liability asserted against such person and incurred by such person in such a
capacity or arising out of the status as such a person, whether or not the
corporation would have the power to indemnify such person against that liability
under this Article. If the insurance or other arrangement is with a person or
entity that is not regularly engaged in the business of providing insurance
coverage, the insurance or arrangement may provide for payment of a liability
with respect to which the corporation would not have the power to indemnify the
person only if including coverage for the additional liability has been approved
by the shareholders of the corporation. Without limiting the power of the
corporation to procure or maintain any kind of insurance or other arrangement,
the corporation may, for the benefit of persons indemnified by the corporation
(a) create a trust fund, (b) establish any form of self-insurance, (c) secure
its indemnity obligations by grant of a security interest or other lien on the
assets of the corporation, or (d) establish a letter of credit, guaranty or
surety arrangement. The insurance or other arrangement may be procured,
maintained or established within the corporation or with any insurer or other
person deemed appropriate by the board of directors, regardless of whether all
or part of the stock or other securities of the insurer or other person are
owned in whole or part by the corporation. In the absence of fraud, the judgment
of the board of directors as to the terms and conditions of the insurance or
other arrangement and the identity of the insurer or other person participating
in an arrangement shall be conclusive and the insurance or arrangement shall not
be voidable and shall not subject the directors approving the insurance or
arrangement to liability, on any ground, regardless of whether directors
participating in the approval are beneficiaries of the insurance or arrangement.
Section 17. Any indemnification of or advance of expenses to a
director in accordance with this Article shall be reported in writing to the
shareholders with or before the notice or waiver of notice of the next meeting
of shareholders or with or before the next submission to shareholders of a
consent to action without a meeting and, in any case, within the twelve (12)
month period immediately following the date of the indemnification or advance.
Section 18. For purposes of this Article, the corporation is deemed
to have requested a director to serve an employee benefit plan whenever the
performance by the director of the director's duties to the corporation also
imposes duties on, or otherwise involves services by, the director to the plan
or participants or beneficiaries of the plan. Excise taxes assessed on a
director with respect to an employee benefit plan pursuant to applicable law
shall be deemed to be fines. Action taken or omitted by the director with
respect to an employee benefit plan in the performance of the director's duties
or for a purpose reasonably believed by the director to be in the interest of
the participants and beneficiaries of the plan shall be deemed to be for a
purpose which is not opposed to the best interests of the corporation.
<PAGE> 80
15
ARTICLE IX
BY-LAWS
Section 1. Amendments. These By-Laws may be altered, amended or
repealed and new By-Laws may be adopted by the shareholders in accordance with
the Articles of Incorporation.
Section 2. When By-Laws Silent. It is expressly recognized that when
the By-Laws are silent as to the manner of performing any corporate function,
the provisions of the Act shall control.
<PAGE> 81
CERTIFICATE
I, [ ], do hereby certify that I am duly elected and
acting Secretary of [ ] (the "Company") and that the above and
foregoing Amended and Restated By-Laws were adopted as the By-Laws of the
Company by Consent Action of the Board of Directors of the Company dated
[ ], 1997.
____________________________________
[ ]
<PAGE> 82
EXHIBIT C
AGREEMENT AMONG SHAREHOLDERS
This agreement (the "Agreement") dated this _____ day of _________ 1997
concerns the respective obligations and relationship of those identified below
as shareholders of Kinetic Concepts, Inc.
SECTION 1. Definitions. The following terms shall have the following meanings
for the purposes of this Agreement:
1.01 "Affiliate" means, with respect to any Person, any other Person
that directly or indirectly, through one or more intermediaries or by agreement,
controls, is controlled by, or is under common control with such Person, and,
with respect to any natural person, any member of his or her immediate family or
a trust for the benefit of any such Person.
1.02 "Closing Time" means the time of the closing of the redemption of
the Common Stock by KCI.
1.03 "Common Stock" means the common stock, par value $0.001 per share,
of KCI.
1.04 "Dr. Leininger" means Dr. James R. Leininger, the founder of KCI
and its Chairman since 1976.
1.05 "Fremont" means Fremont Partners, L.P. and/or its Affiliates
listed on Schedule 1.05.
1.06 "Fremont/KCI Group" means those Persons listed on Schedule 1.06 to
which additions may be made after the Closing Time only to reflect transfers by
Fremont to Fremont Affiliates who invest within six (6) months of the Closing
Time.
1.07 "KCI" means Kinetic Concepts, Inc.
1.08 "KCI Percentage" means, for each of the Shareholders, the
percentage of all outstanding fully diluted Common Stock owned by that
Shareholder from time to time. Schedule 1.08 reflects the KCI Percentage of each
Shareholder as of the date of this Agreement.
1.09 "Person" means any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, pension fund, governmental
authority, or other entity.
1.10 "Public Offering" means a consummated public offering of a number
of shares equal to at least twenty percent (20%) of the then issued and
outstanding Common Stock that is underwritten on a firm commitment basis by a
nationally-recognized investment banking firm.
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1.11 "RCBA" means Richard C. Blum & Associates, L.P. and/or its
Affiliates listed on Schedule 1.11.
1.12 "RCBA/KCI Group" means those Persons listed on Schedule 1.12, to
which additions may be made after the Closing Time only to reflect transfers by
RCBA to RCBA Affiliates who invest within six (6) months of the Closing Time.
1.13 "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
1.14 "Shareholder" means any Person that is, as of the date of this
Agreement, or becomes, at any subsequent time, a party to this Agreement. The
Shareholders as of the date of this Agreement are Fremont, RCBA, Dr. Leininger,
the Fremont/KCI Group, and the RCBA/KCI Group.
1.15 Terms and Usage Generally. The definitions in this Section 1 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine, and neuter forms. All references herein to Sections and
Schedules shall be deemed to be references to Sections of and Schedules to this
Agreement unless the context shall otherwise require. All Exhibits and Schedules
attached hereto shall be deemed incorporated herein as if set forth in full
herein. The words "include," "includes," and "including" shall be deemed to be
followed by the phrase "without limitation." The words "hereof," "herein," and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References to a Person are also to its permitted successors and
permitted assigns.
SECTION 2. Transfer of Shares.
2.01 Restrictions on Transfer of Shares. Each of Fremont and RCBA agree
for themselves and for the respective Fremont/KCI Group and RCBA/KCI Group, and
Dr. Leininger agrees for himself, that immediately after the Closing Time, the
KCI Percentages held by them will be that set forth in Schedule 1.08, and that
until six (6) months after the Common Stock shall have been the subject of a
Public Offering pursuant to the Securities Act, no shares of Common Stock or of
equity interests in the entities comprising the controlling interests in the
Persons comprising the Fremont/KCI Group or the RCBA/KCI Group may be sold,
transferred, pledged, or hypothecated, directly or indirectly (a "Transfer"),
except as set forth in Section 2.02 hereof. Any attempted Transfer that is not
permitted by this Section 2 shall be deemed a violation and breach of this
Agreement that may be treated as null and void by the Shareholders and by KCI.
Any shares of Common Stock or of equity interests in the entities comprising the
controlling interests in the Persons comprising the Fremont/KCI Group or the
RCBA/KCI Group that are the subject of a Transfer permitted by this Section 2
shall remain subject to this Section 2. As a condition precedent to the
effectiveness of any Transfer to any person or entity that is not a party to
this Agreement, such transferee, for good and recognizable consideration, shall
agree in writing to become a party to this Agreement and to be bound by its
terms and provisions.
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2.02 Permitted Transfers. Notwithstanding the foregoing, the following
Transfers will be permitted so long as the transferee, for good and recognizable
consideration, agrees in writing to become a party to this Agreement and to be
bound by its terms and provisions and so long as the Transfer complies with the
registration provisions (or exemptions therefrom) of all applicable federal and
state securities laws:
(a) Transfers by gift or the laws of descent and distribution
to any Affiliate of the transferor.
(b) Sales by Fremont or any member of the Fremont/KCI Group to
any other member of the Fremont/KCI Group.
(c) Sales by RCBA or any member of the RCBA/KCI Group to any
other member of the RCBA/KCI Group.
(d) Sales between Fremont or any member of the Fremont/KCI
Group on the one hand and RCBA or any member of the RCBA/KCI
Group on the other hand, or vice versa, so long as the seller
has first offered the securities on the same price and terms,
for at least thirty (30) days, to the member of its own Group.
(e) Sales by Dr. Leininger of up to 10.5% of KCI's then
outstanding Common Stock.
2.03 Tag-Along Rights. If, at any time after the restrictions of
Section 2.01 expire, a Shareholder proposes to sell Common Stock for value (the
"Transferor") to any Person (other than a transferee in a Transfer permitted by
Section 2.02) in one transaction or a series of related transactions, then such
Transferor shall offer (the "Participation Offer") to include in the proposed
sale a number of shares of Common Stock designated by any of the other
Shareholders not to exceed, in respect of any such Shareholder, the number of
shares equal to the product of (i) the aggregate number of shares to be sold to
the proposed transferee and (ii) the Shareholder's respective KCI Percentage;
provided that if the consideration to be received includes any securities, only
Shareholders that are Accredited Investors (as defined below) shall be entitled
to include their shares in such sale (but, in such case, each Shareholder shall
be entitled to include in such sale a number of its shares, without duplication,
equal to the number of shares held by its Affiliates that are excluded from sale
by the operation of this proviso). The Transferor shall give written notice to
each Shareholder of the Participation Offer (the "Transferor's Notice") at least
twenty (20) days prior to the proposed sale. The Transferor's Notice shall
specify the proposed transferee, the number of shares to be sold to such
transferee, the amount and type of consideration to be received therefor, and
the place and date on which the sale is to be consummated. Each Shareholder that
wishes to include shares of Common Stock in the proposed sale in accordance with
the terms of this Section 2.03 shall so notify the Transferor not more than ten
(10) days after the date of the Transferor's Notice. The Participation Offer
shall be conditioned upon the Transferor's sale of shares pursuant to the
transactions contemplated in the Transferor's Notice with the transferee named
therein. If any Shareholder accepts the
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<PAGE> 85
Participation Offer, the Transferor shall reduce to the extent necessary the
number of shares it otherwise would have sold in the proposed sale so as to
permit other Shareholders that have accepted the Participation Offer to sell the
number of shares that they are entitled to sell under this Section 2.03, and the
Transferor and such other Shareholder or Shareholders shall sell the number of
shares specified in the Participation Offer to the proposed transferee in
accordance with the terms of such sale set forth in the Transferor's Notice. For
purposes of this Section 2.03, "Accredited Investor" shall have the meaning set
forth for such term in Regulation D. Notwithstanding the foregoing, a
Shareholder shall have the right to include shares of Common Stock in the
Transferor's sale under this Section 2.03 only if such Shareholder holds, on the
date he receives the Transferor's Notice, at least ten percent (10%) of the
issued and outstanding shares of Common Stock.
2.04 Drag-Along Rights.
(a) Notwithstanding any other provision in this Section 2, if,
at any time after the restrictions of Section 2.01 expire, Fremont, RCBA, the
Fremont/KCI Group, and the RCBA/KCI Group (collectively, the "Seller") propose
to sell all (but not less than all) of the Common Stock they then hold to a
third party or parties in which the Seller does not own, have any right to
acquire, or propose to own or acquire, any interest (a "Third Party") pursuant
to a Bona Fide Offer (as defined below), then the Seller shall have the right,
subject to the provisions of this Section 2.04, to require Dr. Leininger (the
"Co-Seller"), to include in such sale (a "Required Sale") all of the Common
Stock held by the Co-Seller by delivering notice (the "Required Sale Notice") to
the Co-Seller.
(b) The Required Sale Notice shall set forth: (i) the date of
such notice (the "Notice Date"), (ii) the name and address of the Third Party,
(iii) the proposed amount of consideration to be paid per share for the Sale
Shares, and the terms and conditions of payment offered by the Third Party in
reasonable detail, together with written proposals or agreements, if any, with
respect thereto, (iv) the aggregate number of Sale Shares, (v) confirmation that
the Seller is selling one hundred percent (100%) of the aggregate number of
shares of Common Shares then held by it to a Third Party, and (vi) the proposed
date of the Required Sale (the "Required Sale Date"), which shall be not less
than twenty (20) nor more than one hundred eighty (180) days after the date of
the Notice Date.
(c) The Co-Seller shall cooperate in good faith with the
Seller in connection with consummating the Required Sale (including, without
limitation, the giving of consents and the voting of any Common Stock held by
the Co-Seller to approve such Required Sale). On the Required Sale Date, the
Co-Seller shall deliver, free and clear of all liens, claims, or encumbrances, a
certificate or certificates and/or other instrument or instruments for all of
its Common Stock, duly endorsed and in proper form for transfer, with the
signature guaranteed, to such Third Party in the manner and at the address
indicated in the Required Sale Notice and the Seller shall cause the Co-Seller's
share of the purchase price to be paid to the Co-Seller.
(d) "Bona Fide Offer" shall mean an offer (whether in the form
of a purchase of shares, merger, recapitalization, business combination, or
otherwise) for Common Stock.
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(e) In the event of any Required Sale, if the Co-Seller holds
options to purchase Common Stock, he must exercise or cancel all such stock
options prior to or simultaneously with the consummation of the Required Sale.
Any shares of Common Stock for which options are exercised must be included in
the Required Sale.
(f) Notwithstanding the foregoing, the Co-Seller shall not be
required to sell his shares of Common Stock under this Section 2.04 if, on the
date he receives the Required Sale Notice, he holds less than ten percent (10%)
of the issued and outstanding shares of Common Stock.
SECTION 3. Governance and Voting.
3.01 The Shareholders agree that each shall take such steps as are
required to assure that after the Closing Time, and continuing until such time
as the Common Stock shall have been the subject of a Public Offering registered
under the Securities Act, the Board of Directors of KCI shall have at least
eight (8) members, two (2) of whom shall be persons designated by Fremont, two
(2) of whom shall be persons designated by RCBA, one (1) of whom shall be Dr.
Leininger (so long as he shall own at least fifteen percent (15%) of the
outstanding equity of KCI), one (1) of whom shall be Raymond R. Hannigan
(provided, however, that if Raymond R. Hannigan for any reason ceases to serve
KCI as its chief executive officer, then the successor chief executive officer
shall be elected to serve as director in Mr. Hannigan's place), and two (2) or
more of whom shall be independent outside directors, who shall not be affiliated
with Fremont or RCBA and who shall be designated by the unanimous vote of the
Nominating Committee of the Board of Directors of KCI, which shall comprise Dr.
Leininger, one (1) director designated by Fremont, and one (1) director
designated by RCBA.
3.02 Each of Fremont, RCBA and Dr. Leininger agrees that none of them
shall charge any management, monitoring, consulting or similar fees to KCI or
their Affiliates without the prior consent of the other two (which consent shall
not be unreasonably withheld). In the event Fremont or RCBA charge any such fees
to KCI or its Affiliates (i) the fees shall be of a type and amount customary
between financial buyers and companies that have been the subject of a leveraged
buyout and (ii) Dr. Leininger shall participate in such fees to the extent
equitable in consideration for any management, monitoring or consulting services
that he has provided to KCI or its Affiliates.
SECTION 4. Preemptive Rights.
4.01 Grant of Preemptive Rights. KCI will not issue or sell any capital
stock without first complying with this Section 4. KCI hereby grants to each of
the Shareholders the preemptive right to purchase up to that Shareholder's Pro
Rata Share (as defined below) of any capital stock that KCI may, from time to
time, propose to sell or issue. For purposes of this Section 4, a Shareholder's
"Pro Rata Share" shall mean the percentage of all outstanding fully diluted
capital stock of KCI owned by that Shareholder from time to time.
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4.02 Suspension of Preemptive Rights. The preemptive rights granted in
Section 4.01 shall be suspended with respect to Dr. Leininger if, at the time of
the proposed issuance and sale of capital stock, the exercise of such right
would result in Fremont, RCBA, the Fremont/KCI Group, and the RCBA/KCI Group
collectively holding less than a majority of the issued and outstanding shares
of Common Stock after giving effect to such issuance and sale.
4.03 Notice to Shareholders. If KCI proposes to issue or sell any
capital stock, KCI shall provide each Shareholder with written notice of KCI's
intention (the "Notice of Issuance"). The Notice of Issuance shall describe the
type of capital stock to be issued or sold and the price and other terms upon
which KCI proposes to issue or to sell such capital stock.
4.04 Exercise of Preemptive Rights. Each Shareholder may exercise its
preemptive right under this Section 4, in whole or in part, by giving written
notice of its election to participate in the offering within twenty (20) days
after receipt of the Notice of Issuance. If a Shareholder fails fully to
exercise such preemptive right within such twenty (20) day period, KCI shall
have sixty (60) days in which the sell the capital stock described in the Notice
of Issuance that the Shareholder did not agree to purchase. In the event that
KCI does not sell such capital stock within such sixty (60) day period, KCI
thereafter will not issue or sell such capital stock without again complying
with this Section 4.
4.05 Exceptions. Notwithstanding the foregoing, the preemptive rights
granted in Section 4.01 will not apply to (i) any issuance of capital stock as a
dividend or stock split in respect of outstanding capital stock or (ii) any
issuance of capital stock in an underwritten public offering.
SECTION 5. Registration Rights.
5.01 Demand Registration.
(a) At any time after the fifth anniversary of this Agreement,
if there has not been a Public Offering by such date, each of the Shareholders
may make one (1) written request to KCI for registration of at least
thirty-three percent (33%) of the shares of Common Stock then held by such
Shareholder under Form S-3 (or such other appropriate or successor form if Form
S-3 is not available) and in accordance with the provisions of Rule 415
promulgated under the Securities Act (a "Demand Registration"). In addition to
that right to request a Demand Registration, each Shareholder shall have the
right to request an additional Demand Registration of at least thirty-three
percent (33%) of the shares of Common Stock then held by such Shareholder at any
time after one (1) year, but before three (3) years, following the completion of
a Public Offering.
(b) A registration will not count as a Demand Registration
unless the Shareholder is able to register and sell at least seventy-five
percent (75%) of the shares requested to be included in such registration;
provided, however, that if the Shareholder is able to register and sell less
than such stated percentage, the Shareholder shall be entitled to invoke this
provision to request a subsequent Demand Registration on only one additional
occasion.
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(c) KCI may include in any Demand Registration any of its
securities to be registered for offering and sale on behalf of KCI.
(d) If a Demand Registration is an underwritten registration
and the managing underwriters advise KCI in writing that, in their opinion, the
number of securities in such offering exceeds the number that can be sold in an
orderly manner within a price range acceptable to the Shareholder and to KCI,
then the number of such shares that the managing underwriters believe that may
be sold in such offering shall be allocated first to the Shareholder's shares
for inclusion in the registration statement, second to the shares of any
Piggyback Shareholder (as defined in Section 5.02(a)), then to the KCI shares.
(e) If a Demand Registration is an underwritten offering, the
investment bankers and managers for the offering will be selected by the
Shareholder, subject to the approval of KCI, which will not be unreasonably
withheld.
(f) KCI shall pay the expenses described in Section 5.06 for
any registration pursuant to this Section 5.01.
5.02 Piggyback Registration Rights.
(a) If at any time KCI shall determine to proceed with the
preparation and filing of a registration statement (other than a registration
statement on Form S-4, Form S-8, or other limited purpose form) under the
Securities Act in connection with KCI's or another securityholder's proposed
offer and sale of Common Stock or equity securities convertible into Common
Stock, KCI will give written notice of its determination to the Shareholders at
least twenty (20) days prior to filing the registration statement. Upon the
written request from a Shareholder given within ten (10) days after receipt of
any such notice from KCI, KCI will include the number of shares requested by the
Shareholder in such registration statement ("Piggyback Registration").
Notwithstanding anything in this Agreement to the contrary, if a Shareholder (a
"Piggyback Shareholder") makes a request for Piggyback Registration in a
registration statement filed pursuant to another Shareholder's request for a
Demand Registration under Section 5.01, and the Piggyback Shareholder is able to
register and sell at least seventy-five percent (75%) of the shares requested to
be included in the registration, such request shall be deemed to satisfy the
Piggyback Shareholder's right to request a Demand Registration under Section
5.01.
(b) If a Piggyback Registration is an underwritten primary
registration on behalf of KCI and the managing underwriters advise KCI in
writing that, in their opinion, the number of total securities to be registered
in such offering exceeds the number that can be sold in an orderly manner within
a price range acceptable to KCI, then the number of securities that the managing
underwriter believes may be sold in such offering shall be allocated first to
the shares being offered by KCI for inclusion in the registration statement,
then to the shares of Shareholders submitted for registration, pro rata among
the Shareholders in accordance with the number of shares they then hold.
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(c) If a Piggyback Registration is an underwritten secondary
registration on behalf of the shareholders of KCI's securities and the managing
underwriters advise KCI in writing that, in their opinion, the number of total
securities to be registered in such offering exceeds the number that can be sold
in an orderly manner within a price range acceptable to the shareholders
initially requesting such registration, KCI will include in such registration
the securities being requested to be included therein by the holders initially
requesting such registration and the shares of the Shareholders that requested
Piggyback Registration, pro rata among the holders of such securities on the
basis of the number of shares owned by each such shareholder.
(d) KCI shall pay the expenses described in Section 5.06 for
registration statements filed pursuant to this Section 5.02.
5.03 Registration Procedures. Whenever a Shareholder has requested that
KCI, pursuant to the provisions of Section 5.01 or Section 5.02, effect the
registration of Common Stock under the Securities Act, KCI will:
(a) as soon as reasonably practicable, prepare and file with
the SEC a registration statement with respect to such securities and use its
best efforts to cause such registration statement to become and remain effective
for such period as may be reasonably necessary to effect the sale of such
securities (the "Effective Period");
(b) as soon as reasonably practicable, prepare and file with
the SEC such amendments to such registration statement and supplements to the
prospectus contained therein as may be necessary to keep such registration
statement effective for the Effective Period as may be reasonably necessary to
effect the sale of such securities;
(c) furnish to the Shareholder and to the underwriters for the
securities being registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus, and such other documents as
the Shareholder and such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(d) use its best efforts to register or qualify the Common
Stock covered by such registration statement under such state securities or blue
sky laws of such jurisdictions as the Shareholder may reasonably request in
writing within ten (10) days following the original filing of such registration
statement, except that KCI shall not for any purpose be required to execute a
general consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified or subject itself
to taxation in a jurisdiction where it had not previously been subject to
taxation or take any other action that would subject KCI to service of process
in a lawsuit other than one arising out of the registration of the Common Stock;
(e) cause all such registered shares of Common Stock to be
listed on an exchange or NASDAQ by filing a subsequent listing application;
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(f) notify the Shareholder, promptly after it shall receive
notice thereof, of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed;
(g) notify the Shareholder promptly of any request by the SEC
for the amending or supplementing of such registration statement or prospectus
or for additional information;
(h) prepare and promptly file with the SEC and promptly notify
the Shareholder of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at any time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event shall
have occurred as the result of which any such prospectus or any other prospectus
as then in effect would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; and
(i) advise the Shareholder, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
5.04 Underwriting. A Shareholder may not participate in any
registration hereunder unless such Shareholder (a) agrees to sell its shares of
Common Stock on the basis provided in the underwriting arrangements, if any, and
(b) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements, and other documents reasonably required under the terms
of such underwriting arrangements, if any, and these registration rights.
5.05 Holdback Agreements. Each Shareholder agrees not to effect any
public sale or distribution of Common Stock or any securities convertible into
or exchangeable or exercisable for Common Stock, including a sale pursuant to
Rule 144 under the Securities Act, during the fourteen (14) days prior to, and
during a period of up to one hundred eighty (180) days beginning on and
following the effective date of any registration statement filed by KCI pursuant
to this Section 5 (except as part of such registration), if and to the extent
reasonably requested by the managing underwriter of the offering.
5.06 Expenses. With respect to any registration requested pursuant to
Section 5.01 hereof and with respect to an inclusion of a Shareholder's shares
of Common Stock in a registration statement pursuant to Section 5.02 hereof, all
fees, costs, and expenses of such registration, inclusion, and public offering,
including, without limitation, all registration, filing, and listing fees,
printing expenses, fees and disbursements of legal counsel and accountants for
KCI, and all legal fees and disbursements and other expenses of complying with
state securities or blue sky laws of any jurisdictions in which the securities
to be offered are to be registered and
9
<PAGE> 91
qualified, shall be borne by KCI; provided, however, that each Shareholder shall
bear its own attorney fees and the underwriting commissions and registration
fees with respect to the sale of its shares of Common Stock.
5.07 Indemnification.
(a) KCI will indemnify and hold harmless each Shareholder and
any underwriter (as defined in the Securities Act) for a Shareholder and each
person, if any, who controls such Shareholder or underwriter within the meaning
of the Securities Act, from and against and will reimburse the Shareholder and
each such underwriter and controlling person with respect to, any and all loss,
damage, liability, cost, and expense to which the Shareholder or any such
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, damages, liabilities, costs, or expenses are
caused by any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein, or
any amendment or supplement thereto or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
KCI will not be liable in any such case to the extent that any such loss,
damage, liability, cost, or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished in writing by a Shareholder, such
underwriter, or such controlling person specifically for use in the preparation
thereof. KCI will not be subject to any liability for any settlement made
without its consent, which consent shall not be unreasonably withheld.
(b) Each Shareholder will indemnify and hold harmless KCI, its
directors and officers, any controlling person, and any underwriter thereof from
and against, and will reimburse KCI, its directors and officers, any controlling
person, and any underwriter thereof with respect to, any and all loss, damage,
liability, cost, or expense to which KCI or any controlling person and/or any
underwriter thereof may become subject under the Securities Act or otherwise,
insofar as such losses, damages, liabilities, costs, or expenses are caused by
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein, or any
amendment or supplement thereto or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
conformity with information furnished in writing by or on behalf of the
Shareholder specifically for use in the preparation thereof. A Shareholder will
not be subject to any liability for any settlement made without its consent,
which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) or (b) of this Section 5.07 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will,
10
<PAGE> 92
if a claim thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (a) or (b), promptly notify the indemnifying party
of the commencement thereof; but the omission to so notify the indemnifying
party will not relieve it from any liability that it may have to any indemnified
party otherwise than hereunder, except to the extent that such omission
materially and adversely affects the indemnifying party's ability to defend
against or compromise such claim. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate in and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party; provided, however, that if the defendants in any action
include both the indemnified party and the indemnifying party and there are
legal defenses available to the indemnified party and/or other indemnified
parties that are different from or in addition to those available to the
indemnifying party or if there is a conflict of interest that would prevent
counsel for the indemnifying party from also representing the indemnified party,
the indemnified party or parties shall have the right to select separate counsel
to participate in the defense of such action on behalf of such indemnified party
or parties. After notice from the indemnifying party to an indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party pursuant to the provisions of said paragraph
(a) or (b) for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than costs of
investigation, unless (i) the indemnified party shall have employed counsel in
accordance with the provisions of the preceding sentence, (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the notice of the
commencement of the action, or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party.
(d) If for any reason the foregoing indemnification is
unavailable or is insufficient to hold harmless an indemnified party, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities, or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and the indemnified party on the other
hand in connection with the statement or omission that resulted in the losses,
claims, damages, liabilities, or expenses, as well as any other relevant
equitable considerations. No person guilty of fraudulent misrepresentations
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 6. Liabilities and Indemnification.
6.01 Unless otherwise expressly assumed in writing by Fremont, the
Fremont/KCI Group, RCBA, the RCBA/KCI Group, or Dr. Leininger:
(a) none of them shall be liable to any third parties for any
actions, commitments, or debts of any other as a shareholder of KCI;
and
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<PAGE> 93
(b) each of them shall take all reasonable steps to negotiate
and preclude exposing any of the other of them to any such liability to
any third party.
6.02 To the extent any of Fremont, the Fremont/KCI Group, RCBA, the
RCBA/KCI Group, or Dr. Leininger is presented with a demand or made party to an
adjudication by a third party asserting their potential liability as a
shareholder of KCI for any acts or omissions by any other party or parties to
this Agreement, they shall notify the other party or parties in writing
promptly, and upon the receipt of such notice the notified party or parties will
assume the responsibility for the defense, resolution, and/or satisfaction of
the claim and in all respects indemnify the party that is faced with such a
claim to the full extent of that party's costs and ultimate liabilities, if any.
SECTION 7. Miscellaneous.
7.01 Notices. Except as otherwise expressly provided in this Agreement,
all notices, requests, and other communications to any party hereunder shall be
in writing (including a facsimile or similar writing) and shall be given to such
party at the address or facsimile number specified for such party on Schedule
7.01 hereto or as such party shall hereafter specify for that purpose by notice
to the other parties. Each such notice, request, or other communication shall be
effective (i) if given by facsimile, at the time such facsimile is transmitted
and the appropriate confirmation is received (or, if such time is not during a
business day, at the beginning of the next such business day), (ii) if given by
mail, three business days (or, if to an address outside the United States, seven
calendar days) after such communication is deposited in the mails with
first-class postage prepaid, addressed as aforesaid, or (iii) if given by any
other means, when delivered at the address specified pursuant to this Section
7.01.
7.02 No Third Party Beneficiaries. This Agreement is not intended to
confer any rights or remedies hereunder upon, and shall not be enforceable by,
any Person other than the parties hereto.
7.03 Waiver. No failure by any party to insist upon the strict
performance of any covenant, agreement, term, or condition of this Agreement or
to exercise any right or remedy consequent upon a breach of such or any other
covenant, agreement, term, or condition shall operate as a waiver of such or any
other covenant, agreement, term, or condition of this Agreement. Any Person by
notice given in accordance with Section 7.01 may, but shall not be under any
obligation to, waive any of its rights or conditions to its obligations
hereunder, or any duty, obligation, or covenant of any other Person. No waiver
shall affect or alter the remainder of this Agreement, but each and every
covenant, agreement, term, and condition hereof shall continue in full force and
effect with respect to any other then existing or subsequent breach. The rights
and remedies provided by this Agreement are cumulative, and the exercise of any
one right or remedy by any party shall not preclude or waive its right to
exercise any or all other rights or remedies.
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<PAGE> 94
7.04 Integration. This Agreement constitutes the entire agreement among
the parties hereto and thereto pertaining to the subject matter hereof and
thereof and supersedes all prior agreements and understandings of the parties in
connection herewith and therewith, and no covenant, representation, or condition
not expressed in this Agreement, the confidentiality agreements between Fremont,
RCBA, and KCI, or any other such agreement shall affect, or be effective to
interpret, change, or restrict, the express provisions of this Agreement.
7.05 Dispute Resolution. Any controversy, claim or dispute between Dr.
Leininger and any other party to this Agreement, arising out of or relating to
this Agreement or any breach thereof, including any dispute concerning the scope
of this Section 7.05, shall be resolved exclusively in a California court of law
in a proceeding conducted without a jury, each party hereto expressly waiving
their right to a trial by jury.
7.06 Headings. The titles of the Sections of this Agreement are for
convenience only and shall not be interpreted to limit or amplify the provisions
of this Agreement.
7.07 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same instrument, which may be
sufficiently evidenced by one counterpart.
7.08 Severability. Each provision of this Agreement shall be considered
separable and if for any reason any provision or provisions hereof are
determined to be invalid and contrary to any existing of future law, such
invalidity shall not impair the operation of or affect those portions of this
Agreement that are valid.
7.09 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without giving effect to
the conflicts of law principles thereof.
7.10 Non-Assignability. All of the rights and obligations of the
parties to this Agreement are intended to be exercisable and fulfilled by the
parties themselves, as presently constituted. None of those rights or
obligations may be assigned, assumed, or transferred without the written
informed consent of the counterparties.
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<PAGE> 95
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties as of the day and year first above written.
Fremont Partners, L.P. Richard C. Blum & Associates, L.P.
By Fremont Advisers, L.L.C., By Richard C. Blum & Associates, Inc.,
its General Partner its General Partner
By:_________________________ By_____________________________________
Name: Name:
Title: Title:
Kinetic Concepts, Inc.
By:_________________________ _____________________________________
Name: Dr. James R. Leininger
Title:
[Fremont/KCI Group and RCBA/KCI Group members' signatures lines.]
14
<PAGE> 1
EXHIBIT D
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION BANKERS TRUST COMPANY
231 South LaSalle Street 130 Liberty Street
Chicago, Illinois 60697 New York, New York 10006
BANCAMERICA ROBERTSON STEPHENS BT ALEX. BROWN INCORPORATED
231 South LaSalle Street 130 Liberty Street
Chicago, Illinois 60697 New York, New York 10006
October 1, 1997
Senior Credit Facilities
Commitment Letter
Fremont Purchaser II, Corp.
Fifty Fremont Street, Suite 3700
San Francisco, California 94105
Attention: Mr. James T. Farrell
RCBA Purchaser I, L.P.
909 Montgomery Street, Suite 400
San Francisco, California 94105
Attention: Mr. John C. Walker
Kinetic Concepts, Inc.
8023 Vantage Drive
San Antonio, Texas 78230
Attention: Mr. Raymond R. Hannigan
Ladies and Gentlemen:
You have advised BancAmerica Robertson Stephens ("BRS"), Bank
of America National Trust and Savings Association ("Bank of America"), BT Alex.
Brown Incorporated ("BT Alex. Brown") and Bankers Trust Company ("Bankers
Trust") that Fremont Purchaser II, Corp. ("Fremont"), RCBA Purchaser I, L.P.
("RCBA" and, together with Fremont, the "Sponsors") and Kinetic Concepts, Inc.
(the "Borrower") intend to enter into a transaction agreement (the "Transaction
Agreement") pursuant to which the Sponsors, together with certain of their
affiliates and investors (the Sponsors and such affiliates and investors are
collectively referred to herein as the "New Investor Group"), will participate
and invest in a leveraged recapitalization transaction involving the Borrower
(the "Recapitalization").
<PAGE> 2
2
We understand that the Recapitalization will be accomplished
through the following steps: (a) the Sponsors will purchase for cash from the
Borrower up to $154,700,000 (but not less than $125,000,000) of newly issued
shares of common stock ("Shares") of the Borrower (the "New Investor Shares");
(b) the Borrower will make an all cash tender offer (the "Tender Offer") to
acquire all of its issued and outstanding Shares (and related options), other
than the New Investor Shares, Shares and certain management options (such Shares
and management options, together with the New Investor Shares, the "Rollover
Shares") owned by certain existing stockholders of the Borrower, including
members of the Borrower's Board of Directors and/or management and (the
"Rollover Shareholders" and, together with the New Investor Group, the
"Buyers"), for a maximum aggregate repurchase price not to exceed $655,000,000;
(c) any Shares (and related options) acquired by the Borrower pursuant to the
Tender Offer will immediately be cancelled; (d) any Shares (and related options)
not acquired pursuant to the Tender Offer (other than the Rollover Shares) will
be acquired in a merger in which such Shares will be converted to the right to
receive the consideration paid in the Tender Offer (the "Merger"); and (e)
pursuant to the Merger, the Rollover Shares (which shall have an aggregate value
of at least $355,200,000) shall be converted to shares of the Borrower as the
surviving corporation of the Merger, which shares shall represent all of the
issued and outstanding common stock of the Borrower immediately following the
Merger. References herein to the "Recapitalization" shall include all of the
foregoing transactions and all related financings and other transactions. Upon
consummation of the Recapitalization, the New Investor Group will own at least
66-2/3% of the then outstanding shares of common stock of the Borrower.
You have also advised us that you propose to finance the
Recapitalization (including the refinancing of existing indebtedness) and the
related premiums, fees and expenses from the following sources: (a) the Borrower
will receive at least $125,000,000 in cash proceeds from the sale of the New
Investor Shares prior to the consummation of the Tender Offer on terms to be
agreed upon by you and us; (b) the Borrower will require senior secured credit
facilities (such credit facilities, the "Credit Facilities") comprised of term
loan facilities aggregating $300,000,000 (the "Term Loan Facilities"), a
$130,000,000 tender facility (the "Tender Facility"), a $50,000,000 revolving
credit facility (the "Revolving Credit Facility") and a $50,000,000 acquisition
facility (the "Acquisition Facility"), the proceeds of which will be used to
finance a portion of the Recapitalization and to finance the working capital
requirements and other corporate purposes (including permitted acquisitions) of
the Borrower and its subsidiaries; and (c) the Borrower will, prior to the
consummation of the Merger, require at least $200,000,000 in cash proceeds from
either (i) the issuance of senior subordinated unsecured notes (the "Senior
Subordinated Notes") in a public offering or Rule 144A private placement or (ii)
the proceeds of borrowings under a subordinated bridge facility made available
to the Borrower as interim bridge financing to the Senior Subordinated Notes
(the "Subordinated Facility").
Bank of America and Bankers Trust are each pleased to advise
you of their several commitments to provide one-half of the Credit Facilities.
The Statement of Terms and Conditions attached as Exhibits A and B hereto
(collectively, the "Term Sheet") sets forth the principal terms and conditions
on and subject to which Bank of America and Bankers Trust are willing to make
available their respective portions of the Credit Facilities.
It is agreed that Bank of America will act as the
administrative agent in respect of the Credit Facilities and that Bankers Trust
will act as the syndication agent in respect of the Credit Facilities, and each
will, in such capacities, perform the duties and exercise the authority
customarily performed and exercised by it in such roles in accordance with the
terms of this Commitment Letter. You agree that no other agents, co-agents or
arrangers will be appointed, no other titles will be
<PAGE> 3
3
awarded and no compensation (other than that expressly contemplated by the Term
Sheet and the Fee Letter referred to below) will be paid in connection with the
Credit Facilities unless you and we shall so agree.
We intend to syndicate the Credit Facilities to a group of
financial institutions (together with Bank of America and Bankers Trust, the
"Lenders") identified by us in consultation with you. BRS and BT Alex. Brown
intend to commence syndication efforts promptly, and you agree actively to
assist BRS and BT Alex. Brown in completing a syndication satisfactory to them.
Such assistance shall include (a) your using reasonable efforts to ensure that
the syndication efforts benefit materially from the existing lending
relationships of the Sponsors, the Borrower and the affiliates of the Sponsors
which own a direct or indirect interest in the Borrower, (b) direct contact
between senior management of the Sponsors and the Borrower and the proposed
Lenders, (c) assistance in the preparation of a Confidential Information
Memorandum and other marketing materials to be used in connection with the
syndication and (d) the hosting, with BRS and BT Alex. Brown, of one or more
meetings of prospective Lenders.
BRS and BT Alex. Brown, in consultation with you, will manage
all aspects of the syndication, including decisions as to the selection of
institutions to be approached and when they will be approached, when their
commitments will be accepted, which institutions will participate, the
allocations of the commitments among the Lenders and the amount and distribution
of fees among the Lenders. BRS and BT Alex. Brown will each have syndication
discussions with one-half of the number of invited institutions, except that BRS
will have the exclusive right to have syndication discussions with respect to
the institutions invited to participate in the Tranche B Term Loan Facility and
the Tranche C Term Loan Facility (as such terms are defined in the Term Sheet).
To assist BRS and BT Alex. Brown in their syndication efforts, you agree
promptly to prepare and provide to us all information with respect to the
Borrower and its respective subsidiaries, the Recapitalization and the other
transactions contemplated hereby, including all financial information and
projections (the "Projections"), as we may reasonably request in connection with
the arrangement and syndication of the Credit Facilities. You hereby represent
and covenant that (a) all information other than the Projections (the
"Information") that has been or will be made available to any of us by you or
any of your representatives (in each case, with respect to Information furnished
to any of us prior to the date of commencement of the syndication of the Credit
Facilities, as supplemented from time to time prior to such date) is or will be,
to the best of your knowledge, complete and correct in all material respects and
does not or will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein not materially misleading in light of the circumstances under which such
statements are made and (b) the Projections that have been or will be made
available to any of us by you or any of your representatives have been or will
be prepared in good faith based upon assumptions you believe to be reasonable
(it being understood that the Projections are subject to significant
uncertainties and contingencies, many of which are beyond your control, and that
no assurance can be given that such Projections will be realized). You
understand that in arranging and syndicating the Credit Facilities we may use
and rely on the Information and Projections without independent verification
thereof.
As consideration for Bank of America's and Bankers Trust's
commitments hereunder and BRS's and BT Alex. Brown's agreements to perform the
services described herein, you agree to pay, or to cause the Borrower to pay, to
Bank of America and Bankers Trust the nonrefundable fees set forth in the Term
Sheet and in the fee letter dated the date hereof and delivered herewith (the
"Fee Letter").
<PAGE> 4
4
We shall be entitled, with your consent (which shall not be
unreasonably withheld), to change the structure or amount of, or to eliminate,
any of the Credit Facilities if we determine that such changes are advisable in
order to ensure a successful syndication or an optimal credit structure and if
the aggregate amount of the Credit Facilities shall remain unchanged and the
amount of the Tender Facility shall not be increased.
Bank of America's and Bankers Trust's commitments hereunder
and BRS's and BT Alex. Brown's agreements to perform the services described
herein are subject to (a) our completion of and satisfaction in all respects
with our continuing legal and environmental due diligence investigation of the
Borrower and its subsidiaries, (b) there not occurring or becoming known to us
any change, occurrence or development that would reasonably be expected to have
a material adverse effect on the business, assets, liabilities, condition
(financial or otherwise) or results of operations of the Borrower and its
subsidiaries, taken as a whole, (c) our not becoming aware after the date hereof
of any material negative information or other matter affecting the Borrower and
its subsidiaries, taken as a whole, or the transactions contemplated hereby
which is inconsistent in a material and adverse manner with any such information
or other matter disclosed to us prior to the date hereof, (d) there not having
occurred and being continuing a material disruption of or material adverse
change in the financial, banking or capital markets generally affecting credit
facilities similar to the Credit Facilities which, in our reasonable judgment,
could reasonably be expected to materially impair the syndication of the Credit
Facilities, (e) our satisfaction that prior to and during the syndication of the
Credit Facilities there shall be no competing offering, placement or arrangement
of any debt securities (other than the Senior Subordinated Notes) or bank
financing by or on behalf of the Borrower or any of its affiliates, (f) the
negotiation, execution and delivery on or before January 31, 1998 of customary
definitive documentation with respect to the Credit Facilities satisfactory to
Bank of America, Bankers Trust and their counsel, and (g) the other conditions
set forth or referred to in the Term Sheet.
You agree (a) to indemnify and hold harmless Bank of America,
Bankers Trust, BRS, BT Alex. Brown, their affiliates and their respective
officers, directors, employees, advisors, and agents (each, an "indemnified
person") from and against any and all losses, claims, damages and liabilities to
which any such indemnified person may become subject arising out of or in
connection with this Commitment Letter, the Credit Facilities, the use of the
proceeds thereof, the Recapitalization or any related transaction or any claim,
litigation, investigation or proceeding relating to any of the foregoing,
regardless of whether any indemnified person is a party thereto, and to
reimburse each indemnified person upon demand for any legal or other expenses
incurred in connection with investigating or defending any of the foregoing,
provided that the foregoing indemnity will not, as to any indemnified person,
apply to losses, claims, damages, liabilities or related expenses to the extent
they are determined by a final judgment of a court of competent jurisdiction to
arise from the willful misconduct or gross negligence of such indemnified
person, and (b) to reimburse Bank of America, Bankers Trust, BRS, BT Alex. Brown
and their affiliates on demand for all reasonable out-of-pocket expenses
(including due diligence expenses, syndication expenses, consultant's fees and
expenses, travel expenses, and reasonable fees, charges and disbursements of
counsel (including, without duplication of effort, allocated costs of internal
counsel)) incurred in connection with the Credit Facilities and any related
documentation (including this Commitment Letter, the Term Sheet, the Fee Letter
and the definitive financing documentation) or the administration, amendment,
modification or waiver thereof. No indemnified person shall be liable for any
indirect or consequential damages in connection with its activities related to
the Credit Facilities.
This Commitment Letter shall not be assignable by you without
the prior written consent of Bank of America, Bankers Trust, BRS and BT Alex.
Brown (and any purported assignment without such consent shall be null and
void), is intended to be solely for the benefit of the parties
<PAGE> 5
5
hereto and is not intended to confer any benefits upon, or create any rights in
favor of, any person other than the parties hereto, provided that each of
Fremont and RCBA may assign its rights and obligations under this Commitment
Letter and the Fee Letter to any other affiliate of Fremont Partners, L.L.C. or
Richard C. Blum & Associates, L.P., respectively, in connection with the
assignment by Fremont or RCBA, as the case may be, to such affiliate of all of
its Shares and all of its rights and obligations under the Transaction Agreement
and the other Recapitalization Documentation (as defined in Exhibit A). This
Commitment Letter may not be amended or waived except by an instrument in
writing signed by each of you, Bank of America, Bankers Trust, BRS and BT Alex.
Brown. This Commitment Letter may be executed in any number of counterparts,
each of which shall be an original, and all of which, when taken together, shall
constitute one agreement. Delivery of an executed signature page of this
Commitment Letter by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof. This Commitment Letter, together with the
Term Sheet and the Fee Letter are the only agreements that have been entered
into among us with respect to the Credit Facilities and set forth the entire
understanding of the parties with respect thereto. This Commitment Letter shall
be governed by, and construed in accordance with, the laws of the State of New
York. All of your obligations under this Commitment Letter and the Fee Letter
shall be joint and several obligations.
This Commitment Letter is delivered to you on the
understanding that neither this Commitment Letter, the Term Sheet or the Fee
Letter nor any of their terms or substance shall be disclosed, directly or
indirectly, to any other person except (a) to the officers, agents and advisors
of the Sponsors and the Borrower who are directly involved in the consideration
of this matter or (b) as may be compelled in a judicial or administrative
proceeding or as otherwise required by law (in which case you agree to inform us
promptly thereof), provided, that the foregoing restrictions shall cease to
apply (except in respect of the Fee Letter and its terms and substance) after
this Commitment Letter has been accepted by you.
The compensation, reimbursement, indemnification and
confidentiality provisions contained herein and in the Fee Letter shall remain
in full force and effect regardless of whether definitive financing
documentation shall be executed and delivered and notwithstanding the
termination of this Commitment Letter or Bank of America's and Bankers Trust's
commitments hereunder; provided, that your obligations under this Commitment
Letter, other than those arising under the sixth and thirteenth paragraphs
hereof, shall automatically terminate and be superseded by the provisions of the
definitive documentation relating to the Credit Facilities upon the consummation
of the Recapitalization, and you shall automatically be released from all
liability in connection therewith at such time.
If the foregoing correctly sets forth our agreement, please
indicate your acceptance of the terms hereof and of the Term Sheet and the Fee
Letter by returning to us executed counterparts hereof and of the Fee Letter,
not later than 5:00 p.m., Chicago time, on October 3, 1997. Bank of America's
and Bankers Trust's commitments and BRS's and BT Alex. Brown's agreements herein
will expire at such time in the event Bank of America and Bankers Trust have not
received such executed counterparts in accordance with the immediately preceding
sentence.
<PAGE> 6
6
We are pleased to have been given the opportunity to assist
you in connection with this important financing.
Very truly yours,
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Kevin Morrison
____________________________
Name: Kevin Morrison
Title: Vice President
BANCAMERICA ROBERTSON STEPHENS
By: /s/ Mark Lies
____________________________
Name: Mark Lies
Title: Managing Director
BANKERS TRUST COMPANY
By: /s/ Victoria T. Page
____________________________
Name: Victoria T. Page
Title: Managing Director
BT ALEX. BROWN INCORPORATED
By: /s/ Kate W. Cook
____________________________
Name: Kate W. Cook
Title: Managing Director
Accepted and agreed to as of
the date first written above by:
FREMONT PURCHASER II, INC.
By: /s/ R.S. Kopf
____________________________
Name: R.S. Kopf
Title: General Counsel and Secretary
<PAGE> 7
7
RCBA PURCHASER I, L.P.
By:/s/ N. Colin Lind
_____________________________
Name: N. Colin Lind
Title: Managing Director
KINETIC CONCEPTS, INC.
By:/s/ Raymond R. Hannigan
____________________________
Name: Raymong R. Hannigan
Title: President and Chief Executive Officer
<PAGE> 8
EXHIBIT A
SENIOR CREDIT FACILITIES
Statement of Terms and Conditions
---------------------------
Fremont Purchaser II, Corp. ("Fremont"), RCBA Purchaser I,
L.P. ("RCBA" and, together with Fremont, the "Sponsors") and Kinetic Concepts,
Inc. (the "Borrower") have entered into a transaction agreement (the
"Transaction Agreement") pursuant to which the Sponsors, together with certain
of their affiliates and investors (the Sponsors and such affiliates and
investors are collectively referred to herein as the "New Investor Group"), will
participate and invest in a leveraged recapitalization transaction involving the
Borrower (the "Recapitalization"). The Recapitalization will be accomplished
through the following steps: (a) the Sponsors will purchase for cash from the
Borrower up to $154,700,000 (but not less than $125,000,000) of newly issued
shares of common stock ("Shares") of the Borrower (the "New Investor Shares");
(b) the Borrower will make an all cash tender offer (the "Tender Offer") to
acquire all of its issued and outstanding Shares (and related options), other
than the New Investor Shares and Shares and certain management options (such
Shares and management options, together with the New Investor Shares, the
"Rollover Shares") owned by certain existing stockholders of the Borrower,
including members of the Borrower's Board of Directors and/or management (the
"Rollover Shareholders" and, together with the New Investor Group, the
"Buyers"), for a maximum aggregate repurchase price not to exceed $655,000,000;
(c) any Shares (and related options) acquired by the Borrower pursuant to the
Tender Offer will immediately be cancelled; (d) any Shares (and related options)
not acquired pursuant to the Tender Offer (other than the Rollover Shares) will
be acquired in a merger in which such Shares will be converted to the right to
receive the consideration paid in the Tender Offer (the "Merger"); and (e)
pursuant to the Merger, the Rollover Shares (which shall have an aggregate value
of at least $355,200,000) shall be converted to newly issued shares of the
Borrower as the surviving corporation of the Merger, which newly issued shares
shall represent all of the issued and outstanding common stock of the Borrower
immediately following the Merger. References herein to the "Recapitalization"
shall include all of the foregoing transactions and all related financings and
other transactions. Upon consummation of the Recapitalization, the New Investor
Group will own at least 66-2/3% of the then outstanding shares of common stock
of the Borrower. Set forth below is a statement of the terms and conditions for
the Senior Merger Facilities:
I. Parties
Borrower: Kinetic Concepts, Inc. (the "Borrower").
Guarantors: Each of the Borrower's direct and indirect
domestic subsidiaries (collectively, the
"Guarantors"). In addition, the holding company
parent of the Borrower ("Holdings"), if any such
holding company exists, shall also be a
"Guarantor."
Administrative Agent: Bank of America National Trust and Savings
Association ("Bank of America" and, in such
capacity, the "Administrative Agent").
<PAGE> 9
2
Syndication Agent: Bankers Trust Company ("Bankers Trust" and, in
such capacity, the "Syndication Agent"; together
with the Administrative Agent, the "Agents").
Lenders: A syndicate of banks, financial institutions and
other entities, including Bank of America or one
of its affiliates and Bankers Trust, arranged by
the Agents in consultation with the Borrower
(collectively, the "Lenders").
II. Types and Amounts of Senior Merger Facilities
A. Term Loan Facilities
Types and Amounts of
Facilities: Term loan facilities ("Term Loan Facilities") in
an aggregate amount of $300,000,000 (the loans
thereunder, the "Term Loans") comprised of the
following:
Tranche A Term Loan Facility: A six year term
loan facility (the "Tranche A Term Loan
Facility") in an aggregate principal amount equal
to $120,000,000 (the loans thereunder, the
"Tranche A Term Loans"). The Tranche A Term Loans
shall be repayable in quarterly installments
payable at the end of March, June, September and
December of each year, commencing March 31, 1998,
with the aggregate amount payable in each year
equal to the amount set forth below opposite such
year (and the installments in each year being
equal);
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $ 3,000,000
1999 7,000,000
2000 15,000,000
2001 30,000,000
2002 30,000,000
2003 35,000,000
</TABLE>
Tranche B Term Loan Facility: A seven year term
loan facility (the "Tranche B Term Loan
Facility") in an aggregate principal amount equal
to $90,000,000 (the loans thereunder, the
"Tranche B Term Loans"). The Tranche B Term Loans
shall be repayable in quarterly installments
payable at the end of March, June, September and
December of each year, commencing March 31, 1998,
with the aggregate amount payable in each year
equal to the amount set forth below opposite such
year (and the installments in each year being
equal, except that the first three installments
in 2004 shall be equal to $225,000 and the final
installment shall be equal to $83,925,000):
<PAGE> 10
3
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $ 900,000
1999 900,000
2000 900,000
2001 900,000
2002 900,000
2003 900,000
2004 84,600,000
</TABLE>
Tranche C Term Loan Facility: An eight year term
loan facility (the "Tranche C Term Loan
Facility") in an aggregate principal amount equal
to $90,000,000 (the loans thereunder, the
"Tranche C Term Loans"). The Tranche C Term Loans
shall be repayable in quarterly installments
payable at the end of March, June, September and
December of each year, commencing March 31, 1998,
with the aggregate amount payable in each year
equal to the amount set forth below opposite such
year (and the installments in each year being
equal, except that the first three installments
in 2005 shall be equal to $225,000 and the final
installment shall be equal to $83,025,000):
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $ 900,000
1999 900,000
2000 900,000
2001 900,000
2002 900,000
2003 900,000
2004 900,000
2005 83,700,000
</TABLE>
On the basis of market reception during the
syndication process, the Agents may determine,
with the consent of the Borrower (which consent
shall not be unreasonably withheld), to increase
or decrease the amount of the Tranche B Term Loan
Facility, and to correspondingly decrease or
increase the amount of the Tranche C Term Loan
Facility, provided that the aggregate amount of
the Term Loan Facilities will equal $300,000,000.
Availability: The Term Loans shall be made in a single drawing
on the Closing Date (as defined in Exhibit B).
Purpose: The proceeds of the Term Loans shall be used to
finance a portion of the Recapitalization and to
pay related fees and expenses.
<PAGE> 11
4
B. Tender Facility
Type and Amount of
Facility: Tender facility ("Tender Facility") in the amount
of $130,000,000 (the loans thereunder, the
"Tender Loans").
Availability: The Tender Loans shall be made in a single
drawing on the Closing Date.
Amortization: The Tender Loans will be repayable in full on the
day which is three weeks after the Closing Date
(the "Maturity Date").
Purpose: The proceeds of the Tender Loans shall be used to
finance (a) the purchase of outstanding shares of
common stock of the Borrower pursuant to the
Tender Offer and (b) the payment of interest,
fees and other expenses incurred in connection
with the Tender Offer.
C. Revolving Credit Facility
Type and Amount of
Facility: Six year revolving credit facility ("Revolving
Credit Facility") in the amount of $50,000,000
(or the equivalent thereof in foreign currencies
under the multi-currency subfacility described
below) at any one time outstanding (the loans
thereunder, the "Revolving Credit Loans").
Availability: The Revolving Credit Facility shall be available
on a revolving basis during the period commencing
on the Closing Date and ending on December 31,
2003 (the "Revolving Credit Termination Date").
Letters of Credit: A portion of the Revolving Credit Facility not in
excess of an amount to be agreed upon shall be
available for the issuance of letters of credit
(the "Letters of Credit") by Bank of America or
one of its affiliates (in such capacity, the
"Issuing Lender"). No Letter of Credit shall have
an expiration date after the earlier of (a) one
year after the date of issuance thereof and (b)
thirty days prior to the Revolving Credit
Termination Date, provided that any Letter of
Credit with a one-year tenor may provide for the
renewal thereof for additional one-year periods
(which shall in no event extend beyond the date
referred to in clause (b) above).
Drawings under any Letter of Credit shall be
reimbursed by the Borrower (whether with its own
funds or with the proceeds of Revolving Credit
Loans) on the same business day. To the extent
that the Borrower does not so reimburse the
Issuing Lender, the Lenders under the Revolving
Credit Facility shall be irrevocably and
unconditionally obligated to reimburse the
Issuing Lender on a pro rata basis.
<PAGE> 12
5
Multi-Currency
Subfacility: A portion of the Revolving Credit Facility not in
excess of an amount to be agreed upon shall be
available directly to certain foreign
subsidiaries of the Borrower. Loans under the
Multi-Currency Subfacility ("Multi-Currency
Loans") shall be available in foreign currencies
to be agreed, subject to sub-limits for each such
currency to be agreed. The structure of the
Multi-currency Subfacility (for example, as to
which Lenders shall provide the loans thereunder)
shall be determined by the Administrative Agent
after consultation with the Borrower, but it is
the intention of the Administrative Agent that
all the Lenders shall share the risk on a pro
rata basis. If one Lender fronts for the other
Lenders in respect of a Multi-Currency Loan, such
fronting Lender shall receive from the Borrower a
fronting fee in respect thereof in an amount to
be determined.
Maturity: The Revolving Credit Termination Date.
Purpose: The proceeds of the Revolving Credit Loans shall
be used to finance a portion of the
Recapitalization and related fees and expenses
and to finance the working capital needs and
general corporate purposes of the Borrower and
its subsidiaries in the ordinary course of
business, including to finance Permitted
Acquisitions (as defined below).
D. Acquisition Facility
Type and Amount of
Facility: Six year acquisition facility ("Acquisition
Facility" and, together with the Term Loan
Facilities, the Tender Facility and the Revolving
Credit Facility, the "Credit Facilities") in the
amount of $50,000,000 (the loans thereunder, the
"Acquisition Loans" and, together with the Term
Loans, the Tender Loans and the Revolving Credit
Loans, the "Loans").
Availability: The Acquisition Loans will be available in one or
more drawings during the period commencing on the
Closing Date and ending on December 31, 2000 (the
"Acquisition Facility Termination Date").
Acquisition Loans may not be repaid and
reborrowed, except that Acquisition Loans made to
finance the Recapitalization may be repaid on or
prior to the date of the Merger as described
under "Mandatory Prepayments and Commitments
Reductions" below and reborrowed after the date
of such repayment to finance Permitted
Acquisitions and to pay related fees and
expenses.
Maturity: The aggregate principal amount of Acquisition
Loans outstanding on the Acquisition Facility
Termination Date shall be repayable in twelve
equal quarterly installments payable at the end
of March, June, September and December of each
year, commencing March 31, 2001.
<PAGE> 13
6
Purpose: The proceeds of the Acquisition Loans shall be
used to finance, the Recapitalization, Permitted
Acquisitions and related fees and expenses.
III. Certain Payment Provisions
Fees and Interest Rates: As set forth on Annex I.
Optional Prepayments and
Commitment Reductions: Loans (including the Tender Loans) may be prepaid
and commitments may be reduced by the Borrower in
minimum amounts to be agreed upon. No prepayment
of Term Loans shall be permitted if any Tender
Loans are outstanding. Optional prepayments of
the Term Loans and Acquisition Loans shall be
applied pro rata to the Tranche A Term Loans, the
Tranche B Term Loans, the Tranche C Term Loans
and the Acquisition Loans, and ratably to the
remaining installments thereof. Notwithstanding
the foregoing, in the case of any optional
prepayment to be applied to the Tranche B Term
Loans and the Tranche C Term Loans, the Borrower
may (at its option) offer the holders of such
Tranche B Term Loans and Tranche C Term Loans the
opportunity to waive the right to receive the
amount of such optional prepayment. In the event
such holders elect to waive such right, the
amount that would otherwise have been applied as
such optional prepayment of the applicable
Tranche B Term Loans and/or Tranche C Term Loans
shall be applied to prepay the Tranche A Term
Loans and Acquisition Loans pro rata and, after
the Tranche A Term Loans and Acquisition Loans
have been paid in full, any remaining amount
shall be applied to the prepayment of the other
Tranche B Term Loans and Tranche C Term Loans pro
rata. Optional prepayments of the Term Loans and
(except as otherwise provided under "Acquisition
Facility -- Availability" above) Acquisition
Loans may not be reborrowed.
Mandatory Prepayments and
Commitment Reductions: The following amounts shall be applied to prepay
the Tender Loans, the Term Loans and/or
Acquisition Loans and/or reduce the commitments
under the Acquisition Facility and/or the
Revolving Credit Facility:
(a) subject to exceptions to be agreed, 50% of
the net proceeds of the sale or issuance of
equity (other than (i) any sale or issuance of
equity the proceeds of which are used to
refinance the Subordinated Facility and (ii) up
to $25,000,000 of equity contributed by the
Buyers to the Borrower, the proceeds of which are
used to fund Permitted Acquisitions) and 100% of
the net proceeds of the incurrence of certain
indebtedness after the Closing Date by the
Borrower or any of its subsidiaries (other than
proceeds of the Senior Subordinated Notes and the
<PAGE> 14
7
Subordinated Facility and any proceeds of any
other subordinated debt to the extent applied to
repay the Subordinated Facility);
(b) subject to exceptions to be agreed, 100% of
the net proceeds of any sale or other disposition
(including as a result of casualty or
condemnation) by the Borrower or any of its
subsidiaries of any assets, except for the sale
of inventory or obsolete or worn-out property in
the ordinary course of business and subject to
certain other customary exceptions (including a
basket and capacity for reinvestment) to be
agreed upon; and
(c) 50% of excess cash flow (to be defined in a
mutually satisfactory manner) for each fiscal
year of the Borrower (commencing with the 1998
fiscal year) payable within 90 days after the
relevant fiscal year-end. Step-downs in the
percentage of excess cash flow resulting in
prepayments and commitment reductions will be
made following reductions of leverage below
levels to be negotiated.
All such mandatory prepayments of Loans and/or
reductions of commitments shall be applied first
to prepay any outstanding Tender Loans. After the
Tender Loans shall have been repaid in full, the
Term Loans and Acquisition Loans shall be prepaid
or reduced, as the case may be. Mandatory
prepayments of the Term Loans and Acquisition
Loans shall be applied pro rata to the Tranche A
Term Loans, the Tranche B Term Loans, the Tranche
C Term Loans and the Acquisition Loans, and
ratably to the remaining installments thereof.
After the Term Loans and Acquisition Loans have
been repaid in full, the commitments under the
Revolving Credit Facility and the unused
commitments under the Acquisition Facility and
shall be permanently reduced on a ratable basis.
Notwithstanding the foregoing, in the case of any
mandatory prepayment to be applied to the Tranche
B Term Loans and the Tranche C Term Loans, the
Borrower may (at its option) offer the holders of
such Tranche B Term Loans and Tranche C Term
Loans the opportunity to waive the right to
receive the amount of such mandatory prepayment.
In the event such holders elect to waive such
right, the amount that would otherwise have been
applied as such mandatory prepayment of the
applicable Tranche B Term Loans and/or Tranche C
Term Loans shall be applied to prepay the Tranche
A Term Loans and Acquisition Loans pro rata and,
after the Tranche A Term Loans and Acquisition
Loans have been paid in full, any remaining
amount shall be applied to the prepayment of the
other Tranche B Term Loans and Tranche C Term
Loans pro rata. Mandatory prepayments of the Term
Loans and Acquisition Loans may not be
reborrowed.
Proceeds of the Senior Subordinated Notes and the
Subordinated Facility (other than proceeds of
Senior Subordinated Notes and
<PAGE> 15
8
other subordinated debt to the extent applied to
repay the Subordinated Facility) shall be applied
as follows: first, the outstanding Tender Loans
shall be repaid in full, second, an amount (the
"Escrow Amount") equal to the amount required to
purchase any Shares (and related options) not
acquired pursuant to the Tender Offer (other than
the Rollover Shares) shall be deposited in escrow
pending purchase of such Shares on terms and
conditions satisfactory to the Administrative
Agent, third (a) in the event the RIK Acquisition
is not consummated prior to the receipt of such
proceeds, the outstanding Acquisition Loans shall
be repaid in full, or (b) in the event the RIK
Acquisition is consummated prior to receipt of
such proceeds, the Acquisition Loans shall be
repaid to the extent the aggregate outstanding
principal amount thereof exceeds $23,000,000, and
fourth any remaining proceeds shall be applied to
repay any outstanding Revolving Credit Loans (but
shall not reduce any commitments under the
Revolving Credit Facility). As used herein, "RIK
Acquisition" means the acquisition by the
Borrower of the assets of RIK Medical, L.L.C. and
RIK Medical East, L.L.C.
IV. Collateral The obligations of each of the Borrower and each
Guarantor (collectively, the "Credit Parties") in
respect of the Credit Facilities and any interest
rate or foreign currency protection agreements in
respect thereof provided by any Lender (or any
affiliate of a Lender) shall be secured by a
perfected first priority security interest in all
of its tangible and intangible assets (including,
without limitation, intellectual property, real
property (other than leasehold interest which are
not material), all of the capital stock of the
Borrower's direct and indirect subsidiaries
(limited to 65% of such capital stock in the case
of foreign subsidiaries), and, if any holding
company parent of the Borrower exists, all of the
capital stock of the Borrower, and rights under
the Recapitalization Documentation (as defined in
Exhibit B)), except for those assets as to which
the Administrative Agent shall determine in its
sole discretion that the costs of obtaining such
a security interest are excessive in relation to
the value of the security to be afforded thereby.
V. Certain Conditions
Initial Conditions: The availability of the Credit Facilities shall
be conditioned upon the completion and/or
satisfaction on or before January 31, 1998, of
the applicable conditions set forth in Exhibit B
and other customary corporate and document
delivery requirements.
On-Going Conditions: The making of each extension of credit shall be
conditioned upon (a) the accuracy of all
representations and warranties in the
documentation (the "Credit Documentation") with
respect to the Credit Facilities (including,
without limitation, the material adverse change
and litigation representations) and (b) there
being
<PAGE> 16
9
no default or event of default in existence at
the time of, or after giving effect to the making
of, such extension of credit. As used herein and
in the Credit Documentation a "material adverse
change" shall mean any event, development or
circumstance that has had or would be reasonably
likely to have a material adverse effect on (a)
the Recapitalization, (b) the business, assets,
property, condition (financial or otherwise) or
prospects of the Borrower and its subsidiaries,
taken as a whole, or (c) the validity or
enforceability of any of the Credit Documentation
or the rights and remedies of the Administrative
Agent and the Lenders thereunder.
VI. Certain Documentation Matters
The Credit Documentation shall contain
representations, warranties, covenants and events
of default customary for financings of this type
and other terms deemed appropriate by the
Lenders, including, without limitation:
Representations and
Warranties: Financial statements (including pro forma
financial statements); absence of undisclosed
liabilities; no material adverse change;
corporate existence; compliance with law;
corporate power and authority; enforceability of
Credit Documentation; no conflict with law or
contractual obligations; no material litigation;
no default; ownership of property; liens;
intellectual property; no burdensome
restrictions; taxes; Federal Reserve regulations;
ERISA; Investment Company Act; subsidiaries;
environmental matters; solvency; labor matters;
accuracy of disclosure; Recapitalization
Documentation; creation and perfection of
security interests; and status of Credit
Facilities as senior debt.
Affirmative Covenants: Delivery of financial statements, reports,
accountants' letters, projections, officers'
certificates and other information requested by
the Lenders; payment of other obligations;
continuation of business and maintenance of
existence and material rights and privileges;
compliance with laws and material contractual
obligations; maintenance of property and
insurance; maintenance of books and records;
right of the Lenders to inspect property and
books and records; notices of defaults,
litigation and other material events; compliance
with environmental laws; further assurances
(including, without limitation, with respect to
security interests in after-acquired property);
deposit of the Escrow Amount in escrow pending
consummation of the Merger on terms and
conditions reasonably satisfactory to the
Administrative Agent; and agreement to obtain
within 90 days after the Closing Date interest
rate protection in an amount equal to 50% of the
principal amount of the Term Loans for a period
of three years in a manner satisfactory to the
Administrative Agent.
<PAGE> 17
10
Financial Covenants: To include minimum EBITDA, minimum interest
coverage ratio and maximum leverage ratio.
Negative Covenants: Limitations on: indebtedness; liens; guarantee
obligations; mergers, consolidations,
liquidations and dissolutions; sales of assets;
leases; dividends and other payments in respect
of capital stock and payments in respect of
subordinated debt; capital expenditures;
investments, loans and advances; optional
payments and modifications of subordinated and
other debt instruments; transactions with
affiliates; sale-leasebacks; changes in fiscal
year; negative pledge clauses and clauses
restricting subsidiary distributions; changes in
lines of business; annual management fees and
corporate allocations (not to exceed specified
amounts); amendments to Recapitalization
Documentation; and, if there is a holding company
parent of the Borrower, changes in the passive
holding company status of Holdings.
Acquisitions will be permitted subject to the
following conditions:
(a) The Borrower satisfies, and will continue
to satisfy, after giving effect (on a pro
forma basis) to the relevant acquisition
and any debt incurred in connection
therewith, all financial covenants, and
such acquisition is consummated on a
"friendly" basis;
(b) No default or event of default has then
occurred and is continuing or would result
therefrom;
(c) The purchase price (including assumed
indebtedness and the fair market value of
any non-cash consideration) of the relevant
acquisition does not exceed $25,000,000
individually and the purchase price of all
such acquisitions since the Merger Closing
Date does not exceed $70,000,000 in the
aggregate (provided that such aggregate
limitation may be increased by an aggregate
amount of up to $25,000,000 of any equity
infusions from the Buyers after the Merger
Closing Date which are used to fund
Permitted Acquisitions); and
(d) An amount at least equal to $15,000,000 is
available to be borrowed under the
Revolving Credit Facility after giving
effect to the relevant acquisition.
Any acquisition which satisfies the foregoing
conditions is referred to herein as a "Permitted
Acquisition".
Events of Default: Nonpayment of principal when due; nonpayment of
interest, fees or other amounts after a grace
period to be agreed upon; material inaccuracy of
representations and warranties; violation of
covenants (subject, in the case of certain
affirmative covenants, to
<PAGE> 18
11
a grace period to be agreed upon); cross-default;
bankruptcy events; certain ERISA events; material
judgments; actual or asserted invalidity of any
guarantee, security document, security interest
or subordination provision; failure to consummate
the Merger; and a change of control (the
definition of which is to be agreed).
Voting: Amendments and waivers with respect to the Credit
Documentation shall require the approval of
Lenders holding not less than 51% of the
aggregate amount of the Credit Facilities except
that (a) the consent of each Lender directly
affected thereby shall be required with respect
to (i) reductions in the amount of any Loan or
extensions of the final date of amortization or
maturity of any Loan, (ii) reductions in the rate
of interest or any fee or extensions of any due
date thereof and (iii) increases in the amount or
extensions of the expiry date of any Lender's
commitment, (b) the consent of 100% of the
Lenders shall be required with respect to (i)
modifications to any of the voting percentages
and (ii) releases of significant Guarantors or
all or substantially all of the collateral and
(c) subject to clause (a)(i) above, the consent
of 66-2/3% of the Lenders shall be required to
change the scheduled amortization of the Loans.
In addition, the consent of Lenders holding a
majority of the aggregate principal amount of
each of the Tranche B Term Loans and the Tranche
C Term Loans shall be required with respect to
certain modifications affecting prepayment of the
Term Loan Facilities.
Assignments
and Participations: The Lenders shall be permitted to assign and sell
participations in their Loans and commitments,
subject, in the case of assignments (other than
to another Lender or to an affiliate of a
Lender), to the consent of the Administrative
Agent and (so long as no event of default has
occurred and is continuing) the Borrower (which
consent in each case shall not be unreasonably
withheld). Non-pro rata assignments shall be
permitted. In the case of partial assignments
(other than to another Lender or to an affiliate
of a Lender), the minimum assignment amount shall
be $5,000,000 and, after giving effect thereto,
the assigning Lender shall have commitments and
Loans aggregating at least $5,000,000 in each
case unless otherwise agreed by the Borrower and
the Administrative Agent. Participants shall have
the same benefits as the Lenders with respect to
yield protection and increased cost provisions.
Voting rights of participants shall be limited to
those matters set forth in clause (a) above with
respect to which the affirmative vote of the
Lender from which it purchased its participation
would be required as described under "Voting"
above and those matters set forth in clause (b)
above. Pledges of Loans in accordance with
applicable law shall be permitted without
restriction.
<PAGE> 19
12
Yield Protection: The Credit Documentation shall contain customary
provisions (a) protecting the Lenders against
increased costs or loss of yield resulting from
changes in reserve, tax, capital adequacy and
other requirements of law and from the imposition
of or changes in withholding or other taxes and
(b) indemnifying the Lenders for "breakage costs"
incurred in connection with, among other things,
any prepayment of a Eurodollar Loan (as defined
in Annex I) on a day other than the last day of
an interest period with respect thereto.
Expenses and
Indemnification: The Borrower shall pay (a) all reasonable
out-of-pocket expenses of the Agents, BancAmerica
Robertson Stephens ("BRS") and BT Alex. Brown
Incorporated ("BT Alex. Brown") associated with
the syndication of the Credit Facilities and the
preparation, execution, delivery and
administration of the Credit Documentation and
any amendment or waiver with respect thereto
(including the reasonable fees, disbursements and
other charges of counsel (including the allocated
costs of internal counsel)) and (b) all out-
of-pocket expenses of the Administrative Agent
and the Lenders (including the fees,
disbursements and other charges of counsel
(including the allocated costs of internal
counsel)) in connection with the enforcement of
the Credit Documentation.
The Agents, BRS, BT Alex. Brown and the Lenders
(and their affiliates and their respective
officers, directors, employees, advisors and
agents) will have no liability for, and will be
indemnified and held harmless against, any loss,
liability, cost or expense incurred in respect of
the financing contemplated hereby or the use or
the proposed use of proceeds thereof (except to
the extent resulting from the gross negligence or
willful misconduct of the indemnified party).
Governing Law and Forum: State of New York.
Counsel to the
Administrative Agent: Simpson Thacher & Bartlett.
<PAGE> 20
Annex I
to Exhibit A
Interest and Certain Fees
Interest Rate Options: The Borrower may elect that the Loans comprising
each borrowing bear interest at a rate per annum
equal to:
the Base Rate plus the Applicable Margin; or
the Eurodollar Rate plus the Applicable
Margin.
provided that all Multi-Currency Loans shall bear
interest as described below.
As used herein:
"Base Rate" means the highest of (i) the rate of
interest publicly announced by Bank of America as
its "reference rate" (the "Reference Rate"), and
(ii) the federal funds effective rate from time
to time plus 0.5%.
"Applicable Margin" means:
(a) in the case of the Revolving Credit
Loans, Tender Loans, Tranche A Term Loans
and Acquisition Loans, (i) 1.25%, in the
case of Base Rate Loans (as defined below)
and (ii) 2.25%, in the case of Eurodollar
Loans (as defined below);
(b) in the case of the Tranche B Term Loans,
(i) 1.50% in the case of Base Rate Loans and
(ii) 2.50% in the case of Eurodollar Loans;
and
(c) in the case of Tranche C Term Loans, (i)
1.75% in the case of Base Rate Loans and
(ii) 2.75% in the case of Eurodollar Loans.
The foregoing margins applicable to Revolving
Credit Loans and Tranche A Term Loans shall be
subject to reduction after the end of the second
full fiscal quarter after the Closing Date by
amounts to be agreed upon based on the
achievement of performance targets to be
determined and provided that no event of default
has occurred and is continuing.
"Eurodollar Rate" means the rate (adjusted for
statutory reserve requirements for eurocurrency
liabilities) at which eurodollar deposits for
one, two, three or six months (as selected by the
<PAGE> 21
2
Borrower) are offered to Bank of America in the
interbank eurodollar market, provided that, so
long as any Tender Loans are outstanding, the
Borrower will be permitted to select interest
periods of one week with respect to Tender Loans
and any Acquisition Loans and Revolving Credit
Loans made on the Closing Date.
Interest Payment Dates: In the case of Loans bearing interest based upon
the Base Rate ("Base Rate Loans"), quarterly in
arrears.
In the case of Loans bearing interest based upon
the Eurodollar Rate ("Eurodollar Loans"), on the
last day of each relevant interest period and, in
the case of any interest period longer than three
months, on each successive date three months
after the first day of such interest period.
Commitment Fees: The Borrower shall pay a commitment fee
calculated at the rate of 0.50% per annum on the
average daily unused portion of each of the
Revolving Credit Facility and the Acquisition
Facility, payable quarterly in arrears.
The foregoing commitment fee shall be subject to
reduction after the end of the second full fiscal
quarter after the Closing Date by amounts to be
agreed upon based on the achievement of
performance targets to be determined and provided
that no event of default has occurred and is
continuing.
Letter of Credit Fees: The Borrower shall pay a commission on all
outstanding Letters of Credit at a per annum rate
equal to the Applicable Margin then in effect
with respect to Eurodollar Loans that are
Revolving Credit Loans on the face amount of each
such Letter of Credit. Such commission shall be
shared ratably among the Lenders participating in
the Revolving Credit Facility and shall be
payable quarterly in arrears.
A fronting fee equal to 0.25% per annum on the
face amount of each Letter of Credit shall be
payable quarterly in arrears to the Issuing
Lender for its own account. In addition,
customary administrative, issuance, amendment,
payment and negotiation charges shall be payable
to the Issuing Lender for its own account.
Multi-Currency Loan
Interest and Fees: In the event that Multi-Currency Loans in a
foreign currency are made available by all the
Lenders, such Multi-Currency Loans shall bear
interest at the applicable local base rate for
such Multi-Currency Loans as determined by the
Administrative Agent plus the Applicable Margin
then in effect for Eurodollar Loans. In the event
that Multi-Currency Loans in a foreign currency
are fronted by a Lender, (a) such Multi-Currency
Loans shall bear interest at
<PAGE> 22
3
the applicable local base rate for such
Multi-Currency Loans as determined by the
relevant fronting Lender, (b) the Borrower shall
pay a commission on such Multi-Currency Loans at
a per annum rate equal to the Applicable Margin
then in effect with respect to Eurodollar Loans
on the face amount of each such Loan and (c) a
fronting fee equal to an amount to be determined
per annum on the face amount of each such
Multi-Currency Loan shall be payable quarterly in
arrears to the relevant fronting Lender for its
own account. The commission payable pursuant to
clause (b) of the immediately preceding sentence
shall be shared ratably among the Lenders
participating in the Revolving Credit Facility
and shall be payable quarterly in arrears.
Default Rate: At any time when the Borrower is in default in
the payment of any amount due under the Credit
Facilities, all Loans shall bear interest at 2%
above the rate otherwise applicable thereto.
Overdue interest, fees and other amounts shall
bear interest at 2% above the rate applicable to
the relevant Base Rate Loans.
Rate and Fee Basis: All per annum rates shall be calculated on the
basis of a year of 360 days (or 365/366 days, in
the case of Base Rate Loans the interest rate
payable on which is then based on the Reference
Rate) for actual days elapsed.
<PAGE> 23
EXHIBIT B
The availability of the Credit Facilities, in addition to the
conditions set forth in Exhibit A, shall be subject to the satisfaction of the
following conditions (the date upon which such conditions are satisfied is
referred to as the "Closing Date"). Capitalized terms used but not defined
herein have the meanings given in said Exhibit.
(a) Each Credit Party shall have executed and
delivered satisfactory definitive Credit
Documentation and all conditions to the initial
borrowings thereunder shall have been satisfied.
(b) The Borrower shall have received at least
$125,000,000 in cash proceeds from the sale of
the New Investor Shares prior to the consummation
of the Tender Offer on satisfactory terms and
conditions.
(c) The Tender Offer shall have been consummated
in accordance with applicable law and on
satisfactory terms and all conditions to the
Tender Offer contained in the Transaction
Agreement shall have been satisfied or complied
substantially on the terms set forth therein and
not waived without the Administrative Agent's
consent (which shall not be unreasonably
withheld). The Transaction Agreement and other
documentation (collectively, the
"Recapitalization Documentation") relating to the
Recapitalization shall have satisfactory terms
and conditions, shall be in full force and effect
and no provision of such documentation shall have
been waived, amended, supplemented or otherwise
modified in any material respect. Without
limiting the foregoing, the Transaction Agreement
shall provide that, pursuant to the Merger, the
Rollover Shares (which shall have an aggregate
value of at least $355,200,000) shall be
converted to newly issued shares of the Borrower
as the surviving corporation of the Merger, which
newly issued shares shall represent all of the
issued and outstanding common stock of the
Borrower immediately following the Merger.
(d) (i) (A) The Borrower shall have entered into
a loan or credit agreement with financial
institutions satisfactory to the Lenders pursuant
to which such financial institutions shall have
agreed to provide to the Borrower a $200,000,000
subordinated bridge facility to the Borrower as
interim bridge financing to the Senior
Subordinated Notes (as defined below) on terms
and conditions satisfactory to the Lenders (the
"Subordinated Facility"), (B) all conditions
precedent to the effectiveness of such loan or
credit agreement shall have been satisfied and
(C) the Borrower shall have engaged one or more
financial institutions satisfactory to the
Lenders to publicly sell or privately place at
least $200,000,000 of senior subordinated
unsecured notes (the "Senior Subordinated Notes")
in a public offering or Rule 144A private
placement on
<PAGE> 24
2
terms and conditions satisfactory to the Lenders
or (ii) the Borrower shall have received the
proceeds from the issuance of $200,000,000 of
Senior Subordinated Notes.
(e) At least 27,000,000 of the issued and
outstanding Shares (other than the Rollover
Shares) shall have validly tendered and accepted
for payment pursuant to the Tender Offer. All
documents and materials filed publicly by the
Buyers in connection with the Tender Offer and
the Merger shall have been furnished to the
Lenders and shall be satisfactory in from and
substance to the Lenders. In addition, after
giving effect to the Tender Offer and the
cancellation of the Shares purchased pursuant to
the Tender Offer, the New Investor Group shall
control (by direct ownership or contractual
undertakings) at least 66-2/3% (or such greater
percentage as shall be required to approve the
Merger), on a fully diluted basis, of the
aggregate voting power of the Shares which may be
voted in connection with the approval of the
Merger.
(f) The Lender shall have received evidence
satisfactory to them that (i) the aggregate
purchase price for all of the issued and
outstanding Shares and related options shall not
exceed $855,000,000 and (ii) the aggregate fees
and expenses with respect to the Recapitalization
shall not exceed $44,000,000.
(g) Substantially all of the existing
indebtedness of the Borrower and its subsidiaries
shall have been repaid on satisfactory terms. The
capitalization and structure of each Credit Party
after the Recapitalization shall be reasonably
satisfactory in all respects. The Administrative
Agent shall be satisfied with senior management
and their employment contracts and proposed
ownership interests in the Borrower.
(h) The Lenders, the Agents, BRS and BT Alex.
Brown shall have received all fees required to be
paid, and all expenses for which invoices have
been presented, on or before the Closing Date.
(i) All governmental and third party approvals
necessary in connection with the Recapitalization
(other than with respect to the Merger), the
financing contemplated hereby and the continuing
operations of the Borrower and its subsidiaries
shall have been obtained on terms reasonably
satisfactory to the Administrative Agent and
shall be in full force and effect, and all
applicable waiting periods shall have expired
without any action being taken or threatened by
any competent authority which would restrain,
prevent or otherwise impose adverse conditions on
the Recapitalization or the financing thereof,
except for such governmental and third party
approvals the failure to obtain which could not,
individually or in the aggregate, reasonably be
expected
<PAGE> 25
3
to have a material adverse effect on the
condition (financial or otherwise), business,
assets, liabilities, properties, results of
operations or prospects of the Borrower and its
subsidiaries, taken as a whole.
(j) The Lenders shall have received (i) audited
financial statements of the Borrower for the
fiscal years ending in 1994, 1995 and 1996 and
(ii) unaudited interim consolidated financial
statements of the Borrower for each fiscal month
and quarterly period ended after the latest
fiscal year referred to in clause (i) above as to
which such financial statements are available and
such financial statements shall not, in the
reasonable judgment of the Lenders, reflect any
material adverse change in the consolidated
financial condition of the Borrower and its
subsidiaries, from what was reflected in the
financial statements or projections previously
furnished to the Lenders.
(k) The Lenders shall have received a pro forma
consolidated balance sheet of the Borrower and
its subsidiaries as at the date of the most
recent consolidated balance sheet delivered
pursuant to the preceding paragraph, adjusted to
give effect to the consummation of the
Recapitalization and the financings contemplated
hereby as if such transactions had occurred on
such date prepared in accordance with Regulation
S-X under the Securities Act and consistent in
all material respects with the sources and uses
of cash for the Recapitalization as previously
described to the Lenders and the forecasts
previously provided to the Lenders.
(l) The Lenders shall have received the results
of a recent lien search in each relevant
jurisdiction with respect to the Borrower and its
subsidiaries, and such search shall reveal no
liens on any of the assets of the Borrower and
its subsidiaries except for liens permitted by
the Credit Documentation.
(m) All documents and instruments required to
perfect the Administrative Agent's security
interest in the collateral under the Credit
Facilities shall have been executed and be in
proper form for filing, and, in connection with
the real estate collateral, the Administrative
Agent shall have received title insurance
policies, surveys, permits, certificates of
occupancy and other customary documentation to
the extent reasonably determined to be required
by the Administrative Agent.
(n) The Administrative Agent shall be reasonably
satisfied with the insurance program to be
maintained by the Borrower and its subsidiaries
after the Tender Offer.
(o) The Lenders shall have received a
satisfactory solvency certificate of management
of the Borrower and a satisfactory
<PAGE> 26
4
solvency opinion from Houlihan Lokey Howard &
Zukin, in each case which shall document the
solvency of the Borrower and its subsidiaries
after giving effect to the Recapitalization and
the other transactions contemplated hereby.
(p) The Lenders shall have received a reasonably
satisfactory environmental audit with respect to
certain real property owned or leased by the
Borrower and its subsidiaries.
(q) Neither the Borrower nor any Buyer shall be
in breach or violation of any of its obligations
under the documentation relating to the
Recapitalization or the financing thereof.
(r) Neither the Borrower nor any of its
affiliates and subsidiaries shall be subject to
material contractual or other material
restrictions that would be violated by the
Recapitalization.
(s) The Lenders shall have received such legal
opinions (including opinions (i) from counsel to
the Borrower and its subsidiaries, (ii) if
reasonably available, delivered pursuant to the
Recapitalization Documentation, accompanied by
reliance letters in favor of the Lenders and
(iii) from such special and local counsel as may
be required by the Administrative Agent),
documents and other instruments as are customary
for transactions of this type or as they may
reasonably request.
(t) The Lenders shall be satisfied that the
making of the Loans will not violate Regulation
G, T, U or X of the Board of Governors of the
Federal Reserve.
(u) (i) As a condition to the making of the
Tender Loans, the Term Loan Facilities shall have
been fully drawn and (ii) as a condition to the
making of Acquisition Loans to finance the
Recapitalization, the Tender Facility shall have
been fully drawn.
(v) All representations and warranties of the
Borrower and its subsidiaries under the Credit
Documentation shall be true and correct and no
default or event of default under the Credit
Documentation shall have occurred and be
continuing.
<PAGE> 1
EXHIBIT E
BT ALEX. BROWN INCORPORATED BANCAMERICA ROBERTSON STEPHENS
130 LIBERTY STREET 231 SOUTH LASALLE STREET
NEW YORK, NY 10006 CHICAGO, ILLINOIS 60697
October 1, 1997
RCBA Purchaser I, L.P.
909 Montgomery Street
Suite 400
San Francisco, CA 94133
Attention: John C. Walker,
Managing Director
Fremont Purchaser II, Corp.
50 Fremont Street
Suite 3700
San Francisco, CA 94105
Attention: James T. Farrell,
President
Kinetic Concepts, Inc.
8023 Vantage Drive
P.O. Box 659508
San Antonio, TX 78285-9508
Attention: Mr. Raymond R. Hannigan
Re: Kinetic Concepts, Inc.
Ladies and Gentlemen:
You have advised BT Alex. Brown Incorporated ("BT Alex. Brown") and
BancAmerica Robertson Stephens ("BRS") that RCBA Purchaser I, L.P. ("RCBA") and
Fremont Purchaser II, Corp. ("Fremont"), together with certain other investors
satisfactory to us (RCBA, Fremont and such other investors being herein
collectively referred to as the "New Investor Group"), intend to invest in a
leveraged recapitalization transaction (the "Recapitalization") involving
Kinetic Concepts, Inc. (the "Company"). We understand that the Recapitalization
will be accomplished through the repurchase by the Company of all of its shares
of common stock (including certain options) other than at least $200.5 million
of shares of common stock and options (the "Rollover Shares") to be retained by
certain existing stockholders of the Company, including members of the Com-
<PAGE> 2
-2-
pany's Board of Directors and/or management (the "Rollover Shareholders" and,
together with the New Investor Group, the "Buyers"), for a maximum aggregate
repurchase price not to exceed $655.0 million (the "Repurchase Shares"), and
through the investment of not less than $355.2 million in equity in the Company
(the "Equity Financing"), including the contribution of at least $200.1 million
of Rollover Shares by the Rollover Shareholders and the purchase by the New
Investor Group of not less than $155.1 million of shares of the Company's common
stock directly from the Company (the "Equity Securities"); provided, that to the
extent the Buyers increase the amount of Rollover Shares above $200.1 million
after the date hereof, the amount of Rollover Shares shall be increased and the
amount of Repurchase Shares and Equity Securities shall be decreased by the same
amount; provided that in no event shall the Equity Securities be less than $125
million. In addition, in connection with the Recapitalization and related
transactions, fees and expenses of up to $44 million will be paid. Upon
consummation of the Recapitalization, the Buyers will own at least 66 2/3% of
the then outstanding shares of Company common stock.
You have advised BT Alex. Brown and BRS that the Recapitalization
would be accomplished through a tender offer (the "Tender Offer") followed by a
merger of corporations or other legal entities newly formed by the New Investor
Group with the Company (the "Merger") pursuant to which all shares of common
stock not tendered (in each case, other than Rollover Shares) will be cashed
out. It is expected that the Tender Offer will be financed through (i)
borrowings of up to $530 million under a senior secured credit facility to be
provided to the Company (the "Credit Facility"), of which $300.0 million will be
available to the Company under term loan facilities (the "Term Loans"), up to
$130.0 million will be available to the Company under a tender facility, up to
$50.0 million will be available to the Company under a revolving credit facility
(the "Revolving Loans") and up to $50.0 million will be available to the Company
under an acquisition facility (the "Acquisition Loans"), (ii) cash equity
investments from the New Investor Group of the Equity Securities, but in no
event shall the Equity Securities be less than $125 million, and (iii) cash on
hand of the Company of $23.0 million or in lieu thereof ownership of RIK
Medical, L.L.C. and RIK Medical East L.L.C. (collectively "RIK Medical").
You have further advised us that the amount of funds necessary to
refinance a portion of the Credit Facility on the date which is twenty one days
after the closing of the Credit Facility will be provided through the proceeds
from the sale of
<PAGE> 3
-3-
not less than $200.0 million of senior subordinated notes (the "Securities")
(which Securities may be issued with an equity component depending upon market
conditions) to be issued by the Company (or, in lieu thereof, not less than
$200.0 million of certain subordinated bridge financing made available to the
Company (the "Bridge Financing")). You have further advised us that the
Revolving Loans and Acquisition Loans will also be used to provide for working
capital purposes, letters of credit and other corporate purposes, including
permitted acquisitions, of the Company and its subsidiaries upon consummation of
the Recapitalization; provided that no more than $25.0 million of Revolving
Loans and Acquisition Loans shall be drawn on the closing date of the Merger
(the "Closing Date") ($48.0 million if the acquisition of Rik Medical has been
consummated prior to the Closing Date). Upon consummation of the
Recapitalization, the Company and its subsidiaries will have no indebtedness
other than the Credit Facility and the Securities (or, in lieu thereof, the
Bridge Financing). To the extent the Securities are placed on or prior to the
date which is twenty one days after the closing of the Credit Facility, the
Credit Facility will be refinanced at such time. The Recapitalization, together
with the issuance of the Securities (or, in lieu thereof, the Bridge Financing),
the issuance of the Equity Securities, and the transactions contemplated by the
definitive documents evidencing the Credit Facility and all related collateral
and guarantees (collectively, the "Bank Documents"), are hereinafter referred to
as the "Transactions."
You have asked BT Alex. Brown and BRS to assist you, as exclusive
underwriters or exclusive placement agents, in raising a portion of the funds
required to consummate the Recapitalization through the sale or placement of the
Securities.
The purpose of this engagement letter (this "Engagement Letter") is
to confirm the engagement by you of BT Alex. Brown and BRS as exclusive
underwriters or placement agents in connection with the issuance or sale
(whether pursuant to a public offering or a private placement) of the Securities
for cash in connection with the Recapitalization.
1. Retention. You hereby retain BT Alex. Brown and BRS on an
exclusive basis, and BT Alex. Brown and BRS agree to act, as exclusive joint
co-lead managing underwriters or placement agents (with BT Alex. Brown as book
running manager) in connection with the issuance or sale of $200.0 million of
senior subordinated notes of the Company for cash in connection with the
financing of the Recapitalization. Consistent with such appointments and subject
to the last sentence of this Sec-
<PAGE> 4
-4-
tion 1, BT Alex. Brown and BRS will act as the Company's exclusive underwriters
or placement agents with regard to each such proposed issuance pursuant to the
terms of an underwriting or placement agreement and related transaction
documents (collectively, the "Purchase Agreement"). The Purchase Agreement shall
set forth the terms and conditions, including the discounts, commissions and
fees, applicable to the respective transaction (and shall not be inconsistent
with the terms of this Engagement Letter). Neither you nor the Company shall,
directly or indirectly (except through BT Alex. Brown and BRS or as otherwise
approved by BT Alex. Brown and BRS), sell or offer to sell any equity or debt
security for cash or property in connection with the financing of the
Recapitalization or any related refinancings (other than (a) loans incurred
under and pursuant to the Credit Facility, (b) the Equity Securities and (c) any
bridge loans incurred by the Company pursuant to the Bridge Financing (the
foregoing, collectively, the "Permitted Dispositions")) during the term of this
Engagement Letter. Any such offer, sale or other disposition of any equity or
debt security for cash or property (other than a Permitted Disposition) during
the term of this Engagement Letter will be treated for purposes of Section 2 as
if such sale or disposition were undertaken by BT Alex. Brown and BRS directly.
Notwithstanding anything to the contrary contained herein or any oral
representations or assurances previously or subsequently made by the parties,
this Engagement Letter is not intended to be and does not constitute a
commitment or obligation by BT Alex. Brown or BRS to act as an underwriter or
placement agent in connection with any offering or sale of securities; and no
liability or obligation on the part of BT Alex. Brown or BRS to proceed with or
participate in an offering of securities by the Company shall be created or
exist unless or until BT Alex. Brown or BRS have executed and delivered a
Purchase Agreement and then only in accordance with the terms and conditions set
forth therein.
2. Fees. As compensation for the services of BT Alex. Brown and BRS
hereunder, you shall pay to BT Alex. Brown and BRS the following non-refundable
fees:
(a) an underwriting or placement fee of 3.0% of the gross proceeds
from the issuance of the Securities and any securities related to the
Securities included within the engagement described in Section 1, payable
50% to BT Alex. Brown and 50% to BRS at the closing of such issuance; and
(b) all reasonable legal and out-of-pocket expenses (including
allocated internal legal expenses)
<PAGE> 5
-5-
incurred by BT Alex. Brown or BRS in connection with the contemplated
transaction.
To the extent BT Alex. Brown or BRS performs services other than the
services specified in Section 1, each of you shall jointly and severally pay, or
cause to be paid, to BT Alex. Brown or BRS, as the case may be, additional fees
and/or commissions customary under the circumstances, to be agreed upon in
writing by each of you and BT Alex. Brown or BRS, as the case may be, in advance
of the performance thereof.
3. Other Agreements.
(a) Term. The engagement of BT Alex. Brown and BRS hereunder may be
terminated (i) by either BT Alex. Brown or BRS at any time, or (ii)
by you after the earliest to occur of (1) the termination of the
Recapitalization Agreement in accordance with its terms, (2) the use
of the proceeds of the sale of the Securities contemplated by this
Engagement Letter or (3) the second anniversary after the
consummation of the Recapitalization, by prior written notice
thereof to BT Alex. Brown and BRS; provided, however, that the
provisions of Sections 2 (with respect to any fees earned prior to
the date of such termination) and 3 shall survive such termination
with respect to the Company only and RCBA and Fremont shall be
released from all obligations hereunder and under the Indemnity
Letter described in Section 3(c).
(b) Information. During the course of the term of this Engagement
Letter, you shall furnish BT Alex. Brown and BRS with such
information about the Company as BT Alex. Brown and BRS reasonably
request to be included in a private placement memorandum, offering
circular or other disclosure document ("Company Information"). You
represent and warrant to BT Alex. Brown and BRS that all Company
Information included in the private placement memorandum will be
complete and correct in all material respects and will not contain
any untrue statements of a material fact or omit to state a material
fact necessary to make the statements contained therein, in light of
<PAGE> 6
-6-
the circumstances under which such statements are made, not
materially misleading, in each case as of the date of such
memorandum. You agree to advise BT Alex. Brown and BRS during the
period of the engagement of all developments known to you materially
affecting the Company or the accuracy of Company Information
previously furnished to BT Alex. Brown, BRS or prospective
purchasers of Securities. In addition, any representations and
warranties made by the Company to purchasers of the Securities shall
be deemed to be incorporated into this Engagement Letter and any
opinions delivered by or on behalf of the Company to the purchasers
of any Securities shall expressly provide that BT Alex. Brown and
BRS may rely upon such opinions. You acknowledge that BT Alex.
Brown, BRS and their affiliates may share with each other, any
information related to you or your respective affiliates (including
information relating to creditworthiness), or the Recapitalization
or the financing thereof, provided that BT Alex. Brown, BRS and such
affiliates agree to hold any non-public information confidential in
accordance with their respective customary policies. You acknowledge
that BT Alex. Brown, BRS and their affiliates may share with each
other, any information related to you or the Company and your and
their respective affiliates (including information relating to
creditworthiness), or the Recapitalization or the Transactions,
provided that BT Alex. Brown, BRS and such affiliates agree to hold
any non-public information confidential in accordance with their
respective customary policies related to non-public information.
(c) Indemnification. Each of you, on behalf of yourself and the Company,
jointly and severally agree to indemnify BT Alex. Brown, BRS and
their affiliates and each person in control of BT Alex. Brown, BRS
and their affiliates and their respective officers, directors,
employees, agents and representatives and their respective
affiliates and control persons, in accordance with the Indemnity
<PAGE> 7
-7-
Letter dated the date hereof and attached hereto.
(d) Other Services. You acknowledge and agree that BT Alex. Brown and/or
BRS and/or their affiliates may be requested to provide additional
services with respect to you and/or the Company, the
Recapitalization or other matters contemplated hereby. Any such
services will be set out in and governed by a separate agreement(s)
(containing terms relating, without limitation, to services, fees
and indemnification) in form and substance satisfactory to you and
BT Alex. Brown or BRS (or any such affiliate). Nothing in this
Engagement Letter is intended to obligate or commit BT Alex. Brown
or BRS or any of their affiliates to provide any services or
financing other than as set out herein.
(e) No Shareholder Rights. You acknowledge and agree that BT Alex. Brown
and BRS have been retained only by you and that your engagement of
BT Alex. Brown and BRS is not deemed to be on behalf of and is not
intended to confer rights upon any shareholder, owner or partner of
you or any other person not a party hereto (other than the Company)
as against BT Alex. Brown or BRS or any of their affiliates or the
respective directors, officers, employees, agents and
representatives of BT Alex. Brown or BRS and their affiliates.
Unless otherwise expressly agreed, no person or entity other than
you, the Company and any parent holding company of Company is
authorized to rely upon your engagement of BT Alex. Brown and BRS or
any statements, advice, opinions, or conduct by BT Alex. Brown or
BRS.
(f) Tombstone, Etc. Upon consummation of the transactions contemplated
hereby, BT Alex. Brown and BRS may place the customary "tombstone"
advertisement(s) in publication(s) of its choice at its own expense.
You confirm that you and the Company will rely on your respective
counsel, accountants and other similar expert advisors for legal,
<PAGE> 8
-8-
accounting, tax and other similar expert advice.
(g) Miscellaneous. This Engagement Letter may be executed in two or more
counterparts, all of which together shall be considered a single
instrument. The term "affiliate" as used herein shall have the
meaning ascribed to such term in the rules and regulations
promulgated under the Securities Exchange Act of 1934, as amended.
This Engagement Letter constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter hereof
and cannot be amended or otherwise modified except in writing
executed by the parties hereof.
(h) Successors and Assigns. The provisions of this Engagement Letter
shall inure to the benefit of and be binding upon the successors and
assignees of RCBA, Fremont, the Company, BT Alex. Brown and BRS. BT
Alex. Brown or BRS may transfer or assign, in whole or from time to
time in part, to one or more of their affiliates, their rights and
obligations hereunder, but no such transfer or assignment will
relieve BT Alex. Brown or BRS of their obligations hereunder without
your prior written consent. By your acceptance hereof, each of you
agrees to undertake the obligations described herein on your own
behalf and on behalf of the Company, all such obligations to be
joint and several, except that following the consummation of the
Recapitalization all obligations of RCBA and Fremont shall be solely
the obligations of the Company, and RCBA and Fremont shall be
released from all such obligations.
(i) GOVERNING LAW. THIS ENGAGEMENT LETTER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF. ANY RIGHT
TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION
<PAGE> 9
-9-
ARISING OUT OF THIS ENGAGEMENT LETTER OR CONDUCT IN CONNECTION WITH
THIS ENGAGEMENT IS HEREBY WAIVED. YOU HEREBY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS
LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY DISPUTE
RELATED TO THIS ENGAGEMENT LETTER OR ANY OF THE MATTERS CONTEMPLATED
HEREBY.
[Remainder of page intentionally left blank]
<PAGE> 10
-10-
We are delighted to accept this engagement and look forward to
working with you on this assignment. Please confirm that the foregoing is in
accordance with your understanding by signing and returning to us the enclosed
duplicate of this letter.
Very truly yours,
BT ALEX. BROWN INCORPORATED
By: /s/ Kate W. Cook
__________________________
Name: Kate W. Cook
_____________________
Title: Managing Director
____________________
BANCAMERICA ROBERTSON STEPHENS
By: /s/ Bruce R. Thompson
__________________________
Name: Bruce R. Thompson
_____________________
Title: Managing Director
____________________
AGREED AND ACCEPTED this 1st day of October, 1997:
RCBA PURCHASER I, L.P.
By: /s/ N. Colin Lind
______________________________________
Name: N. Colin Lind
______________________________
Title: A General Partner
FREMONT PURCHASER II, INC.
By: /s/ R.S. Kopf
_______________________________________
Name: R.S. Kopf
_______________________________
Title: General Counsel and Secretary
______________________________
KINETIC CONCEPTS, INC.
By: /s/ Raymond R. Hanningan
_______________________________________
Name: Raymond R. Hanningan
_______________________________
Title: President and Chief Executive
Officer
<PAGE> 1
EXHIBIT F
BANKERS TRUST NEW YORK BANK OF AMERICA NATIONAL TRUST
CORPORATION AND SAVINGS ASSOCIATION
130 LIBERTY STREET 231 SOUTH LASALLE STREET
NEW YORK, NY 10006 CHICAGO, ILLINOIS 60697
October 1, 1997
RCBA Purchaser I, L.P.
909 Montgomery Street
Suite 400
San Francisco, CA 94133
Attention: John C. Walker, Managing Director
Fremont Purchaser II, Corp.
50 Fremont Street
Suite 3700
San Francisco, CA 94105
Attention: James T. Farrell, President
Kinetic Concepts, Inc.
8023 Vantage Drive
P.O. Box 659508
San Antonio, TX 78285-9508
Attention: Mr. Raymond R. Hannigan
Re: Financing Letter (Bridge Financing)
Ladies and Gentlemen:
You have advised Bankers Trust New York Corporation and Bank
of America National Trust and Savings Association (the "Lenders") that RCBA
Purchaser I, L.P. ("RCBA") and Fremont Purchaser II, Corp. ("Fremont"), together
with certain other investors satisfactory to us (RCBA, Fremont and such other
investors being herein collectively referred to as the "New Investor Group"),
intend to invest in a leveraged recapitalization transaction (the
"Recapitalization") involving Kinetic Concepts, Inc. (the "Company"). We
understand that the Recapitalization will be accomplished through the repurchase
by the Company of all of its shares of common stock (including certain options)
other than at least $200.5 million of shares of common stock and options (the
"Rollover Shares") to be retained by certain existing stockholders of the
Company, including members of the Company's Board of Directors and/or management
(the "Rollover Shareholders" and, together with the New Investor Group, the
"Buyers"), for a maximum aggregate repurchase price
<PAGE> 2
-2-
not to exceed $655.0 million (the "Repurchase Shares"), and through the
investment of not less than $355.2 million in equity in the Company (the "Equity
Financing"), including the contribution of at least $200.5 million of Rollover
Shares by the Rollover Shareholders and the purchase by the New Investor Group
of not less than $154.7 million of shares of the Company's common stock directly
from the Company (the "Equity Securities"); provided, that to the extent the
Buyers increase the amount of Rollover Shares above $200.5 million after the
date hereof, the amount of Rollover Shares shall be increased and the amount of
Repurchase Shares and Equity Securities shall be decreased by the same amount;
provided that in no event shall the Equity Securities be less than $125 million.
In addition, in connection with the Recapitalization and related transactions,
fees and expenses of approximately $44 million will be paid. Upon consummation
of the Recapitalization, the Buyers will own at least 66 2/3% of the then
outstanding shares of Company common stock.
You have advised the Lenders that the Recapitalization would
be accomplished through a tender offer (the "Tender Offer") followed by a merger
of corporations or other legal entities newly formed by the New Investor Group
with the Company (the "Merger") pursuant to which all shares of common stock not
tendered (in each case, other than Rollover Shares) will be cashed out. It is
expected that the Tender Offer will be financed through (i) borrowings of up to
$530 million under a senior secured credit facility to be provided to the
Company (the "Credit Facility"), of which $300.0 million will be available to
the Company under term loan facilities (the "Term Loans"), $130.0 million will
be available to the Company under a tender facility, $50.0 million will be
available to the Company under a revolving credit facility (the "Revolving
Loans") and up to $50.0 million will be available to the Company under an
acquisition facility (the "Acquisition Loans"), (ii) cash equity investments
from the New Investor Group of the Equity Securities, but in no event shall the
Equity Securities be less than $125 million, and (iii) cash on hand of the
Company of $23.0 million or in lieu thereof ownership of RIK Medical, L.L.C. and
RIK Medical East, L.L.C. (collectively "RIK Medical").
You have further advised us that the amount of funds necessary
to refinance a portion of the Credit Facility on the date which is twenty one
days after the closing of the Credit Facility will be provided through the
proceeds from the sale of not less than $200.0 million of senior subordinated
notes (the "Securities") (which Securities may be issued with an equity
<PAGE> 3
-3-
component depending upon market conditions) to be issued by the Company (or, in
lieu thereof, not less than $200.0 million of certain subordinated bridge
financing made available to the Company (the "Bridge Financing")). You have
further advised us that the Revolving Loans and Acquisition Loans will also be
used to provide for working capital purposes, letters of credit and other
corporate purposes, including permitted acquisitions, of the Company and its
subsidiaries upon consummation of the Merger; provided that no more than $25.0
million of Revolving Loans and Acquisition Loans shall be drawn on the closing
date of the Merger (the "Merger Date") ($48.0 million if the acquisition of Rik
Medical has been consummated prior to the Merger Date). Upon consummation of the
Merger, the Company and its subsidiaries will have no indebtedness other than
the Credit Facility and the Securities (or, in lieu thereof, the Bridge
Financing). The Recapitalization (including the Tender Offer and the Merger),
together with the issuance of the Securities (or, in lieu thereof, the Bridge
Financing), the issuance of the Equity Securities, and the transactions
contemplated by the definitive documents evidencing the Credit Facility and all
related collateral and guarantees (collectively, the "Bank Documents"), are
hereinafter referred to as the "Transactions."
You have requested the Lenders to commit to provide to Company
funds in an amount of $200.0 million in the form of an unsecured senior
subordinated bridge loan to be made available on the date (the "Closing Date")
which is the earlier of (i) 21 calendar days after the closing of the Credit
Facility and (ii) after the closing of the Credit Facility, the date which is 2
business days after written notice from Company to Lenders that the senior
subordinated bridge loan will be drawn.
Accordingly, subject to the terms and conditions set forth or
referred to in this letter and in reliance upon your representations, warranties
and advice set forth or referred to in this letter, the Lenders agree with you
as follows:
1. Senior Subordinated Bridge Loan. The Lenders hereby
severally commit, subject to the terms and conditions contained herein, to
provide to Company, and Company hereby engages the Lenders as the exclusive
provider of, $100.0 million each of an unsecured senior subordinated bridge loan
(the "Bridge Loan") in an aggregate principal amount of $200.0 million. The
proceeds of the Bridge Loan shall be used to refinance the Credit Facility. The
principal terms of the Bridge Loan are summarized in the term sheet attached
hereto as Exhibit 1 (the "Term Sheet").
<PAGE> 4
-4-
This letter is not meant to be, nor shall it be construed as,
an attempt to define all of the terms and conditions of the transactions
involved in the Bridge Loan. Rather, it is intended only to outline certain
basic points of business understanding around which the legal documentation is
to be structured. Further negotiations within the general scope of these major
terms shall not be precluded by the issuance of this letter and its acceptance
by you.
Unless the Lenders' commitment hereunder shall have been
terminated pursuant to Section 7, the Lenders shall have the exclusive right to
provide the Bridge Loan required in connection with the Transactions.
Representatives of the Lenders and their affiliates have
reviewed certain historical and pro forma financial statements of Company and
its subsidiaries and have met with your respective representatives and certain
members of the management of Company regarding the transactions contemplated
hereby, and we are pleased to advise you that the results of such investigation
of Company and its subsidiaries to date are satisfactory. However, neither we
nor our counsel have had the opportunity to complete our legal and environmental
due diligence. Accordingly, the Lenders' commitment to provide the financings
described in this letter is subject to our satisfaction of such legal and
environmental due diligence. In the event that, prior to the funding of the
Credit Facility, our continuing review of Company and its subsidiaries discloses
information relating to conditions or events not previously disclosed to us or
relating to new information or additional developments concerning conditions or
events previously disclosed to us which we believe may have a material adverse
effect on the business, results of operations, properties, assets, liabilities
or condition (financial or otherwise) of Company and its subsidiaries, we may,
in our sole discretion, suggest alternative financing amounts or structures that
ensure adequate protection for the Lenders or decline to participate in the
proposed financing. In addition, the Lenders' commitment is subject to the
accuracy and completeness of the Information and the Projections described in
the immediately succeeding paragraph, our satisfaction with the structure of the
Recapitalization, and the satisfaction of the conditions to be set forth in the
definitive documentation relating to the Credit Facility, including without
limitation those conditions set forth in the Term Sheet.
You hereby represent that, based on your review and analysis,
to your knowledge (a) all information other than the
<PAGE> 5
-5-
Projections (as defined below), which has been taken or is hereafter made
available to the Lenders by the New Investor Group or Company or any of your or
their respective representatives in connection with the transactions
contemplated hereby (the "Information") has been reviewed and analyzed by you in
connection with the performance of your own due diligence and is now, and as
supplemented by you prior to the funding of the Credit Facility, will be as of
the funding of the Credit Facility, complete and correct in all material
respects and does not now, and as supplemented by you prior to the funding of
the Credit Facility, will not on the funding of the Credit Facility, contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements contained therein, in light of the circumstances under
which such statements were or are made, not materially misleading and (b) all
financial projections concerning Company that have been or are hereafter made
available to the Lenders by the New Investor Group or Company or any of your or
their respective representatives prior to the funding of the Credit Facility in
connection with the transactions contemplated hereby (the "Projections") have
been or, in the case of such Projections made available after the date hereof,
will be, prepared in good faith based upon reasonable assumptions, which
assumptions are, or in the case of Projections made available after the date
hereof will be, set forth therein (it being understood that the Projections are
subject to significant uncertainties and contingencies, many of which are beyond
the control of Company and that no assurance can be given that such projections
will be realized). You agree to supplement the Information and the Projections
from time to time until the funding of the Credit Facility so that the
representation and warranty in the preceding sentence is correct on the funding
of the Credit Facility. In arranging and syndicating the Bridge Loan, the
Lenders will be using and relying on the Information and the Projections,
without independent verification thereof. The representations and covenants
contained in this paragraph shall remain effective until definitive Financing
Documentation (as defined below) is executed and thereafter the disclosure
representations and covenants contained herein shall be superseded by those
contained in such definitive Financing Documentation.
2. Financing Documentation. The making of the Bridge Loan will
be governed by definitive loan and related agreements and documentation
(collectively, the "Financing Documentation") prepared by special counsel to the
Lenders. The Financing Documentation shall contain such covenants, terms and
conditions as are consistent with this letter, will have the principal economic
terms set forth in the Term Sheet and
<PAGE> 6
-6-
shall otherwise be satisfactory to the Lenders; it being understood that such
terms and provisions may require the approval of the Lenders under the Bank
Documents.
3. Conditions. The obligation of the Lenders under Section 1
of this letter to provide the Bridge Loan is subject to fulfillment of customary
and appropriate conditions precedent, including, without limitation, the
following:
A. Recapitalization Agreement; Documentation. At the time of
funding the Credit Facility, the structure of the Recapitalization
shall be substantially similar to that previously described or
otherwise satisfactory to the Lenders, and the definitive agreements
relating to the Recapitalization, including, but not limited to, the
Tender Offer and Merger (collectively, the "Recapitalization
Agreement") shall be in form and substance satisfactory to the Lenders,
shall be in full force and effect and shall not have been amended
without the Lenders' consent, which consent shall not be unreasonably
withheld. All conditions to the Tender Offer contained in the
Recapitalization Agreement shall have been performed or complied with
substantially on the terms set forth therein and not waived without the
Lenders' consent, which consent shall not be unreasonably withheld.
B. Financing Documentation. At the time of funding the Credit
Facility, Company and the Lenders shall have entered into the Financing
Documentation relating to the Bridge Loan and the transactions
contemplated thereby. At the time of funding the Credit Facility, all
documents required to be delivered under the Financing Documentation
(other than those required to be delivered at the time of funding of
the Bridge Loan), including any guarantees described in the Term Sheet,
customary legal opinions, independent third party reports, corporate
records and documents from public officials and officers' certificates,
shall have been delivered.
C. Due Diligence. At the time of funding the Credit Facility,
the Lenders shall have completed their legal and environmental due
diligence investigations of Company. The Lenders' commitment to provide
the financing described in this letter is conditioned upon the results
of such investigations being satisfactory to the Lenders prior to the
funding of the Credit Facility.
<PAGE> 7
-7-
D. No Adverse Change or Development. (i) At the time of
funding the Credit Facility, since December 31, 1996 there shall not
have been, in the reasonable judgment of the Lenders, any material
adverse change, or any development involving (or which may reasonably
be expected to involve) a prospective material adverse change, in the
condition (financial or other), business, assets, liabilities,
properties or results of operations of Company; the Lenders shall have
been promptly notified of any conditions or events not previously
disclosed to the Lenders and of any new information or additional
developments concerning conditions or events previously disclosed to
the Lenders in each case which may have a material adverse effect on
the condition (financial or otherwise), business, assets, liabilities,
properties or results of operations of Company ("Material Adverse
Effect"); (ii) prior to the funding of the Credit Facility, trading in
securities generally on the New York or American Stock Exchange shall
not have been suspended and minimum or maximum prices shall not have
been established on any such exchange; (iii) prior to the funding of
the Credit Facility, a banking moratorium shall not have been declared
by New York or United States federal banking authorities; (iv) prior to
the funding of the Credit Facility, there shall not have been (A) an
outbreak or escalation of hostilities between the United States and any
other power, or (B) an outbreak or escalation of any other incurrection
or armed conflict involving the United States or any other national or
international calamity or emergency, or (C) any material change in, or
development with respect to, the financial markets of the United States
or elsewhere which, in the reasonable judgment of the Lenders, makes it
impracticable or inadvisable to proceed with the consummation of the
Transactions or the Bridge Loan or any of the other transactions
contemplated hereby or that would materially adversely affect the
ability to sell or syndicate the Bridge Loan or sell or place the
Securities, in each case, on the terms contemplated hereby; and (v)
there shall be no issues of debt securities or commercial bank
facilities (other than the Securities, the Bridge Loan and the Credit
Facility) of Company being offered, placed or arranged that would, in
the reasonable judgment of the Lenders, adversely affect the sale or
syndication of the Bridge Loan or the sale or placement of the
Securities.
E. Capital Structure; Management. The pro forma consolidated
capital structure of Company and its subsidiaries, after giving effect
to the Transactions and the
<PAGE> 8
-8-
consummation of all other financial transactions relating to the
transactions contemplated by this letter, shall be consistent with the
capital structure contemplated herein, or otherwise satisfactory to the
Lenders in their discretion. Prior to the funding of the Credit
Facility, the Lenders shall be satisfied with senior management and
their employment contracts, if any, and proposed ownership interests in
Company, and such contracts, if any, and ownership interests shall be
in full force and effect on the Closing Date.
F. Solvency Opinion. Prior to the funding of the Credit
Facility, the Lenders shall have received a solvency certificate of
management of Company and a solvency letter from an independent firm,
in each case satisfactory in form and substance to the Lenders, which
may be Houlihan Lokey Howard & Zukin.
G. Applicable Law. (i) Prior to the funding of the Credit
Facility, there shall not have been any statute, rule, regulation,
injunction or order applicable to any of the Transactions or the
financing thereof, promulgated, enacted, entered or enforced by any
state or federal government or governmental or regulatory authority or
agency or by any federal or state court, or by any tribunal, and (ii)
subsequent to the funding of the Credit Facility and prior to the
funding of the Bridge Loan, there shall not have been any statute,
rule, regulation, injunction or order applicable to any of the
Transactions or the financing thereof, promulgated, enacted, entered or
enforced by any state or federal government or governmental or
regulatory authority or agency or by any federal or state court, or by
any tribunal, in either case that would prohibit the making of the
Bridge Loan or that would result in the making of the Bridge Loan
causing a violation of any such statute, rule, regulation, injunction
or order.
H. Litigation. Prior to the funding of the Credit Facility, no
litigation or similar proceeding (governmental or other) shall exist or
be threatened with respect to or affecting (i) Company or any of its
subsidiaries, any of the Transactions, any party to any of the
Transactions or the Bridge Financing, which the Lenders shall determine
is reasonably likely to have a Material Adverse Effect, or (ii) the
Financing Documentation or any provision thereof, which the Lenders
shall determine is reasonably likely to materially adversely affect the
rights and remedies of the Lenders or any other Lenders
<PAGE> 9
-9-
thereunder, the ability of Company or any guarantor thereof to perform
its obligations thereunder, the making, sale or syndication of the
Bridge Loan or the sale or placement of the Securities.
I. Credit Facility. Company shall have entered into Bank
Documents with a commercial lender or a syndicate of commercial
lenders, an institutional investor or syndicate of institutional
investors, in form and substance satisfactory to the Lenders and
providing for commitments thereunder in an amount that is, together
with the proceeds of the other Transactions and the borrowing of the
Bridge Loan, sufficient to consummate the Recapitalization, to pay all
related fees and expenses and to have not less than $75.0 million of
availability under the Credit Facility immediately after the
consummation of the Recapitalization, which amount may be reduced to
$52.0 million if the acquisition of Rik Medical has been consummated.
Such documentation shall be in full force and effect. The initial
borrowings under the Credit Facility as described above shall have been
made in connection with the funding of the Tender Offer. Since the date
of the funding of the Credit Facility, the Bank Documents shall not
have been amended in a manner materially adverse to the Lenders.
J. Equity Financing. The Equity Securities shall have been
issued.
K. Conduct of Business. Prior to the funding of the Credit
Facility, Company and its subsidiaries shall have operated their
respective businesses in the ordinary course, except as contemplated by
the Transactions.
L. Marketing of Debt Securities. Company shall have engaged
one or more investment banks (collectively, the "Take-Out Banks")
satisfactory to the Lenders to publicly sell or privately place the
Securities the proceeds of which will be used to refinance the Bridge
Loan. Such engagement shall have been definitively documented on terms
and conditions satisfactory to the Lenders, such documentation shall be
in full force and effect and the parties thereto shall be in compliance
with all material agreements thereunder.
M. Release of Collateral. Any and all security interests in
the assets of Company granted in favor of holders of indebtedness
(other than under the Bank Documents)
<PAGE> 10
-10-
shall have been terminated unless otherwise satisfactory to the
Lenders.
N. Financial Statements. Prior to the funding of the Credit
Facility, the Lenders shall have received audited and unaudited
historical financial statements of Company and pro forma financial
statements of Company and its consolidated subsidiaries assuming
consummation of the Recapitalization, in each case in form and
presentation as required by the Securities Act of 1933, as amended, and
the rules and regulations thereunder applicable to registration
statements filed thereunder.
O. Fees and Expenses. All fees and expenses, including without
limitation, the Lenders' reasonable legal fees and out-of-pocket
expenses (including allocated internal legal expenses), shall have been
paid by you or Company, to the extent due.
4. Securities Demand. Upon request from the Take-Out Banks (a
"Request"), Company shall take any and every action necessary or desirable, to
the extent within the power of Company, so that the Take-Out Banks can, as soon
as practicable after such a Request, publicly sell or privately place the
Take-Out Securities. If the Take-Out Securities have not been sold or privately
placed within three months of the Request, Company agrees that upon notice by
the Take-Out Banks (a "Take-Out Securities Notice"), at any time and from time
to time following the three-month anniversary of the Request, Company will cause
the issuance and sale of Take-Out Securities upon such terms and conditions as
specified in the Take-Out Securities Notice; provided that for either a Request
or a Take-Out Securities Notice (i) interest and dividend rates (whether
floating or fixed) shall be determined by the Take-Out Banks, in light of the
then prevailing market conditions, but in no event shall the cash interest or
dividend rates on the Take-Out Securities exceed 15.0% per annum; (ii) Company,
in its reasonable discretion after consultation with the Take-Out Banks, shall
determine whether the Take-Out Securities shall be issued through a public
offering or a private placement; (iii) the scheduled final maturity of any
Take-Out Securities shall not be earlier than one year after the scheduled
termination date of the Credit Facility (as in effect on the Closing Date), but
in no event later than the tenth anniversary of the Closing Date; (iv) the
Take-Out Securities (to the extent they are debt securities) will be issued
pursuant to an indenture and in the form negotiated by Company and the Take-Out
Banks prior to the Closing Date and which shall contain such terms, conditions
and
<PAGE> 11
-11-
covenants (consistent with Section 3 hereof) as are customary for similar
financings and as are satisfactory in all respects to the Take-Out Banks and
their counsel and Company and its counsel; and (v) all other arrangements with
respect to the Take-out Securities shall be reasonably satisfactory in all
respects to the Take-Out Banks and Company in light of the then prevailing
market conditions; provided that the terms and conditions of the Take-Out
Securities are satisfactory to the Lenders under the Bank Documents.
Additionally, if it shall be determined by the Take-Out Banks, based on then
prevailing market conditions, that it is necessary and advisable to sell
Take-Out Securities that are debt securities in an aggregate principal amount in
excess of the principal amount of the Bridge Loan to be refinanced with such
Take-Out Securities, Company shall sell Take-Out Securities in the aggregate
principal amount recommended by the Take-Out Banks; provided that in no event
will Company be required to sell Take-Out Securities in an aggregate principal
amount in excess of $200.0 million pursuant to this sentence.
Further, if it shall be determined by the Take-Out Banks,
based on then prevailing market conditions, that it is necessary and advisable
to sell the Take-Out Securities with an equity component, Company shall issue
common equity or common equity equivalents to the purchasers of the Take-Out
Securities in such amount as is necessary in order for Company to receive net
proceeds from the sale of Company's equity securities, if any) in an amount
sufficient to repay the Bridge Loan, after taking into account the prevailing
market conditions; provided that at no time shall Company be required to issue
common equity or common equity equivalents to the purchasers of the Take-Out
Securities in an amount greater than 5.0% of the aggregate amount of the common
stock of Company on a fully-diluted basis.
As used herein and in the attached fee letter of even date
herewith with respect to the Bridge Loan (the "Fee Letter"), the term "fully
diluted" shall be deemed to include all securities of Company (including all
convertible, exchangeable or similar securities and determined without regard to
whether such securities are then convertible or exchangeable), (i) issued and
(ii) contemplated to be issued in connection with the Transactions even if not
then issued. At the election, from time to time, of the Lenders, any such equity
securities may be in the form of non-voting common stock exchangeable into
voting common stock on certain terms requested by the Lenders.
<PAGE> 12
-12-
With respect to any equity securities issuable pursuant to
this letter or the Fee Letter, the Lenders and their transferees shall be given
tag-along, registration and other rights as are customary in transactions like
that contemplated by this letter and the Fee Letter.
5. Indemnification and Contribution. Each of you agrees,
jointly and severally, to indemnify each of the Lenders and their affiliates and
each person in control of the Lenders and each of their affiliates and the
respective officers, directors, employees, agents and representatives of the
Lenders and their affiliates and control persons, as provided in the indemnity
letter of even date herewith and attached hereto (the "Indemnity Letter").
6. Expenses. In addition to any fees that may be payable to
the Lenders hereunder and regardless of whether any of the transactions
contemplated by this letter are consummated, each of you hereby agrees, jointly
and severally, to reimburse the Lenders for all reasonable fees and
disbursements of the Lenders' counsel, including, without limitation, allocated
internal legal expenses, and all of the Lenders' travel and other reasonable
out-of-pocket expenses incurred in connection with the Transactions or otherwise
arising out of the Lenders' commitment hereunder.
7. Termination. The Lenders' commitment hereunder to provide
the Bridge Loan shall terminate (a) if the Recapitalization Agreement has not
been entered into on terms and in form and substance reasonably satisfactory to
the Lenders on or prior to October 31, 1997, or (b) if the Bridge Loan is not
funded by February 21, 1998. No such termination of the commitments hereunder
shall affect your respective obligations under Section (a) or (b) of the Fee
Letter or under Sections 5 and 6 hereof or this Section 7, which shall survive
any such termination; provided that upon termination of the commitments
hereunder, such obligations shall be solely the obligations of the Company, and
RCBA and Fremont shall be released from all obligations under this Financing
Letter (Bridge Financing), the Fee Letter and the Indemnity Letter.
8. Assignment. This letter shall not be assignable by the New
Investor Group or the Company without the prior written consent of the Lenders;
provided that any member of the New Investor Group may assign this letter to any
of its affiliates. This letter may be assigned by the Lenders without the
consent of the New Investor Group or the Company to affiliates of the Lenders
(it being understood that any such affiliate
<PAGE> 13
-13-
shall be subject to the restrictions set forth in this Section 8 but no such
assignment will relieve the Lenders of their obligations hereunder without your
prior written consent); provided that the Lenders shall have the right (before
and after funding the Bridge Loan), in its sole discretion to syndicate the
Bridge Loan among banks or other financial institutions pursuant to the
Financing Documentation or otherwise and to sell, transfer or assign all or any
portion of, or interests or participation in, the Bridge Loan and any notes
issued in connection therewith; provided, however, that upon delivery by the
Lenders of a commitment letter for all or a portion of the Bridge Loan from a
reputable financial institution (which reputable financial institution shall be
reasonably acceptable to you) and otherwise containing terms and conditions
reasonably acceptable to you and Company, the Lenders shall be fully relieved of
their obligations hereunder to the extent of the commitment set forth in such
commitment letter.
9. Confidentiality. This letter is confidential and shall not
be disclosed by you to any person other than your respective accountants,
attorneys and, to the extent approved by the Lenders, other advisors, and to
Company and its attorneys and, to the extent approved by the Lenders, other
advisors, and then only on a confidential basis and in connection with the
Recapitalization and the related transactions contemplated herein. Additionally,
you may make such disclosures of this letter as are required by law or judicial
process or as may be required or appropriate in response to any summons or
subpoena or in connection with any litigation; provided that you will use your
best efforts to notify us of any such disclosure prior to making such
disclosure.
10. Miscellaneous. THIS LETTER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES GOVERNING CONFLICTS OF LAWS. ANY RIGHT TO TRIAL BY JURY WITH
RESPECT TO ANY CLAIM OR ACTION ARISING OUT OF THIS LETTER IS HEREBY WAIVED. YOU
HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK
STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY DISPUTE
RELATED TO THIS LETTER OR ANY OF THE MATTERS CONTEMPLATED HEREBY. This letter
(including the provisions of the Term Sheet, the Fee Letter and the Indemnity
Letter specifically incorporated herein) embodies the entire agreement and
understanding between you and the Lenders and supersedes all prior agreements
and understandings relating to the subject matter hereof. This letter may be
executed in any number of counterparts, each of which shall be an original, but
all of which shall constitute one instrument.
<PAGE> 14
-14-
You acknowledge that the Lenders and their affiliates may
share with each other any information related to you or your respective
affiliates (including information relating to creditworthiness) or the
Transactions or the financing therefor; provided that the Lenders and such
affiliates agree to hold any non-public information confidential in accordance
with their respective customary policies related to non-public information.
[remainder of page intentionally left blank]
<PAGE> 15
If you are in agreement with the foregoing, please sign and
return to the Lenders at 130 Liberty Street, New York, New York 10006, the
enclosed copy of this letter no later than 5:00 p.m., New York time, on October
3, 1997, whereupon the undertakings of the parties shall become effective to the
extent and in the manner provided hereby. This offer shall terminate if not so
accepted by you on or prior to that time. By your acceptance hereof, you agree
to undertake these obligations on your behalf and on behalf of Company, all such
obligations to be joint and several, but such obligations as to RCBA and Fremont
shall terminate upon consummation of the Recapitalization and shall be solely
the obligations of Company, and RCBA and Fremont shall be released from all such
obligations.
Very truly yours,
BANKERS TRUST NEW YORK CORPORATION
By: /s/ Joseph A. Manganello, Jr.
_______________________________
Name: Joseph A. Manganello, Jr.
Title: Executive Vice President
and Chief Credit Officer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Kevin P. Morrison
______________________________
Name: Kevin P. Morrison
Title: Vice President
<PAGE> 16
AGREED AND ACCEPTED this
1st day of October, 1997
RCBA PURCHASER I, L.P.
By: /s/ N. Colin Lind
______________________________
Name: N. Colin Lind
_________________________
Title:General Partner
________________________
FREMONT PURCHASER II, INC.
By: /s/ R. S. Kopf
______________________________
Name: R.S. Kopf
_________________________
Title: General Counsel and
Secretary
________________________
KINETIC CONCEPTS, INC.
By: /s/ Raymond R. Hannigan
______________________________
Name: Raymond R. Hannigan
_________________________
Title: President and Chief
Executive Officer
________________________
<PAGE> 17
Exhibit 1
RCBA Purchaser I, L.P.
Fremont Purchaser II, Corp.
Recapitalization of Kinetic Concepts, Inc.
Bridge Loan and Term Loan Facility
Summary Term Sheet *
Borrower: Kinetic Concepts, Inc.
Lenders: Bankers Trust New York Corporation and Bank of
America National Trust and Savings Association (the
"Lenders").
Facility: One-year unsecured senior subordinated bridge loan
(the "Bridge Loan") generating gross proceeds of
$200.0 million which, subject to the conditions
outlined below under "Conditions to Conversion of the
Bridge Loan," converts to an unsecured senior
subordinated term loan facility (the "Term Loan,"
and, collectively with the Bridge Loan, the
"Facility") on the date set forth be low under
"Conditions to Conversion of the Bridge Loan." The
Term Loan will mature on the tenth anniversary of the
Funding Date (as described be low).
Guarantors: Each subsidiary of Company that makes a guaranty in
favor of the lenders under the Bank Documents (a
"Guarantor") shall also make a guaranty (a
"Guaranty") in favor of the
- --------
* Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Financing Letter to which this Term Sheet is
attached.
T-1
<PAGE> 18
Lenders, pursuant to which such Guarantor shall
guarantee all of the obligations of the Company to
the Lenders under the Financing Documentation.
Use of Proceeds: Proceeds from borrowings under the Facility will be
used to refinance a portion of the Credit Facility
and be deposited in escrow pending acquisition of
additional Shares.
Funding Date: The date which is the earlier of (i) 21 days after
the closing of the Credit Facility and (ii) after the
closing of the Credit Facility, the date which is two
business days after written notice from Company to
Lenders that the Bridge Loan will be drawn.
Interest Rate: The Bridge Loan and the Term Loan shall bear interest
a rate equal to the greater of three-month LIBOR or
the 90-day U.S. Treasury Rate, reset monthly, plus an
initial spread of 6.0% (the "Interest Rate"), and
such spread over LIBOR or U.S. Treasury Rate shall
automatically increase by 0.5% for each period of
three months that the Bridge Loan or the Term Loan is
outstanding, as the case may be; provided, however,
that in no event shall the Interest Rate exceed 14.0%
per annum on a cash interest basis and 17.0% per
annum on a cash and payment in kind ("PIK") basis. At
any time after the Conversion Date (as hereinafter
defined), the Term Loan of any lender shall, at the
election of such lender, bear interest at a fixed
rate per annum equal to the Fixed Rate (as
hereinafter defined). The Fixed Rate, as of any date
of determination, shall be a rate of interest per
annum equal to
T-2
<PAGE> 19
17.0% per annum, subject to the limitations described
below.
Interest on the Bridge Loan and the Term Loan shall
be payable on a quarterly basis; provided that at
such time as the Term Loan bears interest at the
Fixed Rate, interest on the Term Loan shall be
payable on a semi-annual basis.
Interest on the Bridge Loan and the Term Loan shall
be paid (i) in cash to the extent that interest
thereon is less than or equal to a rate per annum of
14.0% and (ii) in PIK securities having terms and
provisions identical to the Bridge Loan or Term Loan,
as the case may be, to the extent that interest
thereon is greater than a rate per annum of 14.0% but
less than or equal to a rate per annum of 17.0%.
Fees: As set forth in the attached Fee Letter.
Ranking: The obligations of Company under the Facility will be
unsecured senior subordinated obligations and will
rank (i) pari passu with all other unsubordinated
indebtedness of Company (other than as provided in
(iii) below), (ii) senior to any subordinated
indebtedness of Company and (iii) subordinated in
right of payment to obligations of Company under the
Credit Facility and any refinancing thereof. The
obligations of each Guarantor under its Guaranty will
be senior subordinated obligations and will rank (i)
pari passu with all other unsubordinated indebtedness
of such Guarantor (other than as provided in (iii)
below), (ii) senior to any subordinated indebtedness
of such Guarantor and (iii) subordinated in
T-3
<PAGE> 20
right of payment to the obligations of each Guarantor
under the Bank Documents to which it is a party and
any refinancing thereof.
Optional Prepayment: Company may prepay the Bridge Loan or the Term Loan,
in whole or in part, at any time or from time to time
in an amount equal to 100.0% of the principal amount
thereof plus accrued interest thereon; provided that
at such time as the Term Loan bears interest at the
Fixed Rate, the Term Loan shall be subject to
prepayment restrictions and premiums typical for high
yield debt securities; and provided, further that at
such time as the Bridge Loan is less than $100.0
million, or would become less than $100.0 million as
the result of any optional prepayment, any such
prepayment shall prepay the entire outstanding amount
of the Bridge Loan.
Mandatory Prepayment: Net proceeds of sales of Securities or, to the extent
permitted pursuant to the terms of the Credit
Facility, debt or equity securities, whether in a
public offering or private placement by Company or
any subsidiaries thereof, shall be used to prepay the
Bridge Loan plus accrued interest and any other
amount payable thereunder to the full extent of net
proceeds so received.
Participation/Assignment The Lenders may participate out or sell or assign, or
or Syndication: syndicate to other lenders, the Bridge Loan or Term
Loan, in whole or in part, at any time.
Conditions to Conversion On the first anniversary of the Funding Date (the
of the Bridge Loan: "Conversion Date"), unless (A) Company or any
significant subsidiary (which shall be defined to
mean any subsidiary of the Company
T-4
<PAGE> 21
which, would be a "Significant Subsidiary" as defined
in Rule 1.02(w) of Regulation S-X promulgated under
the Securities Act) thereof is subject to a
bankruptcy or other insolvency proceeding, (B) there
exists a payment default (whether or not matured)
with respect to the Bridge Loan or the conversion fee
set forth in the Fee Letter, or (C) there exists a
default in the payment when due at final maturity of
any indebtedness (excluding the indebtedness created
under the Bridge Loan) of Company or any subsidiary
thereof in excess of $20 million in the aggregate for
any such default or all such defaults, or the
maturity of such indebtedness shall have been
accelerated, Company may convert all of the then
outstanding Bridge Loan into the Term Loan; provided
that if an event described in clause (C) is
continuing at the scheduled Conversion Date but the
applicable grace period, if any, set forth in the
events of default provision of the Bridge Loan has
not expired, the Conversion Date (and maturity date
of the Bridge Loan) shall be deferred until the
earlier to occur of (i) the cure of such event or
(ii) the expiration of any applicable grace period.
Debt Security Exchange: Any lender of the Term Loan may at any time after the
Conversion Date require that Company exchange the
Term Loan for long-term notes (the "Exchange Notes")
which shall bear interest at the Fixed Rate, deter
mined at such time, and shall have similar terms and
conditions customary for high yield debt securities
issued for cash in the then prevailing market and in
all cases not in conflict with Company's other debt
instruments and acceptable to such
T-5
<PAGE> 22
lender and shall in addition provide customary
registration rights (including, without limitation,
demand registrations). The lenders of the Term Loans
may designate, at Company's request, one or more
investment banks reasonably satisfactory to Company
to place such long-term notes to be exchanged for the
Term Loan and Company will pay customary fees in
connection therewith.
Conditions Precedent: The obligation of the Lenders to make funds available
under the Bridge Loan shall be subject to (i) receipt
by the Lenders of a borrowing request, (ii)
satisfaction of the conditions set forth in the
Financing Letter and (iii) satisfaction of other
customary closing conditions.
Covenants: Certain covenants will limit the ability of Company
and its subsidiaries to incur additional
indebtedness, pay certain dividends and make certain
other restricted payments and investments, create
liens, enter into transactions with affiliates,
merge, consolidate or transfer substantially all of
their respective assets, impose restrictions on the
ability of Company to pay dividends or make certain
payments to its shareholders, and impose restrictions
on the ability of Company's subsidiaries to limit
their ability pay dividends or make certain payments
to Company. Further, during the term of the Bridge
Loan, the covenants will be more restrictive than the
covenants applicable to the Term Loan and the
Take-Out Securities and will include additional
prohibitive covenants relating to asset sales,
certain acquisitions, certain debt incurrences,
amendments to the Bank Documents that would modify
any of the provisions or
T-6
<PAGE> 23
definitions thereof in respect of the issuance of
Take-Out Securities, the Term Loans or the Exchange
Notes in a manner adverse to the Lenders and certain
other corporate transactions.
Events of Default: Customary for transactions of this type, including
without limitation, payment defaults, covenant
defaults, bankruptcy and insolvency, judgments, cross
acceleration of and failure to pay at final maturity
other indebtedness aggregating an amount to be agreed
upon and foreclosure under the Bank Documents,
subject to, in certain cases, notice, grace periods
and thresholds to be agreed upon.
Governing Law and The State of New York.
Forum:
Indemnification and Ex- Customary for transactions of this type.
pense Reimbursements:
T-7
<PAGE> 1
Exhibit G
RICHARD C. BLUM & ASSOCIATES, L.P. THE FREMONT GROUP
909 Montgomery Street, Suite 400 50 Fremont Street, Suite 3700
San Francisco, CA 96133-4625 San Francisco, CA 94105-1895
Fax: (415) 434-3130 Fax: (415) 284-1895
Telephone: (415) 434-1111 Telephone: (415) 234-8572
October 2, 1997
Kinetic Concepts, Inc.
8023 Vantage Drive
San Antonio, TX 78230
Ladies and Gentleman:
Reference is made to the Confidentiality Agreement (the "Confidentiality
Agreement"), dated as of March 10, 1997, between Kinetic Concepts, Inc. (the
"Company") and Fremont Group L.L.C. ("Fremont") and the Transaction Agreement
(the "Transaction Agreement"), dated as of October 2, 1997, among Fremont
Purchaser II, Inc., RCBA Purchaser I, L.P. and the Company.
The Confidentiality Agreement provides, among other things, pursuant to
the first full paragraph on page 3, that for a period of two years from the date
of the Confidentiality Agreement, Fremont and its affiliates will not purchase
any assets or securities of the Company or assist any other party in effecting
such a transaction (the "Standstill Provision"). The parties hereby agree that
in the event the Transaction Agreement is terminated pursuant to Section
8.01(c)(ii) or 8.01(d)(ii) thereof, the Company shall have no rights, and
Fremont shall have no further obligations to the Company, under the Standstill
Provision and there shall be no restrictions (other than restrictions under law)
on the ability of Fremont or Richard C. Blum & Associates, L.P. or their
respective affiliates to purchase any assets or securities of the Company.
Please indicate by signing below that you acknowledge and agree to the
above described terms.
Very truly yours,
FREMONT GROUP L.L.C.
/s/ R.S. Kopf
By__________________
Name: R.S. Kopf
Title: Authorized Person
RICHARD C. BLUM &
ASSOCIATES, L.P.
/s/ N. Colin Lind
By__________________
Name: N. Colin Lind
Title: Managing Director
Acknowledged and Agreed:
KINETIC CONCEPTS, INC.
/s/ Raymond R. Hannigan
By____________________
Name: Raymond R. Hannigan
Title: President and Chief Executive Officer
<PAGE> 1
EXHIBIT H
SHAREHOLDER SUPPORT AGREEMENT
SHAREHOLDER SUPPORT AGREEMENT, dated as of October 2, 1997
(this "Agreement"), among FREMONT PURCHASER II, INC., a Delaware corporation ("F
Purchaser"), RCBA PURCHASER I, L.P., a Delaware limited partnership ("B
Purchaser"; and together with F Purchaser, "Purchasers"; each individually, a
"Purchaser") and JAMES R. LEININGER, M.D., a citizen of the United States (the
"Shareholder").
WHEREAS, as of the date hereof Shareholder owns or controls
19,856,366 shares of Common Stock, par value $.001 per share ("Company Common
Stock"), of Kinetic Concepts, Inc., a Texas corporation (the "Company ") (all
such Company Common Stock and any shares of Company Common Stock of which
ownership (either beneficially or of record) or control is hereafter acquired by
the Shareholder prior to the termination of this Agreement being referred to
herein as the "Shares");
WHEREAS, Purchasers and the Company propose to enter into a
Transaction Agreement, dated as of even date herewith (as the same may be
amended from time to time, the "Transaction Agreement"), which provides, upon
the terms and subject to the conditions thereof, for (i) the Company to make a
cash tender offer (the "Offer") to acquire all of the issued and outstanding
shares of Company Common Stock for $19.25 per share, net to the seller in cash,
upon and subject to the conditions of the Transaction Agreement and the Offer,
(ii) the purchase by Purchasers and the sale by the Company (the "Stock
Purchase") of 8,083,712 shares of Company Common Stock (subject to adjustment in
accordance with Section 2.0 and Section 5.06 of the Transaction Agreement)
immediately prior to the consummation of the Offer and (iii) the merger of each
of Purchasers with and into the Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Purchasers to
enter into the Transaction Agreement, Purchasers have requested that the
Shareholder agree, and, in order to induce Purchasers to enter into the
Transaction Agreement, the Shareholder has agreed, subject to the terms and
conditions hereof, (i) to grant to the Purchasers an option to purchase from the
Shareholder 4,200,000 Shares, (ii) to tender 13,792,211 Shares pursuant to the
Offer and (iii) vote all Shares he then owns or controls at the time of the
Stockholders' Meeting in favor of the Merger;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements and covenants set forth herein and in the Transaction
Agreement, the parties hereto agree as follows:
<PAGE> 2
2
ARTICLE I
THE OPTIONS
SECTION 1.01. Grant of Options. (a) The Shareholder hereby
grants to F Purchaser an irrevocable option (the "F Option") to purchase
2,529,197 Shares at a price per Share equal to $19.25 (the "Purchase Price").
(b) The Shareholder hereby grants to B Purchaser an
irrevocable option (the "B Option"; and together with the F Option, the
"Options"; and each individually, an "Option") to purchase 1,670,803 Shares at a
price per Share equal to the Purchase Price.
(c) The Options shall expire if not exercised prior to the
earlier of (i) the close of business on the 180th day following termination of
the Transaction Agreement pursuant to Section 8.01(c)(ii) or 8.01(d)(ii) thereof
and (ii) the consummation of the Offer.
SECTION 1.02. Exercise of Options. Provided that (a) to the
extent necessary, any applicable waiting periods (and any extension thereof)
under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act") with respect to the exercise
of an option shall have expired or been terminated and (b) no preliminary or
permanent injunction or other order, decree or ruling issued by any court or
governmental or regulatory authority, domestic or foreign, of competent
jurisdiction prohibiting the exercise of the Options or the delivery of Shares
shall be in effect, either Purchaser may exercise its Option at any time
following termination of the Transaction Agreement pursuant to Section
8.01(c)(ii) or 8.01(d)(ii) thereof until the expiration of such Option. In the
event that either Purchaser wishes to exercise its Option, such Purchaser shall
give written notice (the date of such notice being herein called the "Notice
Date"), to the Shareholder specifying a place and date (not later than ten
Business Days (as defined below) and not earlier than three Business Days
following the Notice Date) for closing such purchase (the "Closing"). For the
purpose of this Agreement, the term "Business Day" shall mean a Saturday, a
Sunday or a day on which banks are not required or authorized by law or
executive order to be closed in the City of New York.
SECTION 1.03. Payment for Delivery of Certificates. At the
Closing, (a) The Purchaser exercising its Option shall pay the aggregate
Purchase Price for the shares being purchased from the Shareholder by wire
transfer in immediately available funds of the total amount of the Purchase
Price for such Shares to an account designated by the Shareholder by written
notice to such Purchaser, and (b) the Shareholder shall deliver to such
Purchaser a certificate or certificates evidencing such Shares, and the
Shareholder agrees that such Shares shall be transferred free and clear of all
liens. All such certificates shall be duly endorsed in blank, or with
appropriate stock powers, duly executed in blank, attached
<PAGE> 3
3
thereto, in proper form for transfer, with the signature of the Shareholder
thereon guaranteed, and with all applicable taxes paid or provided for.
ARTICLE II
TENDER OF SHARES
SECTION 2.01. Tender of Shares. The Shareholder hereby
undertakes to validly tender or cause to be validly tendered (i) 10,000,000
Shares pursuant to the Offer by the third Business Day following commencement of
the Offer and (ii) an additional 3,792,211 Shares pursuant to the Offer by the
tenth Business Day following the commencement of the Offer, and thereafter not
to withdraw from the Offer any such Shares prior to the expiration or
termination of the Offer; provided, however, in the event the number of Shares
to be purchased in the Stock Purchase is reduced in accordance with Section 2.01
and Section 5.06 of the Transaction Agreement the number of Shares so tendered
shall be adjusted so that the portion of the Shares to be retained by the
Shareholder after consummation of the Merger shall remain at 33.53%.
ARTICLE III
TRANSFER AND VOTING OF SHARES
SECTION 3.01. Transfer of Shares. Except as otherwise provided
herein, the Shareholder shall not (a) sell, pledge or otherwise dispose of any
of his Shares, (b) deposit his Shares into a voting trust or enter into a voting
agreement or arrangement with respect to such Shares or grant any proxy with
respect thereto or (c) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect acquisition or sale,
assignment, transfer or other disposition of any Shares; provided, however, that
the Shareholder shall have the right to transfer Shares by gift or the laws of
descent to any person or entity directly or indirectly controlled by the
Shareholder.
SECTION 3.02. Voting of Shares; Further Assurances. (a) The
Shareholder, by this Agreement, with respect to those Shares that he owns of
record, does hereby constitute and appoint Purchasers, or any nominee of
Purchasers, with full power of substitution, as his true and lawful attorney and
proxy, for and in its name, place and stead, to vote each of such Shares as his
proxy, at every annual, special or adjourned meeting of the stockholders of the
Company (including the right to sign his name (as stockholder) to any consent,
certificate or other document relating to the Company that may be permitted or
required by applicable law) (i) in favor of the adoption of the Transaction
Agreement and approval of the Merger and the other transactions contemplated by
the Transaction Agreement, (ii) against any transaction pursuant to an
Acquisition Proposal (as defined below) or any other action or agreement that
would result in a breach of any covenant,
<PAGE> 4
4
representation or warranty or any other obligation or agreement of the Company
under the Transaction Agreement or which could result in any of the conditions
to the Company's obligations under the Transaction Agreement not being
fulfilled, and (iii) in favor of any other matter relating to consummation of
the transactions contemplated by the Transaction Agreement. The Shareholder
further agrees to cause a minimum of 6,064,155 Shares and all Shares owned by
him beneficially to be voted in accordance with the foregoing. The Shareholder
acknowledges receipt and review of a copy of the Transaction Agreement.
(b) If either Purchaser shall exercise its Option in
accordance with the terms of this Agreement, and without additional
consideration, the Shareholder shall execute and deliver further transfers,
assignments, endorsements, consents and other instruments as such Purchaser may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement and the Transaction Agreement, including the
transfer of any and all of the Shareholder's Shares to such Purchaser and the
release of any and all liens, claims and encumbrances covering such Shares.
(c) The Shareholder shall perform such further acts and
execute such further documents and instruments as may reasonably be required to
vest in Purchaser the power to carry out the provisions of this Agreement.
(d) The Shareholder shall take all such other actions as such
other actions as shall be reasonably requested by Purchasers in order to assist
in, and shall cooperate with Purchasers in connection with, the consummation of
the transactions contemplated by the Transaction Agreement, including (i)
participating in meetings with shareholders of the Company and financing
sources, (ii) soliciting proxies and (iii) providing information concerning the
Company to third parties.
(e) The obligations of the Shareholder pursuant to this
Article III shall terminate upon the earlier of (i) the date of termination of
the Transaction Agreement in the case of termination for any reason and (ii) the
consummation of the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES; COVENANTS OF THE SHAREHOLDER
The Shareholder hereby represents and warrants and covenants
to Purchasers as follows:
SECTION 4.01. Power; Binding Agreement. The Shareholder has
the legal capacity, power and authority to enter into and perform all of the
Shareholder's obligations under this agreement. This Agreement has been duly
executed and delivered by the
<PAGE> 5
5
Shareholder and, assuming its due authorization, execution and delivery by
Purchasers, constitutes a legal, valid and binding obligation of the
Shareholder, enforceable against the Shareholder in accordance with its terms.
SECTION 4.02. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by the Shareholder does not, and
the performance of this Agreement by the Shareholder will not, conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to the
Shareholder. There is no beneficiary or holder of a voting trust certificate or
other interest of any trust of which the Shareholder is a trustee whose consent
is required for the execution and delivery of this Agreement or the consummation
by the Shareholder of the transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by the
Shareholder does not, and the performance of this Agreement by the Shareholder
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable requirements, if any, of the Exchange Act and
the HSR Act and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or materially delay the performance by the Shareholder of its
obligations under this Agreement.
SECTION 4.03. Title to Shares. The Shareholder has full right,
power and authority to sell, transfer and deliver, or cause to be transferred or
delivered 19,856,366 Shares pursuant to this Agreement. Upon delivery of such
Shares and payment of the Purchase Price therefor as contemplated herein, each
Purchaser will receive good and valid title to such Shares, free and clear of
any pledge, lien, security interest, charge, claim, equity, option, proxy,
voting restriction or encumbrance of any kind.
SECTION 4.04 Acquisition Proposals. Until the earlier of (i)
the consummation of the Merger and (ii) 180 days after the termination of the
Transaction Agreement in case of termination pursuant to Section 8.01(c)(ii) or
8.01(d)(ii) thereof, or on the date of termination in the case of termination
for any other reason, the Shareholder shall not, directly or indirectly, through
any representative, agent or otherwise, solicit, initiate or encourage the
submission of any proposal or offer from any person or entity relating to any
acquisition or purchase of all or (other than in the ordinary course of
business) any portion of the assets of, or any equity interest in, the Company
or any of its subsidiaries or any recapitalization, business combination or
similar transaction with the Company or any of its subsidiaries (any
communication with respect to the foregoing being an "Acquisition Proposal") or
participate in any negotiations regarding, or furnish to any other person or
entity any information with respect to, or otherwise cooperate in any way with,
or assist or participate in, facilitate or encourage, any effort or attempt by
any other person to do or seek any of the foregoing. The Shareholder will
immediately cease all existing activities,
<PAGE> 6
6
discussions and negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. From and after the execution of this Agreement, the
Shareholder shall immediately advise Purchasers in writing of the receipt,
directly or indirectly, of any inquiries, discussions, negotiations, or
proposals relating to an Acquisition Proposal that the Shareholder receives in
his capacity as a shareholder of the Company (including the specific terms
thereof and the identity of the other party or parties involved) and furnish to
Purchasers within 48 hours of such receipt an accurate description of all
material terms (including any changes or adjustments to such terms as a result
of negotiations or otherwise) of any such written proposal in addition to any
information provided to any third party relating thereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Purchasers hereby represent and warrant to the Shareholder as
follows:
SECTION 5.01. Due Organization; Binding Agreement. Each of
Purchasers is duly organized and validly existing under the laws of the State of
Delaware. Each of Purchasers has all necessary corporate or partnership power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by each of
Purchasers have been duly authorized by all necessary corporate or partnership
action on the part of each of Purchasers. This Agreement has been duly executed
and delivered by each of Purchasers and, assuming its due authorization,
execution and delivery by the Shareholder, constitutes a legal, valid and
binding obligation of each of Purchasers, enforceable against Purchasers in
accordance with its terms.
SECTION 5.02. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by each of Purchasers does not, and
the performance of this Agreement by each of Purchasers will not, (i) conflict
with or violate the organizational documents of either of Purchasers, (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to either of Purchasers or by which either of Purchasers or any of
its properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the property or assets of either of Purchasers pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which either of
Purchasers is a party or by which it or any of its properties is bound or
affected, except for any such breaches, defaults or other occurrences that would
not prevent or materially delay the performance by either of Purchasers of its
obligations under this Agreement.
<PAGE> 7
7
(b) The execution and delivery of this Agreement by each of
Purchasers does not, and the performance of this Agreement by each of Purchasers
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable requirements, if any, of the Exchange Act and
the HSR Act and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by either of Purchasers of its obligations
under this Agreement.
SECTION 5.03. Investment Intent. The purchase of Shares from
the Shareholder pursuant to this Agreement is for the account of Purchasers for
the purpose of investment and not with a view to or for sale in connection with
any distribution thereof within the meaning of the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.01. Notices. All notices and other communications
given or made pursuant hereto shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address as shall be specified by notice given in accordance
with this Section 6.01):
(a) if to F Purchaser:
Fremont Purchaser II, Inc.
50 F Street, Suite 3700
San Francisco, California 94105-1895
Facsimile No: (415) 284-8191
Attention: General Counsel
<PAGE> 8
8
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Facsimile No: (212) 848-7179
Attention: David W. Heleniak, Esq.
(b) if to B Purchaser:
RCBA Purchaser I, L.P.
909 Montgomery Street, Suite 400
San Francisco, California 94133-4625
Facsimile No.: (415) 434-3130
Attention: Murray Indick, Esq., General Counsel
with a copy to:
Wilmer Cutler & Pickering
2445 M Street, NW
Washington, DC 20037
Facsimile No.: (202) 663-6363
Attention: Michael Klein, Esq.
(c) If to Shareholder to:
James Leininger, M.D.
c/o Mission Center Management
8122 Datapoint Drive
Suite 900
San Antonio, Texas 78232
Facsimile No.: (210) 255-6993
Attention: Tim Lyles
with a copy to:
Hughes & Luce
1717 Main Street, Suite 2800
Dallas, Texas 75201
Facsimile No.: (214) 939-6100
Attention: Ken Hawari, Esq.
<PAGE> 9
9
SECTION 6.02. Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 6.03. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 6.04. Entire Agreement. This Agreement constitutes the
entire agreement of the parties and supersedes all prior agreements and
undertakings, both written and oral, between the parties, or any of them, with
respect to the subject matter hereof.
SECTION 6.05. Assignment. This Agreement shall not be assigned
by operation-of law or otherwise.
SECTION 6.06. Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, except that this Agreement shall not be amended without the
prior written consent of the Company.
SECTION 6.07. Specific Performance. The parties hereto agree
that irreparable would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 6.08. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed in that State. All
actions and proceeding arising out of or relating to this Agreement shall be
heard and determined in any Delaware state or federal court. THE COMPANY AND
PURCHASERS KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF,
UNDER OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
<PAGE> 10
10
COURSE OF DEALING, STATEMENT (VERBAL OR WRITTEN) OR ACTION OF THE COMPANY OR
PURCHASERS.
SECTION 6.09. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
FREMONT PURCHASER II, INC.
By: /s/ R. S. Kopf
------------------------
Name: R. S. Kopf
Title: General Counsel
and Secretary
RCBA PURCHASER I, L.P.
By: /s/ N. Colin Lind
------------------------
Name: N. Colin Lind
Title: Managing Director
/s/ James R. Leininger, M.D.
---------------------------
JAMES R. LEININGER, M.D.
Acknowledged for purposes of
Section 6.06 only:
KINETIC CONCEPTS, INC.
By: /s/ Raymond R. Hannigan
-----------------------------
Name: Raymond R. Hannigan
Title: President and Chief Executive Officer
<PAGE> 1
EXHIBIT I
AGREEMENT AMONG BIDDERS
This Agreement Among Bidders (the "Agreement") dated as of October 2, 1997
concerns the respective obligations and relationship of those identified below
as participants in certain transactions relating to Kinetic Concepts, Inc.
SECTION 1. Definitions. The following terms shall have the following meanings
for the purposes of this Agreement:
1.01. "Affiliate" means with respect to any Person, any other Person that
directly, or indirectly, through one or more intermediaries or by agreement,
controls, is controlled by or is under common control with such Person.
1.02. "Bidder Commitments" means $229,490,838.50, representing the amounts
(whether in cash or contribution of securities of KCI) Fremont and RCBA have
committed to contribute to fund the KCI Transactions. The Fremont Bidder
Commitment and the RCBA Bidder Commitment are separately defined below.
1.03. "Closing Time" means the time of funding the Bidder Commitments.
1.04. "Fremont" means Fremont Partners, L.P.
1.05. "Fremont Bidder Commitment" means $138,197,020.50, adjusted as
necessary and appropriate pursuant to Section 3.04(a).
1.06. "Fremont/KCI Group" means any Affiliate of Fremont or any investor
who invests in any such Affiliate within six months of the Closing Time.
1.07. "KCI" means Kinetic Concepts, Inc.
1.08. "KCI Percentages" means the ratio of each party's Bidder Commitment
in relation to their combined commitments, adjusted as necessary and appropriate
pursuant to Section 3.04(a).
1.09. "KCI Transactions" means those series of transactions contemplated
by the Transaction Agreement dated the date hereof among Fremont, RCBA and KCI.
1.10. "Person" means any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, pension fund, governmental
authority or other entity.
1.11. "RCBA" means Richard C. Blum & Associates, L.P.
1.12. "RCBA Bidder Commitment" means $91,293,818.00, adjusted as
necessary and appropriate pursuant to Section 3.04(a).
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1.13. "RCBA/KCI Group" means RCBA Purchaser I, L.P., a Delaware limited
partnership (or any successor thereto), RCBA, Richard C. Blum & Associates,
Inc., The Southern California Carpenters Pension Fund, The United Brotherhood of
Carpenters and Joiners Pension Fund, Insurance Company Supported Organizations
Pension Plan, Stinson Capital Partners, L.P., Stinson Capital Partners II, L.P.,
BK Capital Partners IV, L.P., Prism Partners I. L.P., The Common Fund, and any
Affiliate of RCBA or any investor who invests in any such Affiliate or any
entity listed herein within six months of the Closing Time.
1.14. Terms and Usage Generally. The definitions in this Section 1 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. All references herein to Sections and
Schedules shall be deemed to be references to Sections of and Schedules to, this
Agreement unless the context shall otherwise require. All Schedules attached
hereto shall be deemed incorporated herein as if set forth in full herein. The
words "include", "includes" and "including" shall be deemed to be followed by
the phrase "without limitation". The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
References to a Person are also to its permitted successors and permitted
assigns.
SECTION 2. The KCI Transactions.
2.01. Fremont and RCBA agree to cooperate with one another to accomplish
in accordance with the timetable reflected therein the KCI Transactions.
2.02 Fremont and RCBA agree to make all decisions regarding their pursuit
and execution of the KCI Transactions jointly, by consensus among them, without
regard to percentage of interest or other factors.
2.03 Until the Closing Time:
a. All reasonably necessary books of account and other financial
records of expenses paid and incurred by Fremont and RCBA in pursuit of
the KCI Transactions from the inception of their joint activities shall be
created and maintained by each of them for themselves and their respective
groups.
b. The originals of all other documents germane to the KCI
Transactions shall be maintained by Fremont, and copies shall be provided
regularly to RCBA as it may reasonably request.
c. Fremont shall provide the foregoing services at its cost, and to
the extent Fremont is not reimbursed by KCI, RCBA shall reimburse Fremont
for its pro rata portion of such costs at such periodic intervals as
Fremont reasonably may request.
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<PAGE> 3
d. Each of Fremont and RCBA otherwise shall be responsible for their
own costs, and will be reimbursed by KCI at or reasonably soon after the
Closing Time for their costs and for pro rata shares of such joint out of
pocket costs incurred and paid that have been associated with their joint
pursuit of the KCI Transactions. Their prorata shares shall be the
relationship between their KCI Percentages.
2.04. In the event the parties hereto fail to complete the KCI
Transactions because their bid is topped, they will divide between themselves in
accordance with their respective KCI Percentages, the sum of (a) all
consideration received on any KCI options held by them and their respective KCI
Groups; and (b) all breakup fees and expenses paid to them by KCI. However, in
consideration for the parties' respective rights and obligations under the KCI
Transactions (including without limitation Fremont's guaranty), the RCBA/KCI
Group's portion shall be reduced, and the Fremont/KCI Group's portion shall be
increased, by an amount equal to 5.4% of the aggregate over bid amount (adjusted
as necessary and appropriate pursuant to Section 3.04(a)), wherein the aggregate
over bid amount is calculated as the product of (i) the amount that the price
per share of the topping bid exceeds $19.25, and (ii) KCI's total shares
outstanding.
SECTION 3. Funding.
3.01 Until the Closing Time, each of Fremont and RCBA will contribute the
amounts required to fulfill their respective shares of the Bidders Commitments
and such other incidental funds for expenses as are reasonably required to
pursue the KCI Transactions in proportion to their respective commitments. To
the extent that either such party advances more than its proportionate share
during any month, the other party shall within five business days of the close
of that month true-up accounts, including interest at the rate paid by the party
which has a favorable balance, so that each party has borne all of its
proportionate share, but no more.
3.02 Each of Fremont and RCBA is responsible for raising or contributing
through the Fremont/KCI Group and the RCBA/KCI Group, respectively, the amounts
of equity required to consummate the KCI Transactions, as of the date of this
Agreement.
3.03 [Intentionally Omitted]
3.04. To the extent either of Fremont/KCI Group or RCBA/KCI Group defaults
by failing timely to provide all of its respective share of the equity
commitments set forth above:
a. If the default involves less than $15 million, the non-defaulting party
may elect to provide that share, in which event it will, in consideration
thereof, acquire that additional interest in KCI and be entitled to 125%
of the transaction fees on that additional interest that would have been
received by the defaulting party had it not defaulted; provided that the
defaulting party will have the right to cure any such default prior to the
closing of the tender contemplated as part of the KCI Transactions in
which event it can recoup from the non-defaulting party its additional
interest in KCI but not the transaction fees
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<PAGE> 4
pertaining thereto. In the event of a default of an amount greater than
$15 million, there is no understanding; the parties will attempt to
resolve all issues at that time.
b. Notwithstanding the foregoing rights of the non-defaulting party, it
shall in all events be entitled to be held harmless and be fully
indemnified by the defaulting party from any liability to any and all
third parties, and any reasonable related expenses resulting from such
default.
SECTION 4. Liabilities and Indemnification.
4.01. It being understood as between Fremont and RCBA that they or their
affiliates may be assuming joint and several liability to KCI for some or all of
the KCI Transactions, Fremont and RCBA hereby agree that to the extent one of
them or their Affiliates breaches the Transaction Agreement, the breaching party
will indemnify and hold harmless the party not responsible for the breach from
any such liability and reasonably related expenses resulting from the assertion
of liability.
4.02. Except as set forth above and as otherwise expressly assumed in
writing by Fremont, the Fremont/KCI Group, RCBA or the RCBA/KCI Group:
a. none of them shall be liable to any third parties for any
actions, commitments or debts of any other; and
b. each of them shall take all reasonable steps to negate and
preclude exposing any of the other of them to any liability to any third
party.
4.03. To the extent any of Fremont, the Fremont/KCI Group, RCBA or the
RCBA/KCI Group is presented with a demand or made party to an adjudication by a
third party asserting their potential liability for the actions, commitments or
debts of the other respecting KCI, they shall notify that other party in writing
promptly, and upon the receipt of such notice the notified party will assume the
responsibility for the defense, resolution and/or satisfaction of the claim and
in all respects indemnify the party whose is faced with such a claim to the full
extent of that party's costs and ultimate liabilities, if any.
SECTION 5. Miscellaneous.
5.01. Notices. Except as otherwise expressly provided in this Agreement,
all notices, requests and other communications to any party hereunder shall be
in writing (including a facsimile or similar writing) and shall be given to such
party at the address or facsimile number specified for such party on Schedule
5.01 hereto or as such party shall hereafter specify for the purpose by notice
to the other parties. Each such notice, request or other communication shall be
effective (i) if given by facsimile, at the time such facsimile is transmitted
and the appropriate confirmation is received (or, if such time is not during a
Business Day, at the beginning of the next such Business Day), (ii) if given by
mail, three Business Days (or, if to an address outside
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<PAGE> 5
the United States, seven calendar days) after such communication is deposited in
the mails with first-class postage prepaid, addressed as aforesaid, or (iii) if
given by any other means, when delivered at the address specified pursuant to
this Section 5.01.
5.02. No Third Party Beneficiaries. This Agreement is not intended to
confer any rights or remedies hereunder upon, and shall not be enforceable by,
any Person other than the parties hereto.
5.03. Waiver. No failure by any party to insist upon the strict
performance of any covenant, agreement, term or condition of this Agreement or
to exercise any right or remedy consequent upon a breach of such or any other
covenant, agreement, term or condition shall operate as a waiver of such or any
other covenant, agreement, term or condition of this Agreement. Any Person by
notice given in accordance with Section 5.01 may, but shall not be under any
obligation to, waive any of its rights or conditions to its obligations
hereunder, or any duty, obligation or covenant of any other Person. No waiver
shall affect or alter the remainder of this Agreement but each and every
covenant, agreement, term and condition hereof shall continue in full force and
effect with respect to any other then existing or subsequent breach. The rights
and remedies provided by this Agreement are cumulative and the exercise of any
one right or remedy by any party shall not preclude or waive its right to
exercise any or all other rights or remedies.
5.04. Dispute Resolution. Subject to the aforesaid provisions of this
Agreement providing for remedies, any controversy, claim or dispute arising out
of or relating to this Agreement or any breach hereof, including any dispute
concerning the scope of this Section 5.04, shall be resolved exclusively in a
California court of law, acting in a proceeding conducted without a jury, each
party hereto expressly waiving its right to trial by jury.
5.05. Integration. This Agreement constitutes the entire agreement among
the parties hereto and thereto pertaining to the subject matter hereof and
thereof and supersede all prior Agreements and understandings of the parties in
connection herewith and therewith, and no covenant, representation or condition
not expressed in this Agreement, the confidentiality Agreements between Fremont,
RCBA and KCI or any other such agreement shall affect, or be effective to
interpret, change or restrict, the express provisions of this Agreement.
5.06. Headings. The titles of the Sections of this Agreement are for
convenience only and shall not be interpreted to limit or amplify the provisions
of this Agreement.
5.07. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same instrument, which may be
sufficiently evidenced by one counterpart.
5.08. Severability. Each provision of this Agreement shall be considered
separable and if for any reason any provision or provisions hereof are
determined to be invalid and contrary to
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<PAGE> 6
any existing or future law, such invalidity shall not impair the operation of or
affect those portions of this Agreement which are valid.
5.09. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
conflicts of law principles thereof.
5.10. Non-Assignability. All of the rights and obligations of the parties
to this Agreement are intended to be exercisable and fulfilled by the parties
themselves, as presently constituted. None of those rights or obligations may be
assigned, assumed or transferred without the written informed consent of the
counterparty.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the day and year first above written.
Fremont Partners, L.P. Richard C. Blum & Associates, L.P.
By FP Advisers, L.L.C., By Richard C. Blum & Associates,
its General Partner Inc., its General Partner
By /s/ G.H. Lamphere By /s/ Murray A. Indick
___________________________ ___________________________
Name: G.H. Lamphere Name: Murray A. Indick
Title: Member Title: Managing Director and
General Counsel
6
