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EXHIBIT 10.24
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TRANSACTION AGREEMENT
AMONG
FREMONT PURCHASER II, INC.,
RCBA PURCHASER I, L.P.
AND
KINETIC CONCEPTS, INC.
DATED AS OF OCTOBER 2, 1997
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TABLE OF CONTENTS
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ARTICLE I
THE OFFER
SECTION 1.01 The Offer.............................................................. I-7
SECTION 1.02 Company Action......................................................... I-8
ARTICLE II
PURCHASE AND SALE
SECTION 2.01 Purchase and Sale of the Shares........................................ I-9
SECTION 2.02 Purchase Price......................................................... I-9
SECTION 2.03 Closing................................................................ I-9
SECTION 2.04 Closing Deliveries by the Company...................................... I-9
SECTION 2.05 Closing Deliveries by Purchasers....................................... I-9
ARTICLE III
THE MERGER
SECTION 3.01 The Merger............................................................. I-10
SECTION 3.02 Effective Time; Closing................................................ I-10
SECTION 3.03 Effect of the Merger................................................... I-10
SECTION 3.04 Articles of Incorporation; By-laws..................................... I-10
SECTION 3.05 Directors and Officers................................................. I-10
SECTION 3.06 Conversion of Securities............................................... I-10
SECTION 3.07 Employee Stock Options and Other Equity Awards......................... I-11
SECTION 3.08 Dissenting Shares...................................................... I-11
SECTION 3.09 Surrender of Shares; Stock Transfer Books.............................. I-12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01 Organization and Qualification......................................... I-13
SECTION 4.02 Capitalization......................................................... I-13
SECTION 4.03 Authorization and Validity of Agreement................................ I-14
SECTION 4.04 Consents and Approvals................................................. I-14
SECTION 4.05 No Violation........................................................... I-14
SECTION 4.06 SEC Reports; Financial Statements...................................... I-15
SECTION 4.07 Company Statement; Schedule 13E-3; Schedule 13E-4...................... I-15
SECTION 4.08 Compliance with Law.................................................... I-15
SECTION 4.09 Absence of Certain Changes............................................. I-16
SECTION 4.10 No Undisclosed Liabilities............................................. I-16
SECTION 4.11 Litigation............................................................. I-16
SECTION 4.12 Employee Benefit Matters............................................... I-16
SECTION 4.13 Taxes.................................................................. I-18
SECTION 4.14 Intellectual Property.................................................. I-18
SECTION 4.15 Other Interests........................................................ I-19
SECTION 4.16 Labor Matters.......................................................... I-20
SECTION 4.17 Brokers and Finders.................................................... I-20
SECTION 4.18 Opinions of Financial Advisors......................................... I-20
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SECTION 4.19 Real Property and Leases............................................... I-20
SECTION 4.20 Material Contracts..................................................... I-20
SECTION 4.21 Certain Business Practices............................................. I-22
SECTION 4.22 Accounting Treatment................................................... I-22
SECTION 4.23 Stock Retention Agreements............................................. I-22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
SECTION 5.01 Organization and Qualification......................................... I-22
SECTION 5.02 Authorization and Validity of Agreement................................ I-22
SECTION 5.03 Consents and Approvals................................................. I-22
SECTION 5.04 No Violation........................................................... I-23
SECTION 5.05 Offer Documents; Company Statement; Schedule 13E-3; Schedule 13E-4..... I-23
SECTION 5.06 Financing.............................................................. I-23
SECTION 5.07 Brokers and Finders.................................................... I-24
SECTION 5.08 Operations of Purchasers............................................... I-24
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of the Business of the Company Pending the Merger.............. I-24
SECTION 6.02 Access; Confidentiality................................................ I-25
SECTION 6.03 Preparation of Company Statement; Shareholders' Meeting; Further I-25
Actions................................................................
SECTION 6.04 Public Announcements................................................... I-26
SECTION 6.05 Recapitalization....................................................... I-26
SECTION 6.06 Acquisition Proposals.................................................. I-26
SECTION 6.07 D&O Indemnification and Insurance...................................... I-27
SECTION 6.08 Employee Benefits...................................................... I-28
SECTION 6.09 Fees and Expenses...................................................... I-28
SECTION 6.10 Debt Financing......................................................... I-28
SECTION 6.11 Headquarters of the Company............................................ I-29
SECTION 6.12 Available Cash......................................................... I-29
SECTION 6.13 Options................................................................ I-29
ARTICLE VII
CONDITIONS
SECTION 7.01 Conditions to the Stock Purchase....................................... I-29
SECTION 7.02 Conditions to the Merger............................................... I-30
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination............................................................ I-31
SECTION 8.02 Effect of Termination.................................................. I-32
SECTION 8.03 Fees................................................................... I-32
SECTION 8.04 Amendment.............................................................. I-32
SECTION 8.05 Waiver................................................................. I-32
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ARTICLE X
GENERAL PROVISIONS
SECTION 9.01 Non-Survival of Representations, Warranties and Agreements............. I-33
SECTION 9.02 Notices................................................................ I-33
SECTION 9.03 Certain Definitions.................................................... I-34
SECTION 9.04 Severability........................................................... I-34
SECTION 9.05 Entire Agreement; Assignment........................................... I-35
SECTION 9.06 Parties in Interest.................................................... I-35
SECTION 9.07 Specific Performance................................................... I-35
SECTION 9.08 Governing Law.......................................................... I-35
SECTION 9.09 Joint and Several Obligations.......................................... I-35
SECTION 9.10 Headings............................................................... I-35
SECTION 9.11 Counterparts........................................................... I-35
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
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GLOSSARY OF DEFINED TERMS
DEFINED TERM LOCATION OF DEFINITION
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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)
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)
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DEFINED TERM LOCATION OF DEFINITION
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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)
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)
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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
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
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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 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.
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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 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:
(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.
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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.
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;
(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
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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 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
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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.
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 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.
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(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 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.
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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 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 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.
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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.
(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,
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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 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 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
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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 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
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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 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 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.
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(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 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).
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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 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 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
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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 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.
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SECTION 4.21. Certain Business Practices. Neither the Company nor any of
its subsidiaries nor any of their respective directors, officers, agents,
representatives or 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, 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
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(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 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.
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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);
(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;
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(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 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 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
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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 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
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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 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.
(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
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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 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,
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without limitation, by participating in roadshows and meeting with, and
providing information to, potential sources of financing identified by
Purchasers.
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:
(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.
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(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.
(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 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
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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
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,
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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, (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").
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.
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ARTICLE IX
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):
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
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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;
(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.
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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 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.
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
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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, 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
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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
(h) The Company shall not 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).
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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:
"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
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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
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]"
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 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,
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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.
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.
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ARTICLE TWO
The period of duration of the Corporation is perpetual.
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 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
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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
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
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:"
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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 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
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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 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.
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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.
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
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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 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 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
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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.
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, 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
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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.
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.
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.
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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.
(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: (i) 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
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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 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 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
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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 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
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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.
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.
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.
--------------------------------------
[ ]
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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.
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
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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.
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
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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 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.
(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.
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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.
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.
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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.
(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
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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.
(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;
(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
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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 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
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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, 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
(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.
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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.
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.
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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.
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.]
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