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Exhibit 99.2
KINETIC CONCEPTS, INC.
DEFERRED COMPENSATION PLAN
Effective Date: October 1, 1995
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TABLE OF CONTENTS
ARTICLE PAGE
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I - Definitions and Construction . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
II - Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
III - Account Credits and Allocations of Interest Credits . . . . . . . . . . . . . . . III-1
IV - Deemed Investment of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . IV-1
V - Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1
VI - Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI-1
VII - Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-1
VIII - Administration of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . VIII-1
IX - Administration of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IX-1
X - Nature of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X-1
XI - Adopting Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XI-1
XII - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XII-1
(i)
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KINETIC CONCEPTS, INC.
DEFERRED COMPENSATION PLAN
W I T N E S S E T H :
WHEREAS, KINETIC CONCEPTS, INC. and other adopting entities desire to
adopt the KINETIC CONCEPTS, INC. DEFERRED COMPENSATION PLAN (the "PLAN") for
the benefit of certain eligible individuals; and
NOW THEREFORE, the Plan is hereby adopted as follows, effective as of
October 1, 1995:
(ii)
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I.
DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. Where the following words and phrases appear in
the Plan, they shall have the respective meanings set forth below, unless their
context clearly indicates to the contrary.
(1) ACCOUNT: An individual account for each Member to which is credited
the Deferrals made on his behalf pursuant to Section 3.1 and which is
credited for such account's allocation of interest credits as provided
in Section 3.2.
(2) AFFILIATE: Each trade or business (whether or not incorporated) which
together with the Company would be deemed to be a "single employer"
within the meaning of subsections (b), (c), (m) or (o) of section 414
of the Code.
(3) CODE: The Internal Revenue Code of 1986, as amended.
(4) COMPANY: Kinetic Concepts, Inc. and any other adopting entity which
adopts the Plan pursuant to the provisions of Article XI.
(5) DEFERRALS: Deferrals made by the Company on a Member's behalf
pursuant to Section 3.1.
(6) DIRECTORS: The Board of Directors of Kinetic Concepts, Inc.
(7) DISABILITY: The total and permanent disability of a Member, as
determined under Kinetic Concepts, Inc. Long-Term Disability Plan.
(8) EFFECTIVE DATE: October 1, 1995.
(9) ELIGIBLE INDIVIDUAL: Any individual who is employed by the Company in
a position with a senior management grade of 111 or above and any
Director. For all purposes herein, the "service" of an individual as
a Director shall be deemed to be equivalent to "employment" with the
Company.
(10) ENTRY DATE: The first day of each Plan Year and, with respect to an
Eligible Individual who becomes a Member on other than the first day
of a Plan Year, the date such Eligible Individual becomes a Member in
such Plan Year.
(11) MEMBER: Each Eligible Individual who has met the eligibility
requirements for participation in the Plan and who has become a Member
pursuant to Article II.
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(12) PAY: The total of all amounts paid by the Company to or for the
benefit of a Member for services rendered or labor performed, which
are required to be reported on such Member's federal income tax
withholding statement(s) (Form W-2, 1099, or their subsequent
equivalents), excluding taxable income resulting from the exercise of
nonqualified stock options, the imputed value of group term life
insurance, relocation reimbursements and from non-cash executive
perquisites, plus any amounts such Member could have received in cash
in lieu of Deferrals pursuant to Section 3.1.
(13) PLAN: The Kinetic Concepts, Inc. Deferred Compensation Plan, as
amended from time to time.
(14) PLAN ADMINISTRATOR: The Plan administrator appointed by the Directors
pursuant to Section 8.1.
(15) PLAN YEAR: The short period commencing on the Effective Date and
ending on December 31, 1995, and thereafter the twelve-consecutive
month period commencing January 1 of each year.
(16) RETIREMENT. A Member's termination of employment with the Company and
its Affiliates after attainment of age sixty-five or attainment of age
fifty-five with five years of aggregate employment from and after the
Effective Date.
(17) TRUST: The trust, if any, established under the Trust Agreement.
(18) TRUST AGREEMENT: The agreement, if any, entered into between the
Company and the Trustee pursuant to Article X.
(19) TRUST FUND: The funds and properties, if any, held pursuant to the
provisions of the Trust Agreement, together with all income, profits
and increments thereto.
(20) TRUSTEE: The trustee appointed by the Directors who is qualified and
acting under the Trust Agreement at any time.
(21) UNFORESEEABLE FINANCIAL EMERGENCY: An unexpected need of a Member for
cash that (i) arises from an illness, casualty loss, sudden financial
reversal, or such other unforeseeable occurrence that is caused by an
event beyond the control of such Member, (ii) would result in severe
financial hardship to such Member if his Deferral election was not
cancelled pursuant to Section 3.1(g) and/or if a withdrawal or benefit
payment pursuant to Article VI or Section 7.6 was not permitted, and
(iii) is not reasonably satisfiable from other resources of such
Member. Cash needs arising from foreseeable events, such as the
purchase of a house or education expenses for children, shall not be
considered to be the result of an Unforeseeable Financial Emergency.
(22) VALUATION DATES: Each Entry Date and any other interim Valuation Date
designated by the Plan Administrator on a nondiscriminatory basis.
Notwithstanding the foregoing, an
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interim Valuation Date shall be designated as the first day of the
calendar month next preceding the date a withdrawal or payment of a
Member's benefit is to be made or to commence pursuant to Article VI
or Article VII.
1.2 NUMBER AND GENDER. Wherever appropriate herein, words used in
the singular shall be considered to include the plural and words used in the
plural shall be considered to include the singular. The masculine gender,
where appearing in the Plan, shall be deemed to include the feminine gender.
1.3 HEADINGS. The headings of Articles and Sections herein are
included solely for convenience, and if there is any conflict between such
headings and the text of the Plan, the text shall control.
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II.
PARTICIPATION
2.1 ELIGIBILITY. Any Eligible Individual shall be eligible to
become a Member of the Plan for any Plan Year by electing to make Deferrals
pursuant to Section 3.1.
2.2 PARTICIPATION.
(a) Prior to each Entry Date, the Plan Administrator
shall notify those Eligible Individuals who are determined by the Plan
Administrator to be eligible to initially become Members pursuant to Section
2.1 as of such Entry Date. Any such Eligible Individual may become a Member
for the Plan Year beginning on such Entry Date by effecting, prior to such
Entry Date and within the time period prescribed by the Plan Administrator, the
Deferral election prescribed by the Plan Administrator. Notwithstanding any
provision herein to the contrary, an Eligible Individual who first becomes an
Eligible Individual on other than the first day of a Plan Year may become a
Member on the first day of the calendar month coinciding with or next following
the date he first becomes an Eligible Individual for the remainder of such Plan
Year with respect to Deferrals pursuant to Section 3.1 by effecting, prior to
or within 30 days after the date he first becomes an Eligible Individual and
within the time period prescribed by the Plan Administrator, the Deferral
election prescribed by the Plan Administrator.
(b) Notwithstanding any provision herein to the contrary,
an Eligible Individual who has become a Member of the Plan shall cease to be
entitled to make Deferrals hereunder effective as of any date designated by the
Plan Administrator. Any such Plan Administrator action shall be communicated
to the affected individual prior to the effective date of such action. Any
such Eligible Individual may again become entitled to make Deferrals hereunder
for any subsequent Plan Year selected by the Plan Administrator in its sole
discretion.
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III.
ACCOUNT CREDITS AND ALLOCATIONS OF INTEREST CREDITS
3.1 DEFERRALS.
(a) A Member may:
(1) Elect to defer from his Pay a fixed amount
or an integral percentage of from 1% to 100% of his base annual salary
for a Plan Year; and/or
(2) Elect to defer from his Pay a fixed amount or
an integral percentage of from 1% to 100% of his annual bonus for a
Plan Year.
Notwithstanding the foregoing, no Member may elect to defer more than $100,000
of his Pay or less than $5,000 of his Pay ($2,000, if a Director) for any Plan
Year (with such amounts prorated for any Plan Year of less than twelve months
with respect to any Member). Further, with respect to an Eligible Individual
who first becomes a Member on other than the first day of a Plan Year, any such
Deferrals pursuant to Section 3.1(a)(1) shall apply only for the portion of
such Plan Year commencing with the date he first becomes a Member and ending on
the last day of such Plan Year. Further, any such initial Deferral election
pursuant to Section 3.1(a)(2) for the 1995 Plan Year shall be limited to 25% of
such Member's annual bonus for the 1995 Plan Year.
(b) Pay for a Plan Year not so deferred by such election
pursuant to this Section shall be received by such Member in cash. A Member's
election to defer an amount of his Pay pursuant to this Section shall be made
by effecting, in the form prescribed by the Plan Administrator, a Deferral
election pursuant to which the Member authorizes the Company to reduce his Pay
in the elected amount and the Company, in consideration thereof, agrees to
credit an equal amount to such Member's Account maintained under the Plan. The
reduction in a Member's Pay pursuant to Section 3.1(a)(1) shall be effected by
equal Pay reductions each pay period during the applicable portion of the Plan
Year as determined by the Plan Administrator following the effective date of
such election. The reduction in a Member's Pay pursuant to Section 3.1(a)(2)
shall be effected by a Pay reduction at the time such annual bonus is paid.
Notwithstanding the foregoing, a Deferral election of a Member pursuant to
Section 3.1(a)(1) for a Plan Year shall be automatically suspended during such
Member's unpaid leave of absence, six months after the incurrence of such
Member's Disability and upon termination of such Member's employment with the
Company and its Affiliates. Such Pay reductions shall be within the Plan Year
to which the Deferral election relates, except that Pay reductions attributable
to elections pursuant to Section 3.1(a)(2) may be made within the next
following Plan Year if the bonus to which the Deferral election relates is paid
in such next following Plan Year. Deferrals made by a Member shall be credited
to such Member's Account as of a date determined in accordance with procedures
established from time to time by the Plan Administrator; provided, however,
that such Deferrals shall be credited to the Member's Account no later than 30
days
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after the date upon which the Pay deferred would have been received by such
Member in cash if he had not elected to defer such amount pursuant to this
Section 3.1.
(c) A Deferral election pursuant to Section 3.1(a) shall
become effective as of the Entry Date which is on or after the date the
election is effected by the Member. A Deferral election shall remain in force
and effect for the entire (or partial, if applicable) Plan Year to which such
election relates.
(d) A Deferral election shall indicate the applicable
time and form of payment, as provided in Sections 7.2 and 7.3, for the Pay
deferred thereunder for such Plan Year and the interest credits allocated with
respect thereto. Each Member's Account shall be divided into subaccounts to
reflect such Member's various elections respecting time and form of payment.
(e) A Member who has made a Deferral election pursuant to
Section 3.1(a) may change his election, as of the Entry Date of any subsequent
Plan Year, by effecting a new Deferral election prior to such Entry Date and
within the time period prescribed by the Plan Administrator.
(f) A Member who has made a Deferral election pursuant to
Section 3.1(a) may cancel his election, as of the Entry Date of any subsequent
Plan Year, by effecting the same in the form prescribed by the Plan
Administrator prior to such Entry Date and within the time period prescribed by
the Plan Administrator. A Member who so cancels his Deferral election may
again make a new such Deferral election for a subsequent Plan Year, if he
satisfies the eligibility requirements set forth in Section 2.1, by effecting a
new such Deferral election prior to the Entry Date of such Plan Year and within
the time period prescribed by the Plan Administrator.
(g) In the event that the Plan Administrator, upon
written petition of a Member, determines in its sole discretion that such
Member has suffered an Unforeseeable Financial Emergency, the Deferral election
of such Member then in effect, if any, shall be terminated as soon as
administratively practicable after such determination. A Member whose Deferral
election has been so terminated may again make a new Deferral election for a
subsequent Plan Year that begins at least twelve months after the effective
date of such termination, if he satisfies the eligibility requirements set
forth in Section 2.1, by effecting a new Deferral election for such Plan Year
and within the time period prescribed by the Plan Administrator.
3.2 ALLOCATION OF INTEREST CREDITS.
(a) As of each Valuation Date, the Plan Administrator
shall determine the interest credits under the Plan for the period elapsed
since the next preceding Valuation Date. The interest credits under the Plan
since the next preceding Valuation Date shall be ascertained by the Plan
Administrator in accordance with Article IV.
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(b) So long as there is any balance in any Account, such
Account shall continue to receive allocations pursuant to this Section.
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IV.
DEEMED INVESTMENT OF ACCOUNTS
A Member's Account shall be deemed to be invested in a manner giving
rise to designated interest credits. The Plan Administrator shall set the
applicable interest rate for each Plan Year prior to the start of such Plan
Year based upon 125% of the October Moody's Corporate Bond Rate as published by
Moody's Investor Service in the November immediately preceding such Plan Year;
provided, that for the 1995 Plan Year, the applicable interest rate shall be
9.76%. Notwithstanding the foregoing, in the event a Member terminates his
employment with the Company and its Affiliates for a reason other than
Retirement, Disability, or death prior to completing five years of
participation in the Plan from the effective date of the Member's first
Deferral election, the applicable interest rate for each Plan Year shall be
based upon 100% of such October Moody's Corporate Bond Rate, unless an
exception is created in the sole discretion of the Plan Administrator due to
the circumstances of the Member's termination. Interest credits shall be
determined by applying the applicable interest rate (calculated on a per-annum
basis) to a Member for a Plan Year to the prior Deferrals (including interest
credits thereon) in the Member's Account as of the Entry Date of the Plan Year
and to the total amount of base annual salary Deferrals for such Member for
such Plan Year assuming such Deferrals are invested as of the Entry Date of
such Plan Year. Interest credits shall also be determined by applying the
applicable interest rate (calculated on a per-annum basis) to a Member for the
Plan Year in which an annual bonus would have been paid but for the Member's
annual bonus Deferral to the amount of such annual bonus Deferral assuming such
Deferral is invested as of the date such annual bonus is paid. For purposes of
determining interest credits hereunder, partial withdrawals pursuant to Article
VI shall be deducted from a Member's Account as made.
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V.
VESTING
A Member shall be 100% vested in his Account at all times.
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VI.
WITHDRAWALS
6.1 IN GENERAL. Except as provided in this Article VI and in
Article VII, Members shall not be permitted to make withdrawals from the Plan.
Members shall not, at any time, be permitted to borrow from the Plan.
6.2 UNFORESEEABLE FINANCIAL EMERGENCY. In the event that the Plan
Administrator, upon written petition of a Member, determines in its sole
discretion that such Member has suffered an Unforeseeable Financial Emergency,
such Member shall be entitled to a benefit, determined as of any Valuation
Date, in an amount not to exceed the lesser of (1) the amount determined by the
Plan Administrator as necessary to meet such Member's needs created by the
Unforeseeable Financial Emergency or (2) the then value of such Member's
Account. Such withdrawal benefit shall be paid in a single lump sum, cash
payment as soon as administratively practicable after the Plan Administrator
has made its determinations with respect to the availability and amount of such
benefit. If a Member's Account contains more than one distribution subaccount,
such withdrawal benefit shall be considered to have been distributed, first,
from the subaccount with respect to which the earliest distribution would be
made, then, from the subaccount with respect to which the next earliest
distribution would be made, and continuing in such manner until all of such
subaccounts necessary to satisfy the withdrawal benefit have been exhausted.
Moreover, within the applicable Account or subaccount, such withdrawal benefit
shall be considered to have been distributed from Deferrals (including interest
credits thereon) on a first-in, first-out basis.
6.3 ELECTIVE WITHDRAWAL. A Member may elect at any time, by
effecting the election procedure prescribed by the Plan Administrator, to
withdraw as a benefit all, but not less than all, of his Account as of any
Valuation Date, subject to a withdrawal penalty of 10% of such Account as of
such Valuation Date. Upon any such withdrawal, the withdrawal penalty shall be
forfeited to the Company. Upon any such withdrawal, such Member's
participation in the Plan shall terminate and no further Deferrals shall be
made under the Plan on behalf of such Member.
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VII.
DISTRIBUTIONS
7.1 AMOUNT OF BENEFIT. A Member or, in the event of the death of
the Member, the Member's designated beneficiary, shall be entitled to a benefit
equal in value to the Member's Account as of the Valuation Date next preceding
the date the payment of such benefit is to be made or to commence pursuant to
Section 7.2 (plus any annual bonus Deferral not previously allocated to such
Account).
7.2 TIME OF PAYMENT. Payment of a Member's benefit under Section
7.1 shall be made or commence, with respect to such Member's Account, or with
respect to such Member's subaccounts established pursuant to Section 3.1(d)
separately and respectively, as soon as administratively practicable as of the
date irrevocably elected by such Member pursuant to Section 3.1(d). A Member
may elect distribution with respect to his Deferrals for any Plan Year to be
made as of an Entry Date which is at least five years following the beginning
of such Plan Year or to be made or commenced after the first day of the month
following his Retirement. Notwithstanding the foregoing, payment of a Member's
benefit under Section 7.1 shall be made as soon as administratively practicable
after the first day of the month following the date the Member terminates his
employment with the Company and its Affiliates for any reason including
Disability or death.
7.3 ALTERNATIVE FORMS OF BENEFIT PAYMENTS. A Member's benefit
under Section 7.1 payable prior to termination of employment with the Company
and its Affiliates shall be paid, with respect to such Member's Account, or
with respect to such Member's subaccounts established pursuant to Section
3.1(d) separately and respectively, in one lump sum payment. A Member's
benefit under Section 7.1 payable after termination of employment with the
Company and its Affiliates prior to a Member's Retirement shall be paid in one
lump sum payment, unless an exception is created in the sole discretion of the
Plan Administrator due to the circumstances of the Member's termination. A
Member's benefit under Section 7.1 payable after a Member's Retirement shall be
paid, with respect to such Member's Account, or with respect to such Member's
subaccounts established pursuant to Section 3.1(d) separately and respectively,
in one of the following forms irrevocably elected by such Member pursuant to
Section 3.1(d):
(1) One lump sum payment; or
(2) Monthly installment payments for a term certain of
either 5 or 10 years payable to the Member or, in the event of such
Member's death prior to the end of such term certain, to his
designated beneficiary as provided in Section 7.4.
With respect to any portion of a Member's Retirement benefit for which no form
of payment election is in effect, such amount shall be paid in the form of
monthly installment payments for a term certain of 10 years payable to such
Member or, in the event of such Member's death prior to the end of such term
certain, to his designated beneficiary as provided in Section 7.4; provided,
however, that the Plan Administrator may, in its sole discretion, elect to make
such
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benefit payment in any other available form. If a Member dies prior to the
date the payment of his lump sum benefit is made, then such lump sum benefit
shall be made to the Member's designated beneficiary as provided in Section
7.4. Plan provisions to the contrary notwithstanding, if payments are to be
made in monthly installments, "installment valuation dates" shall be
established as of the Valuation Date next preceding the date the Member's
benefit is to commence and as of each anniversary of such date throughout the
installment period. As of each such "installment valuation date," interest
credits for each of the twelve-consecutive months following such "installment
valuation date" (based upon the applicable per annum interest rate in effect
for the Plan Year in which each such month falls) shall be credited to the
Member's Account by applying such applicable interest rates to the balance of
such Member's Account as of such "installment valuation date" reduced by the
total installment payments to be made on behalf of the Member during the
twelve-consecutive months following such "installment valuation date." The
total installment payments to be made on behalf of a Member during the
twelve-consecutive months following an "installment valuation date" shall be
determined by multiplying the balance of such Member's Account as of such
"installment valuation date" (prior to any interest credits or payment
reductions) by a fraction, the numerator of which is one and the denominator of
which is the number of years remaining in the installment period.
7.4 DESIGNATION OF BENEFICIARIES.
(a) Each Member shall have the right to designate the
beneficiary or beneficiaries to receive payment of his benefit in the event of
his death. Each such designation shall be made by executing the beneficiary
designation form prescribed by the Plan Administrator and filing same with the
Plan Administrator. Any such designation may be changed at any time by
execution of a new designation in accordance with this Section.
(b) If no such designation is on file with the Plan
Administrator at the time of the death of the Member or such designation is not
effective for any reason as determined by the Plan Administrator, then the
designated beneficiary or beneficiaries to receive such benefit shall be as
follows:
(1) If a Member leaves a surviving spouse, his
benefit shall be paid to such surviving spouse;
(2) If a Member leaves no surviving spouse, his
benefit shall be paid to such Member's executor or administrator, or
to his heirs at law if there is no administration of such Member's
estate.
7.5 ACCELERATED PAY-OUT OF CERTAIN BENEFITS. Notwithstanding any
provision in Section 7.3 to the contrary, if a Member's Retirement benefit
payments are to be paid in installments and the aggregate amount to be paid
with respect to such Member in any particular Plan Year is less than $10,000,
then the Plan Administrator may, in its sole discretion, elect to cause the
installment payments for such Plan Year with respect to such Member to be paid
in one lump sum payment. Notwithstanding any provision in Section 7.3 to the
contrary, if a Member's Retirement benefit payments are to be paid in
installments and the aggregate amount remaining to be paid with respect to such
Member is less than $20,000, then the Plan
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Administrator may, in its sole discretion, elect to cause the remaining Account
balance with respect to such Member to be paid in one lump sum payment.
7.6 ACCELERATED PAY-OUT DUE TO EMERGENCY. Notwithstanding any
provision in Sections 7.2 and 7.3 to the contrary, in the event that the Plan
Administrator, upon written petition of a Member, determines in its sole
discretion that such Member has suffered an Unforeseeable Financial Emergency,
such Member shall be entitled to an accelerated payout of his benefit pursuant
to Section 6.2. Any remaining amounts in such Member's Account following
payment of such emergency benefit shall be payable at the time and in the form
otherwise provided in Sections 7.2 and 7.3.
7.7 DEFERRED PAYOUT DUE TO LOSS OF TAX DEDUCTION. If the Company
determines in good faith that there is a reasonable likelihood that any
benefits paid to a Member pursuant to this Article VII would not be deductible
by the Company under applicable income tax provisions then in effect, then to
the extent deemed necessary by the Company to ensure that the entire amount of
any such distribution to a Member is deductible, the Company may defer payment
of all or any portion of such benefits. Any amount deferred pursuant to this
Section 7.7 shall continue to receive interest credits pursuant to the Plan
until distribution. The amounts so deferred and interest credits thereon shall
be distributed to the Member (or his beneficiary in the event of the Member's
death) at the earliest possible date, as determined by the Company in good
faith, as of which such deductibility will be ensured.
7.8 PAYMENT OF BENEFITS. To the extent the Trust Fund has
sufficient assets, the Trustee shall pay benefits to Members or their
beneficiaries, except to the extent the Company pays the benefits directly and
provides adequate evidence of such payment to the Trustee. To the extent the
Trustee does not or cannot pay benefits out of the Trust Fund, the benefits
shall be paid by the Company. Any benefit payments made to a Member or for his
benefit pursuant to any provision of the Plan shall be debited to such Member's
Account. All benefit payments shall be made in cash to the fullest extent
practicable.
7.9 UNCLAIMED BENEFITS. In the case of a benefit payable on
behalf of a Member, if, after exercising reasonable diligence, the Plan
Administrator is unable to locate the Member or beneficiary to whom such
benefit is payable, upon the Plan Administrator's determination thereof, such
benefit shall be forfeited to the Company. Notwithstanding the foregoing, if
subsequent to any such forfeiture the Member or beneficiary to whom such
benefit is payable makes a valid claim for such benefit, such forfeited benefit
shall be restored to the Plan by the Company.
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VIII.
ADMINISTRATION OF THE PLAN
8.1 APPOINTMENT OF PLAN ADMINISTRATOR. The general administration
of the Plan shall be vested in the Plan Administrator (which may be an
individual or a committee of two or more persons) which shall be appointed by
the Directors.
8.2 RESIGNATION AND REMOVAL. At any time during his term of
office, the individuals comprising the Plan Administrator may resign by giving
written notice to the Directors, such resignation to become effective upon the
appointment of a substitute or, if earlier, the lapse of thirty days after such
notice is given as herein provided. At any time during its term of office, and
for any reason, the individuals comprising the Plan Administrator may be
removed by the Directors.
8.3 RECORDS AND PROCEDURES. The Plan Administrator shall keep
appropriate records of its proceedings and the administration of the Plan and
shall make available for examination during business hours to any Member or
beneficiary such records as pertain to that individual's interest in the Plan.
The Plan Administrator shall provide an annual statement to each Member or
beneficiary of his interest in the Plan. The Plan Administrator shall
designate the person or persons who shall be authorized to sign for the Plan
Administrator and, upon such designation, the signature of such person or
persons shall bind the Plan Administrator.
8.4 SELF-INTEREST OF PLAN ADMINISTRATOR. No individual comprising
the Plan Administrator shall have any right to vote or decide upon any matter
relating solely to himself under the Plan or to vote in any case in which his
individual right to claim any benefit under the Plan is particularly involved.
In any case in which an individual comprising the Plan Administrator is so
disqualified to act, the remaining individuals comprising the Plan
Administrator or, if none, the Directors shall decide the matter in which he is
disqualified.
8.5 COMPENSATION AND BONDING. The Plan Administrator shall not
receive compensation with respect to its services as Plan Administrator. To
the extent required by applicable law, or required by the Company, the Plan
Administrator shall furnish bond or security for the performance of its duties
hereunder.
8.6 PLAN ADMINISTRATOR POWERS AND DUTIES. The Plan Administrator
shall supervise the administration and enforcement of the Plan according to the
terms and provisions hereof and shall have all powers necessary to accomplish
these purposes, including, but not by way of limitation, the right, power,
authority and duty:
(a) to make rules, regulations and bylaws for the
administration of the Plan which are not inconsistent with the terms
and provisions hereof, provided such rules, regulations and bylaws are
evidenced in writing and copies thereof are delivered to the Trustee
and to the Company;
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(b) to construe all terms, provisions, conditions and
limitations of the Plan;
(c) to correct any defect or supply any omission or
reconcile any inconsistency that may appear in the Plan, in such
manner and to such extent as it shall deem expedient to carry the Plan
into effect for the greatest benefit of all interested parties;
(d) to employ and compensate such accountants, attorneys,
investment advisors and other agents and employees as the Plan
Administrator may deem necessary or advisable in the proper and
efficient administration of the Plan;
(e) to determine all questions relating to eligibility;
(f) to determine the amount, manner and time of payment
of any benefits and to prescribe procedures to be followed by Members
and their beneficiaries in obtaining benefits;
(g) to make a determination as to the right of any person
to a benefit under the Plan; and
(h) to receive and review reports from the Trustee as to
the financial condition of the Trust Fund, including its receipts and
disbursements.
8.7 COMPANY TO SUPPLY INFORMATION. The Company shall supply full
and timely information to the Plan Administrator relating to the Pay of all
Members, their ages, their Retirement, Disability, death or other termination
of employment and such other pertinent facts as the Plan Administrator may
require. The Company shall advise the Trustee of such of the foregoing facts
as are deemed necessary for the Trustee to carry out the Trustee's duties under
the Plan. When making a determination in connection with the Plan, the Plan
Administrator shall be entitled to rely upon the aforesaid information
furnished by the Company.
8.8 CLAIMS REVIEW. In any case in which a claim for Plan benefits
of a Member or beneficiary is denied or modified, the Plan Administrator shall
furnish written notice to the claimant within ninety days (or within 180 days
if additional information requested by the Plan Administrator necessitates an
extension of the ninety-day period), which notice shall:
(a) State the specific reason or reasons for the denial
or modification;
(b) Provide specific reference to pertinent Plan
provisions on which the denial or modification is based;
(c) Provide a description of any additional material or
information necessary for the Member, his beneficiary, or
representative to perfect the claim and an explanation of why such
material or information is necessary; and
(d) Explain the Plan's claim review procedure as
contained herein.
VIII-2
19
In the event a claim for Plan benefits is denied or modified, if the Member,
his beneficiary, or a representative of such Member or beneficiary desires to
have such denial or modification reviewed, he must, within sixty days following
receipt of the notice of such denial or modification, submit a written request
for review by the Plan Administrator of its initial decision. In connection
with such request, the Member, his beneficiary, or the representative of such
Member or beneficiary may review any pertinent documents upon which such denial
or modification was based and may submit issues and comments in writing.
Within sixty days following such request for review the Plan Administrator
shall, after providing a full and fair review, render its final decision in
writing to the Member, his beneficiary or the representative of such Member or
beneficiary stating specific reasons for such decision and making specific
references to pertinent Plan provisions upon which the decision is based. If
special circumstances require an extension of such sixty-day period, the Plan
Administrator's decision shall be rendered as soon as possible, but not later
than 120 days after receipt of the request for review. If an extension of time
for review is required, written notice of the extension shall be furnished to
the Member, beneficiary, or the representative of such Member or beneficiary
prior to the commencement of the extension period.
8.9 INDEMNITY. To the extent permitted by applicable law, the
Company shall indemnify and save harmless the Directors and any individual
acting as Plan Administrator against any and all expenses, liabilities and
claims (including legal fees incurred to defend against such liabilities and
claims) arising out of their discharge in good faith of responsibilities under
or incident to the Plan. Expenses and liabilities arising out of willful
misconduct shall not be covered under this indemnity. This indemnity shall not
preclude such further indemnities as may be available under insurance purchased
by the Company or provided by the Company under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, as such indemnities are
permitted under applicable law.
VIII-3
20
IX.
ADMINISTRATION OF FUNDS
9.1 PAYMENT OF EXPENSES. All expenses incident to the
administration of the Plan and Trust, including but not limited to, legal,
accounting, Trustee fees, and expenses of the Plan Administrator, shall be paid
by the Company and, if not paid by the Company, shall be paid by the Trustee
from the Trust Fund, if any.
9.2 TRUST FUND PROPERTY. All income, profits, recoveries,
contributions, forfeitures and any and all moneys, securities and properties of
any kind at any time received or held by the Trustee, if any, shall be held as
a commingled Trust Fund pursuant to the terms of the Trust Agreement. The Plan
Administrator shall maintain an Account in the name of each Member, but the
maintenance of an Account designated as the Account of a Member shall not mean
that such Member shall have a greater or lesser interest than that due him by
operation of the Plan and shall not be considered as segregating any funds or
property from any other funds or property contained in the commingled fund. No
Member shall have any title to any specific asset in the Trust Fund, if any.
IX-1
21
X.
NATURE OF THE PLAN
The Company intends and desires by the adoption of the Plan to
recognize the value to the Company of the past and present services of
individuals covered by the Plan and to encourage and assure their continued
service with the Company by making more adequate provision for their future
retirement security. The Plan is intended to constitute an unfunded, unsecured
plan of deferred compensation for a select group of management or highly
compensated employees of the Company. Plan benefits herein provided are a
contractual obligation of the Company which may be paid out of the Company's
general assets or out of the Trust Fund. Subject to the terms hereof and of
the Trust Agreement, the Company may transfer money or other property to the
Trustee, and the Trustee shall pay Plan benefits to Members and their
beneficiaries out of the Trust Fund in accordance with the terms of the Trust
Agreement.
The Directors, in their sole discretion, may establish the Trust and
direct the Company to enter into the Trust Agreement. In such event, the
Company shall remain the owner of all assets in the Trust Fund and the assets
shall be subject to the claims of Company creditors if the Company ever becomes
insolvent. For purposes hereof, the Company shall be considered "insolvent" if
(a) the Company is unable to pay its debts as they become due, or (b) the
Company is subject to a pending proceeding as a debtor under the United Sates
Bankruptcy Code (or any successor federal statute). The chief executive
officer of the Company and its board of directors shall have the duty to inform
the Trustee in writing if the Company becomes insolvent. Such notice given
under the preceding sentence by any party shall satisfy all of the parties'
duty to give notice. When so informed, the Trustee shall suspend payments to
the Members and hold the assets for the benefit of the Company's general
creditors. If the Trustee receives a written allegation that the Company is
insolvent, the Trustee shall suspend payments to the Members and hold the Trust
Fund for the benefit of the Company's general creditors, and shall determine
within the period specified in the Trust Agreement whether the Company is
insolvent. If the Trustee determines that the Company is not insolvent, the
Trustee shall resume payments to the Members. No Member or beneficiary shall
have any preferred claim to, or any beneficial ownership interest in, any
assets of the Trust Fund.
X-1
22
XI.
ADOPTING ENTITIES
It is contemplated that other corporations, associations,
partnerships or proprietorships may adopt this Plan and thereby become the
Company. Any such entity, whether or not presently existing, may become a
party hereto by appropriate action of its officers without the need for
approval of its board of directors or noncorporate counterpart or of the
Directors; provided, however, that such entity must be an Affiliate. The
provisions of the Plan shall apply separately and equally to each Company and
its employees in the same manner as is expressly provided for Kinetic Concepts,
Inc. and its employees, except that the power to appoint or otherwise affect
the Plan Administrator or the Trustee and the power to amend or terminate the
Plan or amend the Trust Agreement shall be exercised by the Directors alone.
Transfer of employment among Companies and Affiliates shall not be considered a
termination of employment hereunder. Any Company may, by appropriate action of
its officers without the need for approval of its board of directors or
noncorporate counterpart or the Directors, terminate its participation in the
Plan. Moreover, the Directors may, in their discretion, terminate a Company's
Plan participation at any time.
XI-1
23
XII.
MISCELLANEOUS
12.1 NOT CONTRACT OF EMPLOYMENT. The adoption and maintenance of
the Plan shall not be deemed to be a contract between the Company and any
person or to be consideration for the employment of any person. Nothing herein
contained shall be deemed to give any person the right to remain under contract
with the Company or to be retained in the employ of the Company or to restrict
the right of the Company to discharge any person at any time nor shall the Plan
be deemed to give the Company the right to require any person to remain under
contract with the Company or remain in the employ of the Company or to restrict
any person's right to terminate his services at any time.
12.2 ALIENATION OF INTEREST FORBIDDEN. The interest of a Member or
his beneficiary or beneficiaries hereunder may not be sold, transferred,
assigned, or encumbered in any manner, either voluntarily or involuntarily, and
any attempt so to anticipate, alienate, sell, transfer, assign, pledge,
encumber, or charge the same shall be null and void; neither shall the benefits
hereunder be liable for or subject to the debts, contracts, liabilities,
engagements or torts of any person to whom such benefits or funds are payable,
nor shall they be an asset in bankruptcy or subject to garnishment, attachment
or other legal or equitable proceedings.
12.3 WITHHOLDING. All Deferrals and payments provided for
hereunder shall be subject to applicable withholding and other deductions as
shall be required of the Company under any applicable local, state or federal
law.
12.4 AMENDMENT AND TERMINATION. The Directors may from time to
time, in their discretion, amend, in whole or in part, any or all of the
provisions of the Plan; provided, however, that no amendment may be made that
would impair the rights of a Member with respect to amounts already allocated
to his Account. The Directors may terminate the Plan at any time. In the
event that the Plan is terminated, the balance in a Member's Account shall be
paid to such Member or his designated beneficiary in the manner specified by
the Plan Administrator, which may include one lump sum payment in full
satisfaction of all of such Member's or beneficiary's benefits hereunder.
12.5 SEVERABILITY. If any provision of this Plan shall be held
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining provisions hereof; instead, each provision shall be fully
severable and the Plan shall be construed and enforced as if said illegal or
invalid provision had never been included herein.
12.6 GOVERNING LAWS. ALL PROVISIONS OF THE PLAN SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF TEXAS EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL
LAW.
XII-1
24
EXECUTED this ______ day of ____________________, 1995.
KINETIC CONCEPTS, INC.
By: ____________________________________
Name: _____________________________
Title: _____________________________
(iii)
25
KINETIC CONCEPTS, INC.
DEFERRED COMPENSATION PLAN TRUST AGREEMENT
26
TABLE OF CONTENTS
ARTICLE I : GENERAL TRUST PROVISIONS . . . . . . . . . . . . . . . . . . . . . . I-1
ARTICLE II : GENERAL DUTIES OF THE PARTIES . . . . . . . . . . . . . . . . . . . II-1
ARTICLE III : INVESTMENT, ADMINISTRATION AND
DISBURSEMENT OF TRUST FUND . . . . . . . . . . . . . . . . . . . . III-1
ARTICLE IV : SETTLEMENT OF ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . IV-1
ARTICLE V : TAXES, EXPENSES AND COMPENSATION
OF TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1
ARTICLE VI : FOR PROTECTION OF TRUSTEE . . . . . . . . . . . . . . . . . . . . . VI-1
ARTICLE VII : INDEMNITY OF TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . VII-1
ARTICLE VIII : RESIGNATION AND REMOVAL OF TRUSTEE . . . . . . . . . . . . . . . . . VIII-1
ARTICLE IX : DURATION AND TERMINATION OF
TRUST AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . IX-1
ARTICLE X : CLAIMS OF COMPANY'S CREDITORS . . . . . . . . . . . . . . . . . . . X-1
ARTICLE XI : ADOPTING ENTITIES . . . . . . . . . . . . . . . . . . . . . . . . . . XI-1
ARTICLE XII : MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . XII-1
(i)
27
KINETIC CONCEPTS, INC.
DEFERRED COMPENSATION PLAN TRUST AGREEMENT
THIS AGREEMENT AND DECLARATION OF TRUST, made this 1st day of
October, 1995, by and between KINETIC CONCEPTS, INC. and FROST
NATIONAL BANK (hereinafter referred to as the "TRUSTEE").
WHEREAS, KINETIC CONCEPTS, INC. has established the KINETIC CONCEPTS,
INC. DEFERRED COMPENSATION PLAN (hereinafter referred to as the "PLAN") for the
benefit of certain individuals who are eligible for benefits under the terms of
the Plan (such individuals being referred to herein as the "MEMBERS"), which
Plan provides for the payment of certain deferred compensation benefits (the
"BENEFITS") to the Members and the beneficiaries of the respective Members who
may become entitled to any payments under the terms of the Plan in the event of
the Member's death ("BENEFICIARIES"); and
WHEREAS, other adopting entities may adopt the Plan (such other
adopting entities, if any, along with KINETIC CONCEPTS, INC. hereinafter
referred to as the "COMPANY," jointly and severally); and
WHEREAS, the Plan contemplates that the Company will pay the entire
cost of the Benefits from its general assets; and
WHEREAS, KINETIC CONCEPTS, INC. desires to establish the KINETIC
CONCEPTS, INC. DEFERRED COMPENSATION PLAN TRUST AGREEMENT (the "TRUST") to aid
the Company in meeting the obligations under the Plan; and
WHEREAS, the Trust is intended to be a "grantor trust" with the corpus
and income of the Trust treated as assets and income of the Company for federal
income tax purposes; and
WHEREAS, the Company intends that the assets of the Trust shall at all
times be subject to the claims of general creditors of the Company as provided
in Article X; and
WHEREAS, the Company intends that the existence of the Trust shall not
alter the characterization of the Plan as "unfunded" for purposes of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
shall not be construed to provide income to any Member prior to actual payment
of Benefits under the Plan; and
WHEREAS, under the Trust, the Trustee covenants that it will hold all
property which it may receive hereunder, IN TRUST, for the uses and purposes
and upon the terms and conditions hereinafter stated;
NOW, THEREFORE, the parties hereto adopt this Trust Agreement,
effective October 1, 1995, and agree, as follows:
(ii)
28
ARTICLE I
GENERAL TRUST PROVISIONS
1.1 ESTABLISHMENT OF TRUST. Kinetic Concepts, Inc. hereby adopts
the Trust Agreement, establishing the Trust with the Trustee, consisting of
such sums of money and other property acceptable to the Trustee as from time to
time shall be paid or delivered to the Trustee by the Company. All such money
and other property, all investments and reinvestments made therewith or
proceeds thereof and all earnings and profits thereon, less all payments and
charges as authorized herein, shall constitute the "TRUST FUND." The Trust
Fund shall at all times be subject to the claims of general creditors of the
Company as provided in Article X. No Member or Beneficiary shall have any
preferred claim to, or any beneficial ownership interest in, any assets of the
Trust Fund prior to the time such assets are paid to such Member or Beneficiary
as Benefits.
1.2 SEPARATE SUB-TRUSTS. Contrary provisions of the Trust
notwithstanding, except as provided in Article XI, the provisions of the Trust
shall apply separately and equally to Kinetic Concepts, Inc. and to each
adopting entity that has entered into this Trust Agreement pursuant to Article
XI. Each Company shall bear the cost of providing Benefits for its own Members
and their Beneficiaries, and the portion of the Trust Fund attributable to the
contributions of each Company shall be available to provide benefits only to
such Company's Members and their Beneficiaries.
1.3 TRUST IRREVOCABLE. The Trust shall be irrevocable and shall
be held for the exclusive purpose of providing benefits under the Plan to
Members and their Beneficiaries and defraying expenses of the Trust in
accordance with the provisions of this Trust Agreement. Except as provided in
Sections 3.6(c) and 3.6(d) and Articles IX and X hereof, no part of the income
or corpus of the Trust Fund shall be recoverable by or for the Company.
1.4 NON-ALIENATION. No right or interest to receive benefits from
the Trust may be assigned, sold, anticipated, alienated or otherwise
transferred by any Member or Beneficiary.
1.5 ACCEPTANCE BY TRUSTEE. The Trustee accepts the Trust
established under this Trust Agreement on the terms and subject to the
provisions set forth herein, and it agrees to discharge and perform fully and
faithfully all of the duties and obligations imposed upon it under this Trust
Agreement.
I-1
29
ARTICLE II
GENERAL DUTIES OF THE PARTIES
2.1 GENERAL DUTIES OF THE COMPANY AND THE TRUSTEE.
(a) The Company has provided or will provide the Trustee
with a copy of the Plan and shall provide the Trustee with a copy of any
amendment to the Plan promptly upon its adoption. The Plan, as of the date of
execution of this Trust Agreement, is hereby incorporated by reference into and
shall form a part of this Trust Agreement as fully as if set forth herein
verbatim. Any amendment to the Plan shall also be incorporated by reference
into and form a part of this Trust Agreement, effective as of the effective
date of such amendment. Schedule A to this Trust Agreement sets forth the name
and mailing address of each Member entitled to receive Benefits, the
Beneficiaries, if any, designated by each Member, and each Member's aggregate
balance ("ACCOUNT BALANCE") in the accounts maintained under the Plan on his or
her behalf. Such Schedule (as amended from time to time as provided herein) is
hereinafter referred to as the "BENEFIT SCHEDULE." The Company shall be
responsible for notifying the Trustee of any changes in the information set
forth on the Benefit Schedule, including, but not limited to, the addition of
new Members and a change in the mailing address of a Member.
(b) Subject to the provisions of Section 2.1(c), the
Trustee shall be charged with keeping the Benefit Schedule accurate and
current, including but not limited to, preparing by March 31 of each year a
completely updated Benefit Schedule as of December 31 of the immediately
preceding year with such assistance from the Company and independent third
parties as may be necessary in order to permit distributions from the Trust
Fund to be made in accordance with the provisions of Section 3.6. The Company
shall keep accurate books and records with respect to the eligibility of
individuals to participate in the Plan and the Benefits payable under the Plan,
and shall provide such information to the Trustee and any independent third
party referred to in the immediately preceding sentence and shall also provide
access to such books and records at such time or times as the Trustee shall
reasonably request.
(c) If, at any time, the Company fails or refuses to give
the Trustee Member data or access to such books and records in accordance with
Section 2.1(b), the Trustee shall deliver a written request to the Company to
provide access to books and records of the Company and to provide such data as
required in accordance with Section 2.1(b) for the Trustee to keep the Benefit
Schedule accurate and current. If the Company fails or refuses to comply with
the Trustee's written request pursuant to the preceding sentence prior to the
expiration of thirty days from the date of delivery thereof by the Trustee, the
Trustee shall, after ten days written notice to the Company, immediately pay to
each Member an amount equal to such Member's Account Balance as set forth on
the most recent Benefit Schedule, reduced by any taxes to be withheld pursuant
to Section 3.6. Such payment shall be made in accordance with the provisions
of Section 3.6. For this purpose, the Company shall be deemed to have complied
with the Trustee's written request if, in the Trustee's judgment, it shall have
substantially complied at the end of the thirty-day period and is endeavoring
in good faith to complete compliance without delay.
II-1
30
(d) The Trustee shall notify each Member and Beneficiary
of a then deceased Member in writing of any changes in the Benefit Schedule
with respect to such Member or Beneficiary and shall notify all Members and
such Beneficiaries of any failure of the Company to provide information
required in this Section 2.1.
(e) It is intended that Benefits payable to Members shall
be determined under the provisions of the Plan and shall be calculated under
the provisions of the Plan as of the date of payment. Payment of Benefits
shall be based upon the amounts set forth on the Benefit Schedule only under
the circumstances set forth in Section 2.1(c). If the actual Benefits payable
to a Member under the provisions of the Plan exceeds the amount set forth on
the Benefit Schedule which is paid pursuant to Section 2.1(c), the Company
shall be liable for payment of the remaining portion of such Benefits.
2.2 ADDITIONAL GENERAL DUTIES OF TRUSTEE. The Trustee shall
manage, invest and reinvest the Trust Fund as the Trustee may determine in the
exercise of its fiduciary duties hereunder, consistent with the provisions of
Article III. The Trustee shall collect the income on the Trust Fund, and make
distributions therefrom, all as hereinafter provided.
II-2
31
ARTICLE III
INVESTMENT, ADMINISTRATION AND DISBURSEMENT OF TRUST FUND
3.1 INVESTMENT OF TRUST FUND. The following provisions shall
apply with respect to investment of the Trust Fund:
(a) At any time prior to the occurrence of a Change in
Control (as such term is defined in Section 12.3), the Trustee shall
invest and reinvest the assets of the Trust Fund in accordance with
the written directions received from time to time by the Trustee from
the administrator established pursuant to the Plan (the "PLAN
ADMINISTRATOR").
(b) To the extent that the Trustee is directed by the
Plan Administrator to invest all or part of the Trust Fund in
insurance contracts, the type and amount thereof shall be specified by
the Plan Administrator. The Trustee shall be under no duty to make
inquiry as to the propriety of the type or amount of insurance
contract so specified. Each insurance contract issued shall provide
that the Trustee shall be the owner thereof with the power to exercise
all rights, privileges, options and elections granted by or permitted
under such insurance contract or under the rules of the insurer. The
exercise by the Trustee of any incidents of ownership under any
insurance contract shall, prior to a Change in Control, be subject to
the direction of the Plan Administrator. The Trustee shall have no
power to name a beneficiary of the insurance contract other than the
Trust, to assign the insurance contract (as distinct from conversion
of the insurance contract to a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any
borrowing against such insurance contract. The Trustee may, however,
(i) loan to the Company the proceeds of any borrowing against an
insurance contract held in the Trust Fund or (ii) assign all, or any
portion, of an insurance contract to the Company if under other
provisions of this Trust Agreement the Company is entitled to receive
assets from the Trust Fund.
(c) From and after the occurrence of a Change in Control,
or if the Plan Administrator fails to provide the Trustee with such
written directions, the Trustee shall have, with respect to the Trust
Fund, power in its discretion to invest and reinvest such assets in
(a) common and preferred stocks, bonds, notes and debentures
(including convertible stocks and securities but not including any
stock, debt instruments, or other securities of the Company, the
Trustee or their affiliates) which are readily marketable and listed
on a United States national securities exchange or the NASDAQ national
market, (b) interest-bearing deposit accounts or certificates of
deposit maturing within one year after acquisition thereof, entered
into or issued by a United States national or state bank or trust
company having capital, surplus and undivided profits, at the holding
company level, of at least $75 million, (c) direct obligations of, and
obligations fully guaranteed by, the United States of America or any
agency of the United States of America which is backed by the full
faith and credit of the United States of America (so long as such
obligations shall mature within one year after acquisition thereof),
(d) any common, collective or commingled fund, including a fund
maintained by the Trustee,
III-1
32
established and maintained primarily for the purpose of investing and
reinvesting in assets of the type described in (a), (b) and (c) above,
and (e) insurance contracts issued by one or more insurance companies.
Further, notwithstanding the provisions of the preceding sentence,
after the occurrence of a Change in Control or in the event the Plan
Administrator fails to provide the Trustee with written directions
pursuant to the first sentence of this Section, the Trustee shall have
the power in its discretion to retain, maintain, continue, sell, or
take any other actions relative to any assets then held in the Trust
Fund.
3.2 VALUATION OF TRUST FUND. As soon as practicable after
December 31 of each year and as of such other dates as may be specified by the
Company or the Plan Administrator, the Trustee shall report to the Company and
the Plan Administrator the assets held in the Trust Fund as of such day and
shall determine and include in such report the fair market value as of such day
of each such asset. In determining such fair market values, the Trustee shall
use such market quotations and other information as are available to it and may
in its discretion be appropriate. The report of any such valuation shall not
constitute a representation by the Trustee that the amounts reported as fair
market values would actually be realized upon the liquidation of the Trust
Fund. The Trustee shall not be accountable to the Company or to any other
person on the basis of any such valuation, but its accountability shall be in
accordance with the provisions of Article IV hereof.
3.3 ADDITIONAL INVESTMENT POWERS OF TRUSTEE. Subject to the
provisions of Sections 3.1, 3.6 and 9.2 hereof, the Trustee shall have, with
respect to the Trust Fund, the power in its discretion:
(a) To retain any property at any time received by it;
(b) To sell, exchange, convey, transfer or dispose of,
and to grant options for the purchase or exchange with respect to, any
property at any time held by it; and
(c) To register and carry any securities or any other
property in the name of the Trustee, or in the name of the nominee of
the Trustee (or to hold any such property unregistered) without
increasing or decreasing the fiduciary liability of the Trustee, and
to exercise any option, right or privilege to convert any convertible
securities, including shares or fractional shares of the Trustee so
long as the conversion privilege is offered pro rata to all
shareholders.
3.4 ADMINISTRATIVE POWERS OF TRUSTEE. The Trustee shall have the
power in its discretion:
(a) To exercise all voting rights with respect to the
shares of stock held in the Trust Fund and to grant proxies,
discretionary or otherwise;
(b) To cause any shares of stock to be registered and
held in the name of one or more of its nominees, or one or more
nominees of any system for the central handling of securities, without
increase or decrease of liability;
III-2
33
(c) To collect and receive any and all money and other
property due to the Trust Fund and to give full discharge therefor;
(d) Subject to the provisions of Section 3.6 hereof: to
settle, compromise or submit to arbitration any claims, debts or
damages due or owing to or from the Trustee; to commence or defend
suits or legal proceedings to protect any interest of the Trust; and
to represent the Trust in all suits or legal proceedings in any court
or before any other body or tribunal;
(e) To organize under the laws of any state a corporation
or limited liability company for the purpose of acquiring and holding
title to any property which it is authorized to acquire under this
Trust Agreement and to exercise with respect thereto any or all of the
powers set forth in this Trust Agreement;
(f) To determine how all receipts and disbursements shall
be credited, charged or apportioned as between income and principal;
(g) To determine the amount and time of Benefit payments
in accordance with Section 3.6; and
(h) Generally to do all acts, whether or not expressly
authorized, which the Trustee may deem necessary or desirable for the
protection of the Trust Fund.
3.5 DEALINGS WITH TRUSTEE. Persons dealing with the Trustee shall
be under no obligation to see to the proper application of any money paid or
property delivered to the Trustee or to inquire into the Trustee's authority as
to any transaction.
3.6 DISTRIBUTIONS FROM TRUST FUND.
(a) Except as set forth in Section 3.6(c), Section
3.6(d), Section 9.2 and Article X hereof, distributions from the Trust Fund
shall be made by the Trustee to the Members and Beneficiaries at the times and
in the amounts set forth in the Plan and, to the maximum extent permitted by
applicable law, the Trustee shall be fully protected in so doing. Any amounts
so paid shall be reduced by the amount of any federal, state, or local income
or other taxes that may be required by law to be withheld or paid by the
Trustee and the Trustee shall pay such amounts to the appropriate governmental
authorities; provided, however, that the Company, the Plan Administrator, the
Members, and the Beneficiaries shall provide the Trustee with all of the
information necessary for the Trustee to determine the amount of such taxes
required to be withheld or paid by the Trustee and the Trustee shall be fully
protected in relying upon such information. Notwithstanding any provision of
this Trust Agreement to the contrary, the Company shall be obligated to pay the
Benefits. To the extent that the Trust Fund is not sufficient to pay any
Benefit when due, the Company shall pay such Benefit directly. In the event
Benefits are due to more than one Member or Beneficiary on the same date and
the Trust Fund is not sufficient to pay all such Benefits, the Trust Fund shall
be applied pro rata among such Members and Beneficiaries on the basis of the
Benefits due to be paid such individuals on
III-3
34
such date. Nothing in this Trust Agreement shall relieve the Company of its
liabilities to pay Benefits except to the extent such liabilities are met by
application of Trust Fund assets.
(b) Prior to the occurrence of a Change in Control, the
Plan Administrator shall direct the Trustee in writing as to the time and
amount of Benefits to be distributed to the Members and Beneficiaries. From
and after the occurrence of a Change in Control, a Member or Beneficiary who
believes that he or she is entitled to Benefits may apply in writing directly
to the Trustee for payment of such Benefits. Such application shall advise the
Trustee of the circumstances which entitle such Member or Beneficiary to
payment of such Benefits. The Trustee shall, in such case, reach its own
independent determination as to the Member's or Beneficiary's entitlement to
Benefits, even though the Trustee may be informed from another source
(including the Company or the Plan Administrator) that payments are not due
under the Plan. If the Trustee so desires, it may, in its sole discretion,
make such additional inquiries and/or take such additional measures as it deems
necessary in order to enable it to determine whether Benefits are due and
payable, including, but not limited to, interviewing appropriate persons,
requesting affidavits, soliciting oral or written testimony under oath, or
holding a hearing or other proceeding. After the occurrence of a Change in
Control, the Trustee shall determine whether Benefits are payable as promptly
as possible.
(c) At any time and from time to time, the Plan
Administrator may direct the Trustee in writing to distribute to the Company
cash held by the Trustee as part of the Trust Fund in an amount equal to the
Benefits accrued under the Plan that have been forfeited under the terms of the
Plan. As soon as practicable after receipt of such a direction and, if such
direction is received by the Trustee after the occurrence of a Change in
Control, the Trustee's independent determination that such benefits have, in
fact, been forfeited in accordance with the terms of the Plan, the Trustee
shall distribute such amount to the Company.
(d) At any time and from time to time prior to the
occurrence of a Change in Control, the Company may apply in writing to the
Trustee for a distribution by the Trustee to the Company of assets held by the
Trustee as part of the Trust Fund ("TRUST ASSETS") in an amount (the "REFUND
AMOUNT") equal to or less than the difference, if any, between (i) the Net Fair
Market Value of the Trust Assets (as such term is hereinafter defined) as of
the last day of the month coincident with or immediately preceding the date of
such application, and (ii) the aggregate Account Balances for all Members and
Beneficiaries as of such date. Such application shall advise the Trustee of
the manner in which the Refund Amount was calculated. Upon the receipt of such
an application from the Company, the Trustee shall reach its own independent
determination as to the Company's entitlement to the Refund Amount, even though
the Trustee may be informed from another source (including a Member) that the
Company is not entitled to the Refund Amount. If the Trustee so desires, it
may, in its sole discretion, make such additional inquiries and/or take such
additional measures as it deems necessary in order to enable it to determine
whether the Company is entitled to the Refund Amount, including, but not
limited to, interviewing appropriate persons, requesting affidavits, soliciting
oral or written testimony under oath, or engaging such independent third
parties as the Trustee may deem necessary to assist in making such
determination. The Trustee shall determine whether the Company is entitled to
all or any portion of the Refund Amount as promptly as possible. If the
Trustee determines that the Company is entitled to all or any portion of the
Refund Amount,
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then the Trustee shall distribute such amount to the Company in cash or in kind
as determined by the Trustee in its sole discretion. As used herein, the term
"NET FAIR MARKET VALUE OF THE TRUST ASSETS" shall mean the fair market value of
the Trust Assets, as determined by the Trustee in its sole discretion, reduced
by all liabilities of the Trust, whether or not such liabilities are secured by
any or all of the Trust Assets, other than liabilities to Members or
Beneficiaries under the Plan. In determining such fair market value, the
Trustee shall use such market quotations and other information as are available
to it and may in its discretion be appropriate; provided, however, that the
fair market value of any life insurance contract which constitutes a portion of
the Trust Assets shall be its net cash surrender value. The determination of
the Net Fair Market Value of the Trust Assets by the Trustee shall not
constitute a representation by the Trustee that the amounts reported as fair
market values would actually be realized upon the liquidation of the Trust
Assets. The Trustee shall not be accountable to the Company or to any other
person, including the Members or Beneficiaries, on the basis of any such
valuation except as otherwise provided in this Trust Agreement.
(e) The Trustee may engage its own counsel or other
experts to assist it in making its determination under Section 3.6(a), (b), (c)
or (d) hereof. The cost of such counsel or other expert assistance, and any
other costs reasonably incurred by the Trustee in making such determination,
shall be borne by the Company. If the Company fails to pay any such costs when
due, the Trustee may use the assets of the Trust Fund to pay them as provided
in Section 5.2.
(f) The Trustee shall not itself commence any legal
action, whether in the nature of an interpleader action, request for
declaratory judgment or otherwise, requesting a court to make a determination
under Section 3.6(a), (b), (c) or (d) hereof in the Trustee's stead without
first using its best efforts to make such determination.
(g) Notwithstanding any other provision of this Trust
Agreement, if any amounts held in the Trust are found in a "determination"
(within the meaning of Section 1313(a) of the Internal Revenue Code of 1986) to
have been includible in gross income of a Member or Beneficiary prior to
payment of such amounts from the Trust, the Trustee shall, as soon as
practicable, pay such amounts to such Member or Beneficiary, as applicable,
(but not in excess of such Member's or Beneficiary's Account Balance at the
time of such payment). For purposes of this Section 3.6, the Trustee shall be
entitled to rely on an affidavit by a Member or Beneficiary, as applicable, and
a copy of the determination to the effect that a determination described in the
preceding sentence has occurred.
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ARTICLE IV
SETTLEMENT OF ACCOUNTS
The Trustee shall keep full accounts of all of its receipts and
disbursements. Its books and records with respect to the Trust Fund shall be
open to inspection by the Company, any Member or any Beneficiary of a deceased
Member or their representatives at all times during business hours of the
Trustee. Within sixty days after December 31 of each year, or any termination
of the duties of the Trustee, the Trustee shall prepare, sign and mail to the
Company and the Plan Administrator an account of its acts and transactions as
Trustee hereunder. If, within sixty days after the mailing of the account or
any amended account, the Company and the Plan Administrator have not filed with
the Trustee notice of any objection to any act or transaction of the Trustee,
the account or amended account shall become an account stated. If any
objection has been filed, and if the objecting party is satisfied that it
should be withdrawn or if the account is adjusted to the objecting party's
satisfaction, the objecting party shall in writing filed with the Trustee
signify its approval of the account and it shall become an account stated.
When an account becomes an account stated, such account shall be finally
settled, and the Trustee shall be completely discharged and released, as if
such account had been settled and allowed by a judgment or decree of a court of
competent jurisdiction in an action or proceeding in which the Trustee, the
Company and the Plan Administrator were parties. The Trustee, the Company or
the Plan Administrator shall have the right to apply at any time to a court of
competent jurisdiction for judicial settlement of any account of the Trustee
not previously settled as hereinabove provided. In any such action or
proceeding it shall be necessary to join as parties the Trustee, the Company
and the Plan Administrator and any judgment or decree entered therein shall be
conclusive upon all such parties.
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ARTICLE V
TAXES, EXPENSES AND COMPENSATION OF TRUSTEE
5.1 TAXES. The Company agrees that all income, deductions and
credits of the Trust Fund belong to it as owner for income tax purposes and
will be included on the Company's income tax returns. The Company shall from
time to time pay taxes (references in this Trust Agreement to the payment of
taxes shall include interest and applicable penalties) of any and all kinds
whatsoever which at any time are lawfully levied or assessed upon or become
payable in respect of the Trust Fund, the income or any property forming a part
thereof, or any security transaction pertaining thereto. To the extent that
any taxes levied or assessed upon the Trust Fund are not paid by the Company or
contested by the Company pursuant to the last sentence of this Section 5.1, the
Trustee shall pay such taxes out of the Trust Fund and the Company shall upon
demand by the Trustee deposit into the Trust Fund an amount equal to the amount
paid from the Trust Fund to satisfy such tax liability. If requested by the
Company, the Trustee shall, at Company expense, contest the validity of such
taxes in any manner deemed appropriate by the Company or its counsel, but only
if it has received an indemnity bond or other security satisfactory to it to
pay any expenses of such contest. Alternatively, the Company may itself
contest the validity of any such taxes, but any such contest shall not affect
the Company's obligation to reimburse the Trust Fund for taxes paid from the
Trust Fund.
5.2 EXPENSES AND COMPENSATION. The Trustee shall be paid
compensation by the Company as the Company and the Trustee may from time to
time agree. The Trustee shall be reimbursed by the Company for its reasonable
expenses of management and administration of the Trust, including reasonable
compensation of counsel and any agent engaged by the Trustee to assist it in
such management and administration. In the event that the Company shall fail
or refuse to make such reimbursement upon demand, the Trustee may satisfy such
obligations out of the assets of the Trust Fund; in that event, the Company
shall immediately upon demand by the Trustee deposit into the Trust Fund a sum
equal to the amount paid by the Trust Fund for such fees and expenses.
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ARTICLE VI
FOR PROTECTION OF TRUSTEE
6.1 COMMUNICATIONS WITH THE COMPANY, THE PLAN ADMINISTRATOR AND
THE MEMBERS.
(a) The Company shall certify to the Trustee the name or
names of any person or persons authorized to act for the Company and for the
Plan Administrator. Such certification shall be signed by the President or a
Vice President and the Secretary or an Assistant Secretary of the Company.
Until the Company notifies the Trustee, in a similarly signed notice, that any
such person is no longer authorized to act for the Company or for the Plan
Administrator, as applicable, the Trustee may continue to rely upon the
authority of such person.
(b) The Trustee may rely upon any certificate, notice or
direction of the Company or the Plan Administrator which the Trustee reasonably
believes to have been signed by a duly authorized officer or agent of the
Company or the Plan Administrator, as applicable.
(c) Communications to the Trustee shall be sent in
writing to its principal address, Attention: Legal Department, or to such
other address as the Trustee may specify. No communication shall be binding
upon the Trust Fund or the Trustee until it is received by the Trustee and
unless it is in writing and signed by an authorized person.
(d) Communications to the Company shall be sent in
writing to the Company at 8023 Vantage Dr., San Antonio, Texas 78230,
Attention: General Counsel, or to such other address as the Company may
specify in writing to the Trustee. Communications to the Plan Administrator
shall be sent in writing to the Company's address, Attention: Deferred
Compensation Plan Administrator. Communications to a Member or Beneficiary
shall be sent in writing to the address of such person as stated on the Benefit
Schedule, or to such other address as such person may specify in writing to the
Trustee. No communication shall be binding upon the Company, the Plan
Administrator, or a Member or Beneficiary until it is received by such person.
6.2 ADVICE OF COUNSEL. The Trustee may consult with any legal
counsel with respect to the construction of this Trust Agreement, its duties
hereunder or any act which it proposes to take or omit, and shall not be liable
for any action taken or omitted in good faith pursuant to such advice.
Expenses of such counsel shall be deemed to be expenses of management and
administration of the Trust within the meaning of Section 5.2 hereof.
6.3 FIDUCIARY RESPONSIBILITY.
(a) The Trustee shall discharge its duties under this
Trust Agreement in effectuating the Plan in a manner consistent with the
objectives of this Trust Agreement and the Plan. The Trustee shall not be
liable for any loss sustained by the Trust Fund by reason of the purchase,
retention, sale or exchange of any investment in good faith and in accordance
with the
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provisions of this Trust Agreement. The Trustee shall have no responsibility
or liability for any failure of the Company to make contributions to the Trust
Fund or for any insufficiency of assets in the Trust Fund to pay Benefits when
due. The Trustee shall not be liable hereunder for any act taken or omitted to
be taken in good faith, except for its own negligence or misconduct.
(b) The Trustee's duties and obligations shall be limited
to those expressly imposed upon it by this Trust Agreement.
(c) The Company at any time may employ as agent (to
perform any act, keep any records or accounts, or make any computations
required of the Company or the Plan Administrator by this Trust Agreement or
the Plan) the individual, corporation or association serving as Trustee
hereunder. Nothing done by said individual, corporation or association as such
agent shall affect its responsibilities or liability as Trustee hereunder.
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ARTICLE VII
INDEMNITY OF TRUSTEE
The Company hereby indemnifies and holds the Trustee harmless from and
against any and all losses, damages, costs, expenses or liabilities (herein,
"LIABILITIES"), including reasonable attorneys' fees and other costs of
litigation, to which the Trustee may become subject pursuant to, arising out
of, occasioned by, incurred in connection with or in any way associated with
this Trust Agreement, except for any act or omission constituting negligence or
misconduct of the Trustee. If one or more Liabilities shall arise, or if the
Company fails to indemnify the Trustee as provided herein, or both, then the
Trustee may engage counsel of the Trustee's choice, but at the Company's
expense, either to conduct the defense against such Liabilities or to conduct
such actions as may be necessary to obtain the indemnity provided for herein,
or to take both such actions. The Trustee shall notify the Company within
fifteen days after the Trustee has so engaged counsel of the name and address
of such counsel. If the Trustee shall be entitled to indemnification by the
Company pursuant to this Article VII and the Company shall not provide such
indemnification upon demand, the Trustee may apply assets of the Trust Fund in
full satisfaction of the obligations for indemnity by the Company, and any
legal proceeding by the Trustee against the Company for such indemnification
shall be on behalf of the Trust.
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ARTICLE VIII
RESIGNATION AND REMOVAL OF TRUSTEE
8.1 RESIGNATION OF TRUSTEE. The Trustee may resign upon sixty
days' prior written notice to the Board of Directors of Kinetic Concepts, Inc.
(the "DIRECTORS"), the Plan Administrator, each Member and each Beneficiary of
a deceased Member, except that any such resignation shall not be effective
until the Directors have appointed in writing a successor trustee, which must
be a bank, trust company, or an individual, and such successor has accepted the
appointment in writing; provided, however, that if such appointment is to
become effective at any time after the occurrence of a Change in Control, then
the consent of a majority of the Members to the appointment of such successor
trustee must be obtained. For all purposes of this Trust Agreement where the
consent of a majority of the Members is required, the determination of majority
consent shall be based upon receiving the consent of any combination of Members
whose sum of Account Balances as of the time of determination is greater than
fifty percent of the sum of Account Balances for all Members at such time,
rather than upon receiving the consent of a majority of the number of Members.
For purposes of this determination, Beneficiaries of deceased Members shall be
considered Members. The Directors shall make a good faith effort, following
receipt of notice of resignation from the Trustee, to find and appoint a
successor Trustee who will adhere to the obligations imposed on such successor
under the terms of this Trust Agreement, and in particular, but without
limitation, the obligation to exercise judgment independent of the Company in
the circumstances described in Section 3.6 hereof. The appointment of a
successor trustee shall also be conditioned upon obtaining from such successor
a written statement that the successor has read the Trust Agreement and
understands its obligations thereunder. If the consent of a majority of the
Members is required for the appointment of a successor Trustee, then the
Trustee shall be responsible for securing such Member consents in a timely
fashion and, unless ordered by a court of competent jurisdiction, shall not
reveal to the Directors, the Plan Administrator or any other person any
information concerning such consents, except whether the required majority has
been achieved. Any notice sent to Members by the Trustee canvassing the
Members as to their consent to a successor trustee, shall include the name and
address of the proposed successor trustee. Any consent of a Member required
under this Section 8.1 shall be deemed given if no written objection is
received by the Trustee from such Member within fourteen days after request for
such consent is sent postpaid by United States registered or certified mail
with return receipt requested to such Member.
8.2 REMOVAL OF TRUSTEE. The Directors may remove the Trustee upon
sixty days' prior written notice to the Trustee, the Plan Administrator, each
Member and each Beneficiary of a deceased Member, except that any such removal
shall not be effective until the close of such notice period and (a) delivery
by the Directors to the Trustee of an instrument in writing appointing a
successor trustee meeting the requirements of Section 8.1, and (b) an
acceptance of such appointment in writing executed by such successor.
Notwithstanding the provisions of the preceding sentence, if such appointment
of a successor trustee is to become effective at any time after the occurrence
of a Change in Control, then the removal of the Trustee and the appointment of
a successor trustee shall not be effective until the Trustee has received the
VIII-1
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consent of a majority of the Members (as determined in accordance with the
provisions of Section 8.1 hereof) to such removal and such appointment. Upon
the receipt by the Trustee of a written notice of removal, the Trustee shall be
responsible for securing the Member consents (if such consents are required
pursuant to the preceding provisions of this Section 8.2) in a timely fashion
and, unless ordered by a court of competent jurisdiction, shall not reveal to
the Directors, the Plan Administrator or any other person any information
concerning such consents, except whether the required majority has been
achieved. Any notice sent to Members by the Trustee canvassing the Members as
to their consent to removal of the Trustee and the appointment of a proposed
successor trustee, shall include the name and address of the proposed successor
trustee. Any consent of a Member required under this Section 8.2 shall be
deemed given if no written objection is received by the Trustee from such
Member within fourteen days after request for such consent is sent postpaid by
United States registered or certified mail with return receipt requested to
such Member.
8.3 SUCCESSOR TRUSTEE. All of the provisions set forth herein
with respect to the Trustee shall relate to each successor with the same force
and effect as if such successor had been originally named as the Trustee
hereunder.
8.4 TRANSFER OF TRUST FUND TO SUCCESSOR. Upon the resignation or
removal of the Trustee and appointment of a successor, the Trustee shall
transfer and deliver the Trust Fund to such successor. Following the effective
date of the appointment of the successor, the Trustee's responsibility
hereunder shall be limited to managing the assets in its possession and
transferring such assets to the successor, and settling its final account.
Neither the Trustee nor the successor shall be liable for the acts of the
other.
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ARTICLE IX
DURATION AND TERMINATION OF TRUST AND AMENDMENT
9.1 DURATION AND TERMINATION. The Trust is hereby declared to be
irrevocable and shall continue until (a) all payments required by Section 3.6
have been made or (b) until the Trust Fund contains no assets and retains no
claims to recover assets from the Company or any other person or entity,
whichever shall first occur. Notwithstanding the preceding provisions of this
Section 9.1, unless earlier terminated, the Trust shall terminate twenty-one
(21) years after the death of the last to die of all of the Members and their
issue living on the date of execution of this Trust Agreement; provided,
however, that if at that time the Trust may be continued in force without
violating the rule against perpetuities or any other law of the State of Texas,
then the Trust shall remain in effect until otherwise terminated as provided
hereunder.
9.2 DISTRIBUTION UPON TERMINATION. If this Trust terminates under
the provisions of Section 9.1, the Trustee shall liquidate the Trust Fund and,
after its final account has been settled as provided in Article IV, shall
distribute to the Company the net balance of any assets of the Trust remaining
after all expenses have been paid and all Benefits, whether or not due and
payable under the terms of the Plan on the date of such termination, have been
paid to the Members and Beneficiaries. Upon making such distribution, the
Trustee shall be relieved from all further liability. The powers of the
Trustee hereunder shall continue so long as any assets of the Trust Fund remain
in its hands.
9.3 AMENDMENT. The Directors may from time to time amend, in
whole or in part, any or all of the provisions of this Trust Agreement;
provided, however, that (a) no amendment will be made to this Trust Agreement
or the Plan which will cause this Trust Agreement, the Plan or the assets of
the Trust Fund to be governed by or subject to Part 2, 3 or 4 of Title I of
ERISA, (b) no such amendment shall adversely affect any Benefits to the date of
such amendment in respect of any Member or Beneficiary or the amount of assets
of the Trust Fund available to pay such Benefits, (c) no such amendment shall
purport to alter the irrevocable character of the Trust established under this
Trust Agreement, (d) no such amendment shall increase the duties or
responsibilities of the Trustee unless the Trustee consents thereto in writing,
and (e) after the occurrence of a Change in Control, no amendment will be made
to this Trust Agreement without the consent of a majority of the Members (as
determined pursuant to the provisions of Section 8.1 hereof). Upon receipt of
a request from the Directors for an amendment which requires the consent of a
majority of the Members, the Trustee shall be responsible for securing Member
consents in a timely fashion, and unless ordered by a court of competent
jurisdiction, shall not reveal to the Directors, the Plan Administrator or any
other person any information concerning such consents, except whether the
required majority has been achieved. Any consent of a Member required under
this Section 9.3 shall be deemed given if no written objection is received by
the Trustee from such Member within fourteen days after request for such
consent is sent postpaid by United States registered or certified mail with
return receipt requested to such Member. This Trust Agreement may be amended,
to the extent permitted in this Section 9.3, by an instrument in writing
executed on behalf of Kinetic
IX-1
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Concepts, Inc. by its authorized representatives, consents to which instrument
have been obtained from the required majority of Members if such consents are
required.
IX-2
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ARTICLE X
CLAIMS OF COMPANY'S CREDITORS
10.1 INSOLVENCY OF COMPANY. As used in this Article X, the Company
shall be deemed to be "INSOLVENT" if (a) the Company is unable to pay its debts
as they come due, or (b) the Company is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code (or any successor federal
statute). In the event that the Company shall be deemed Insolvent, the assets
of the Trust Fund shall be held for the benefit of the general creditors of the
Company (hereinafter referred to as "BANKRUPTCY CREDITORS").
10.2 TRUSTEE'S RESPONSIBILITIES IF COMPANY MAY BE INSOLVENT.
(a) If at any time the Company or a person claiming to be
a creditor of the Company alleges in writing to the Trustee that the Company
has become Insolvent, the Trustee shall within thirty days independently
determine whether the Company is Insolvent and, pending such determination, the
Trustee shall discontinue any payment of Benefits under the Plan and this Trust
Agreement and shall hold the Trust Fund for the benefit of Bankruptcy
Creditors. The Trustee shall resume payments of Benefits under the Plan and
this Trust Agreement in accordance with Section 3.6 hereof only after the
Trustee has determined that the Company is not Insolvent (or is no longer
Insolvent, if the Trustee initially determined the Company to be Insolvent) or
upon receipt of an order of a court of competent jurisdiction requiring such
payments. The Company, by its chief executive officer and its Board of
Directors, shall further be obligated to give the Trustee prompt notice in
writing in the event that the Company becomes Insolvent, with the same
consequences as provided in the preceding two sentences. In determining
whether the Company is Insolvent, the Trustee may rely conclusively upon, and
shall be protected in relying upon, court records showing that the Company is
Insolvent, or a current report or statement from a nationally recognized credit
reporting agency showing that the Company is Insolvent. For purposes of this
Trust Agreement, knowledge and information concerning the Company which is not
in the possession of the Trustee, or its employees, shall not be imputed to the
Trustee. The Trustee shall have no duty or obligation to ascertain whether the
Company is Insolvent unless and until it receives a writing that the Company is
Insolvent as described in the first or third sentence of this Section 10.2(a).
(b) If the Trustee determines that the Company is
Insolvent, the Trustee shall hold the assets of the Trust Fund for the benefit
of the Bankruptcy Creditors, and shall disburse the assets of the Trust Fund to
satisfy such claims as a court of competent jurisdiction shall direct.
(c) If the Trustee discontinues payment of Benefits
pursuant to Section 10.2(a) and subsequently resumes such payments, the first
payment to a Member or Beneficiary following such discontinuance shall include
an aggregate amount equal to the difference between the payments that would
have been made to such Member or Beneficiary, as applicable, under this Trust
Agreement but for this Section 10.2 and the aggregate payments actually made to
such Member or Beneficiary, as applicable, by the Company pursuant to the Plan
during any such
X-1
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period of discontinuance. In the event that upon resumption of payments
pursuant to the preceding sentence, the assets of the Trust Fund are
insufficient to pay Benefits in full, Benefit payments to the affected Members
and Beneficiaries shall be prorated so as to equitably apportion the assets of
the Trust Fund among all affected Members and Beneficiaries in proportion to
their Benefits.
10.3 TRUST RECOVERY OF PAYMENTS TO CREDITORS. In the event that at
any time an amount is paid from the Trust Fund to Bankruptcy Creditors of the
Company, the Trustee shall demand that the Company deposit into the Trust Fund
a sum equal to the amount paid by the Trust Fund to such Bankruptcy Creditors
and, if such payment is not made within ninety days of such demand, the Trustee
shall take such action as it deems prudent or advisable to recover payment.
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47
ARTICLE XI
ADOPTING ENTITIES
It is contemplated that other corporations, associations, partnerships
or proprietorships that have adopted the Plan may adopt this Trust Agreement
and thereby become the Company. Any such entity, whether or not presently
existing, may become a party hereto by appropriate action of its officers
without the need for approval of its board of directors or noncorporate
counterpart or of the Directors. The provisions of the Trust Agreement shall
apply separately and equally to each Company and its Members and their
Beneficiaries in the same manner as is expressly provided for Kinetic Concepts,
Inc. and its Members and their Beneficiaries, except that (a) the power to
appoint or otherwise affect the Trustee and the power to amend the Trust
Agreement shall be exercised by the Directors alone, and (b) the determination
of whether a Change in Control has occurred shall be based solely on Kinetic
Concepts, Inc.
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ARTICLE XII
MISCELLANEOUS
12.1 LAWS OF THE STATE OF TEXAS TO GOVERN. This Trust Agreement
and the Trust hereby created shall be construed and regulated by the laws of
the State of Texas.
12.2 TITLES AND HEADINGS NOT TO CONTROL. The titles to Articles
and headings of Sections in this Trust Agreement are placed herein for
convenience of reference only and, in case of any conflict, the text of this
Trust Agreement, rather than such titles or headings, shall control.
12.3 CHANGE IN CONTROL. As used in this Trust Agreement, the term
"CHANGE IN CONTROL" shall mean the occurrence of one or more of the following
events: (a) Kinetic Concepts, Inc. shall not be the surviving entity in any
merger, consolidation or other reorganization to which it is a party (or
survives only as a subsidiary of an entity other than a previously wholly-owned
subsidiary of Kinetic Concepts, Inc.); (b) Kinetic Concepts, Inc. sells, leases
or exchanges all or substantially all of its assets to any other person or
entity (other than a wholly-owned subsidiary of Kinetic Concepts, Inc.); (c)
Kinetic Concepts, Inc. is dissolved and liquidated or adopts a plan of
dissolution and liquidation; (d) any person or entity, including a "group" as
contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, acquires or gains ownership or control (including, without limitation,
power to vote) of more than 50% of the outstanding shares of Kinetic Concepts,
Inc.'s voting stock (based upon voting power); or (e) as a result of or in
connection with a contested election of directors, the persons who were
directors of Kinetic Concepts, Inc. before such election shall cease to
constitute a majority of the Directors. Kinetic Concepts, Inc., by its chief
executive officer and its Directors, shall be obligated to give the Trustee
prompt notice in writing of the occurrence of a Change in Control. In the
event the Trustee receives such a notice or if at any time a Member or a
Beneficiary of a deceased Member alleges in writing to the Trustee that a
Change in Control has occurred, the Trustee shall within thirty days
independently determine whether a Change in Control has occurred and, pending
such determination, the Trustee shall assume that a Change in Control has
occurred for all purposes of this Trust Agreement and the Plan. The Trustee
shall have no duty or obligation to ascertain whether a Change in Control has
occurred unless it receives a written notice as described in either of the
preceding two sentences. In determining whether a Change in Control has
occurred, the Trustee may, in its sole discretion, make such additional
inquiries and/or take such additional measures as it deems necessary,
including, but not limited to, interviewing appropriate persons, requesting
affidavits, soliciting oral or written testimony under oath, or engaging such
independent third parties as the Trustee may deem necessary to assist in making
such determination. Notwithstanding the foregoing, if at any time Kinetic
Concepts, Inc. notifies the Trustee in writing that the Trustee should
interpret this Trust Agreement and the Plan as if a Change in Control had
occurred, then for all purposes of this Trust Agreement and the Plan, the
Trustee shall so interpret this Trust Agreement and the Plan. Once the notice
described in the preceding sentence is received by the Trustee, it may not be
rescinded by Kinetic Concepts, Inc.
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12.4 SUCCESSORS AND ASSIGNS. This Trust Agreement may not be
assigned by either party without the prior written consent of the other, and
any purported assignment without such prior written consent shall be null and
void. This Trust Agreement shall be binding upon the successors and permitted
assigns of each party hereto.
12.5 CONTROLLING DOCUMENT. Should an inconsistency or conflict
exist between the specific terms of this Trust Agreement and those of the Plan,
then the relevant terms of this Trust Agreement shall govern and control.
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50
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be executed as of the day and year first above written.
KINETIC CONCEPTS, INC.
BY: /s/ LARRY BAKER
-------------------------------------
NAME: LARRY BAKER
-------------------------------------
TITLE: Vice President of Corporate Services
-------------------------------------
FROST NATIONAL BANK, TRUSTEE
BY: __________________________________
NAME: ___________________________
TITLE: ___________________________
(iii)