Document:

Exhibit 10.7

 

STATEMENT OF DESIGNATIONS, PREFERENCES AND RIGHTS

OF THE

SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK

OF

KINETIC CONCEPTS, INC.

 

 

(Pursuant to
Article 2.13 of the Texas Business Corporation Act)

 

 

Kinetic
Concepts, Inc. (the “Corporation”), a corporation organized and existing under
the laws of the State of Texas, does hereby certify that, pursuant to authority
conferred upon the Board of Directors of the Corporation by its Articles of
Incorporation, as amended, (hereinafter referred to as the “Articles of
Incorporation”) and pursuant to the provisions of Article 2.13 of the Texas
Business Corporation Act, said Board of Directors, duly approved and adopted
the following resolution (the “Resolution”) on August 9, 2003:

 

RESOLVED,
that pursuant to the authority vested in the Board of Directors by the Articles
of Incorporation, the Board of Directors hereby creates, authorizes and
provides for the issuance of a series of Preferred Stock of the Corporation,
designated as Series A Convertible Participating Preferred Stock of the
Corporation, par value $0.001 per share, having the designations, preferences,
relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof that are set forth in this
Resolution, as follows:

 

SECTION
1.  Designation and Amount. The
designation for the series of Preferred Stock authorized by this Resolution
shall be the Series A Convertible Participating Preferred Stock, par value
$0.001 per share (the “Series A Preferred”). The initial liquidation preference
of the Series A Preferred is $1,000.00 per share (the “Initial Liquidation
Preference”) and the original issue price for each such share is $1,000.00. The
Initial Liquidation Preference or the issue price per share of the Series A
Preferred Stock shall not for any purpose be considered to be a determination
by the Board of Directors with respect to the capital and surplus of the
Corporation.  The number of shares
constituting such Series A Preferred Stock shall be 264,000 shares.

 

SECTION 2. 
Rank.  The Series A
Preferred shall, with respect to the right to receive dividends and
distributions of assets and rights upon the Corporation’s liquidation,
dissolution or winding up, rank (x) senior to the Common Stock and each other
class or series of preferred stock of the Corporation hereafter created which
does not expressly rank senior to or pari passu with the Series A Preferred
Stock with respect to the right to receive dividends and distributions and
rights upon the Corporation’s liquidation, dissolution or winding up (together
with the Common Stock, the “Junior Capital Stock”), (y) pari passu with all
other series of Preferred Stock of the Corporation, created after the date
hereof, which expressly ranks on a parity with the Series A Preferred Stock
with respect to the right to receive dividends and distributions and rights
upon the Corporation’s liquidation, dissolution or winding up (the “Parity
Capital Stock”), and (y) junior to all other series of Preferred Stock of the
Corporation, created after the date hereof, which expressly ranks senior to the
Series A Preferred Stock with respect to the right to receive dividends and
distributions and rights upon the Corporation’s liquidation, dissolution or
winding up (the “Senior Capital Stock”).

 

SECTION
3.  Stated Value/Liquidation,
Dissolution or Winding Up

 

(a)       For
the purposes hereof, the “Stated Value” per share of Series A Preferred as of
any date, shall mean the Initial Liquidation Preference, together with accrued
Dividends through such date that have been added to the Stated Value through
accretion as provided in Section 4(a)

 

 

below; provided, that,
upon any conversion of shares of Series A Preferred in accordance with Section
7 hereof or a Sale of the Corporation on or prior to December 31, 2005, the
Stated Value shall mean the Initial Liquidation Preference, together with (i)
accrued Dividends through the date of such conversion or sale and (ii) the
Minimum Dividends that such shares of Series A Preferred would have been
entitled to on each Quarterly Dividend Payment Date had they not become subject
to conversion or sale and remained outstanding through December 31, 2005.

 

(b)       In
the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, the holders of shares of Series A Preferred then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, before any payment shall be
made to the holders of any shares of any Junior Capital Stock by reason of
their ownership thereof, an amount in cash equal to the greater of (i) the
amount the holders of Series A Preferred would have received had they converted
their shares of Series A Preferred into Common Stock, in accordance with the
provisions of Section 7 hereof, immediately prior to such liquidation,
dissolution or winding up or (ii) the Stated Value then in effect plus (A) if
such liquidation, dissolution or winding up occurs prior to the Final Quarterly
Dividend Payment Date, the increase in the Stated Value which would have
occurred on the Quarterly Dividend Payment Date next following such
liquidation, dissolution or winding up or (B) if such liquidation, dissolution
or winding up occurs after the Final Quarterly Dividend Payment Date, the
amount of any accumulated but unpaid Participating Dividends as of the date of
such event, pro rata to the date
of such dissolution, liquidation, or winding up.  If upon any such liquidation, dissolution or
winding up of the Corporation the remaining assets of the Corporation available
for distribution to its stockholders shall be insufficient to pay the holders
of shares of Series A Preferred the full amount to which they shall be entitled
pursuant to this Section 3(b), the holders of shares of Series A Preferred, and
any other shares of Parity Capital Stock, shall share ratably in any
distribution of the remaining assets and funds of the Corporation in proportion
to the respective amounts which would otherwise be payable in respect of the
shares of Series A Preferred held by them upon such distribution if all amounts
payable on or with respect to such shares were paid in full.  For the purposes of this Section 3(b) and
3(c), a Sale of the Corporation (as defined below) shall not be considered a
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation.

 

(c)       After
the payment of all amounts required to be paid pursuant to Section 3(b) to the
holders of shares of Series A Preferred, and any other shares of Parity Capital
Stock, upon the dissolution, liquidation or winding up of the Corporation, the
holders of shares of any capital stock of the Corporation other than the Series
A Preferred and Parity Capital Stock then outstanding shall share in any distribution
of the remaining assets and funds of the Corporation in the manner provided by
law, in the Articles of Incorporation of the Corporation, as amended, or as
provided in any pertinent Statement of Designations of the Corporation, as the
case may be.

 

(d)       Upon
the occurrence of, (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Corporation or, after a Holding Company Merger, Parent to any
Person (other than the Corporation or any Subsidiary of the Corporation) or
group of related Persons (other than the Corporation and its Subsidiaries) for
purposes of Section 13(d) of the Exchange Act (a “Group”), together with any
Affiliates thereof (whether or not otherwise in compliance of the terms of this
Resolution), (ii) any Person or Group (other than any of the Permitted
Holder(s) or any underwriters in connection with an offering of Common Stock
registered under the Securities Act) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 50% of
the aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Corporation or, after a Holding Company Merger, Parent, or
(iii) the first day on which a majority of the members of the Board of
Directors of the Corporation or, after a Holding Company Merger, Parent are not
Continuing Directors (each a “Sale of the Corporation”), the Series A Preferred
will be entitled to receive the greater of (x) the Stated Value of the Series A
Preferred at such time, plus (A)
if such Sale of the Corporation occurs prior to the Final Quarterly Dividend
Payment Date,

 

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the increase in the Stated
Value that would have occurred on the Quarterly Dividend Payment Date next
following such Sale of the Corporation, pro rated to the date of such Sale of
the Corporation, or (B) if such Sale of the Corporation occurs after the Final
Quarterly Dividend Payment Date, the amount of any accumulated but unpaid
Participating Dividends as of the date of such event, in cash or other
securities received in the transaction, which value, if the securities received
in the transaction are not then publicly traded, will be based on the advice of
a non-affiliated investment banking firm selected by the Corporation that is
reasonably acceptable to the holders of two-thirds of the shares of outstanding
Series A Preferred or (y) the cash or consideration that would have been received
in such transaction by the holder of shares of Common Stock equal to the number
of shares of Common Stock the Series A Preferred would have been convertible
into at such time; provided, however, that prior to the Corporation’s
repurchase or redemption of any of the shares of Series A Preferred pursuant to
this Section 3(d), the Corporation shall have repurchased any High Yield Notes
as are required to be repurchased by the terms of the High Yield Indenture.

 

SECTION
4.  Dividends

 

(a)       The
holders of shares of Series A Preferred shall be entitled to receive, whether
or not declared by the Board of Directors, cumulative quarterly dividends (the
“Dividends”) equal to the greater of: 
(i) 9.00% per annum of the Stated Value of the Series A Preferred,
calculated at each Quarterly Dividend Payment Date from the later of the date
that the first share of Series A Preferred is issued (the “Issue Date”) or the
most recent Quarterly Dividend Payment Date, compounded quarterly (the “Minimum
Dividends”), or (ii) the dividends which would have been payable to such
holders of shares of Series A Preferred in such quarter had such holders
converted such shares of Series A Preferred into Common Stock immediately prior
to the record date of any dividend declared on the Common Stock in such quarter
(the “Participating Dividends”); provided, however, that to the
extent that any Dividends are not paid in cash, an amount equal to the fair
market value of such Dividends shall be added to the Stated Value.  Dividends payable in respect of outstanding
shares of Series A Preferred shall begin to accrue and compound quarterly on
the last day of each of March, June, September and December in each year (each
such date being a “Quarterly Dividend Payment Date”) commencing in respect of
each outstanding share of Series A Preferred on the first Quarterly Dividend
Payment Date occurring on or after the Issue Date; provided, however,
that to the extent that any Dividends are not paid in cash, an amount equal to
the fair market value of such Dividends shall be added to the Stated Value.

 

(b)       Holders
of the Series A Preferred shall be entitled to receive either the Minimum
Dividends or the Participating Dividends in accordance with Section 4(a), up to
and including the last Quarterly Dividend Payment Date occurring on or prior to
the sixth anniversary of the Issue Date (the “Final Quarterly Dividend Payment
Date”).  After the Final Quarterly
Dividend Payment Date, holders of the Series A Preferred shall only be entitled
to receive Participating Dividends; provided, that, during any
period after the Initial Mandatory Redemption Date during which the Corporation
has delayed the mandatory redemption of the Series A Preferred pursuant to
Section 6(a) below, the Series A Preferred shall be entitled to the greater of
(i) the Minimum Dividends and (ii) Participating Dividends for such periods.

 

(c)       The
Dividends set forth in Section 4(a) hereof for the twelve Quarterly Dividend
Payment Dates immediately after the Issue Date shall not be payable in cash,
but shall be added to the Stated Value on the relevant Dividend Payment Date in
accordance with Section 4(a) hereof.

 

(d)       The
Board of Directors of the Corporation may fix a record date for the
determination of holders of Series A Preferred entitled to receive payment of
Dividends pursuant to Section 4(a) hereof, which record date shall be no more
than sixty (60) days prior to the date fixed for the payment thereof.  All cash payments shall be made in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.

 

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SECTION
5.  Protective Provisions

 

Prior to a Qualified IPO (as defined below) or a Sale of the
Corporation:

 

(a)  Limitation on Incurrence of Indebtedness.  Without the approval of the holders of
two-thirds of the outstanding shares of Series A Preferred Stock, the
Corporation shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume, guarantee, acquire, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, “incur”) any Indebtedness; provided,
however, the Corporation and its Subsidiaries may incur Indebtedness
(including, without limitation, Acquired Indebtedness) if on the date of the
incurrence of such Indebtedness, after giving effect to the incurrence thereof,
the Corporation’s Leverage Ratio is no more than 5.5 to 1.  Notwithstanding the foregoing, the
Corporation and any of its Subsidiaries may incur: (i) Indebtedness permitted
to be incurred under the terms of the High Yield Indenture or any Refinancings
thereof, (ii) Indebtedness permitted to be incurred under the terms of the
Credit Agreement or any Refinancings thereof, and (iii) Indebtedness arising
from loans or advances from any Subsidiary of the Corporation to the
Corporation or any other Subsidiary of the Corporation.

 

(b)  Limitation on Restricted Payments.  The Corporation shall not, and shall not
permit any of its Restricted Subsidiaries to, directly or indirectly,

 

(1)   declare or pay any dividend or make any distribution
(other than dividends or distributions payable in Qualified Capital Stock of
the Corporation or warrants, options or other rights to acquire Qualified
Capital Stock (but excluding any debt security or Disqualified Capital Stock
convertible into, or exchangeable for, Qualified Capital Stock)) on or in
respect of shares of the Corporation’ s Junior Capital Stock to holders of such
Junior Capital Stock, or

 

(2)          purchase, redeem or otherwise acquire or
retire for value any Junior Capital Stock of the Corporation or any warrants,
rights or options to purchase or acquire shares of any class of such Junior
Capital Stock, (each of the foregoing actions set forth in clauses (1) and (2)
being referred to as a “Restricted Payment”),

 

if at the time of such Restricted Payment or immediately after giving
effect thereto:

 

(A)      the Corporation’s Consolidated Fixed Charge
Coverage Ratio, after giving effect to such Restricted Payment, is greater than
2.0 to 1.0; or

 

(B)        the aggregate amount of Restricted Payments
(including such proposed Restricted Payment but excluding the Distribution)
made subsequent to the Issue Date (the amount expended for such purposes, if
other than in cash, being the fair market value of such property as determined
in good faith by the Board of Directors of the Corporation, whose determination
shall be conclusive) shall exceed the sum, without duplication, of:

 

(1)     50%
of the cumulative Consolidated Net Income (or if cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss) of the Corporation earned
during the period beginning on the first day of the fiscal quarter which
includes the Issue Date and ending on the last day of the last fiscal quarter
that precedes the date the Restricted Payment occurs (the “Reference Date”) for
which a financial statement relating to such fiscal quarter has been filed or
furnished in a report with the SEC (treating such period as a single accounting
period); plus

 

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(2)     100%
of the aggregate net cash proceeds received by the Corporation from any Person
(other than a Subsidiary of the Corporation ) from the issuance and sale
subsequent to the Issue Date and on or prior to the Reference Date of Qualified
Capital Stock of the Corporation (other than the Series A Preferred to the
extent that the net cash proceeds therefrom are or are expected to be used to
fund the Distribution and other than proceeds of Qualified Capital Stock to the
extent that they are used pursuant to clause (14) of Permitted Investments);
plus

 

(3)     100%
of the aggregate net cash proceeds received after the Issue Date by the
Corporation from the issuance or sale (other than to a Subsidiary of the
Corporation ) of debt securities or Disqualified Capital Stock that have been
converted into or exchanged for Qualified Capital Stock of the Corporation,
together with (without duplication) any net cash proceeds received by the Corporation
at the time of such conversion or exchange; plus

 

(4)     to
the extent not otherwise included in the Consolidated Net Income of the
Corporation, an amount equal to the net reduction in Investments (other than
reductions in Permitted Investments) in Unrestricted Subsidiaries resulting
from the payments in cash of interest on Indebtedness, dividends, repayments of
loans or advances or other transfers of assets, in each case to the Corporation
or a Restricted Subsidiary or from the redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary; plus

 

(5)     to
the extent not otherwise included in Consolidated Net Income, net cash proceeds
from sale of Investments which were treated as Restricted Payments, but not to
exceed the amounts so treated; plus

 

(6)     without
duplication of any amounts included in clauses (B)(2) and (B)(3) above, 100% of
the aggregate net cash proceeds of any equity contribution received by the
Corporation from a holder of the Corporation’ s Capital Stock other than
proceeds of a Capital Contribution to the extent that they are used pursuant to
clause (14) of Permitted Investments.

 

Notwithstanding the foregoing,
the provisions set forth in the immediately preceding paragraph do not
prohibit:

 

(1)   the
payment of any dividend or redemption payment within 60 days after the date of
declaration of such dividend or redemption payment if the dividend or
redemption payment would have been permitted on the date of declaration;

 

(2)   the acquisition of any shares of Capital Stock of
the Corporation, either:

 

(A)  solely in exchange for shares of Qualified Capital
Stock of the Corporation (or warrants, options or other rights to acquire
Qualified Capital Stock of the Corporation (but excluding any debt security or
Disqualified Capital Stock convertible into, or exchangeable for, Qualified
Capital Stock)), or

 

(B)   through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of the
Corporation) of shares of Qualified Capital Stock of the Corporation (or
warrants, options or other rights to acquire Qualified Capital Stock of the

 

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Corporation (but excluding any debt security or Disqualified Capital
Stock convertible into, or exchangeable for, Qualified Capital Stock));

 

(3)   repurchases by the Corporation of Equity Interests
of the Corporation from employees, consultants or directors of the Corporation
or any of its Subsidiaries or their authorized representatives upon or within
270 days after the death, disability or termination of employment, consultancy,
or directorships of such employees, consultants or directors, in an amount not
to exceed the difference of (A) a cumulative amount equal to $10.0 million per
fiscal year (or partial fiscal year) beginning with the fiscal year that
included the Issue Date, minus (B) the aggregate amount of Restricted Payments
made pursuant to this clause (3); provided, however, that the aggregate amount
of Restricted Payments made pursuant to this clause (3) shall not exceed $30.0
million in the aggregate from and after the Issue Date;

 

(4)   the repurchase of Equity Interests deemed to occur
upon the exercise of stock options if such Equity Interests represent a portion
of the exercise price of such stock options;

 

(5)   for the avoidance of doubt only, payments pursuant
to the Management Agreement;

 

(6)   other Restricted Payments pursuant to this clause
(6) not to exceed $80.0 million in the aggregate from and after the Issue Date;

 

(7)   the acquisition of, or declaration or payment of
dividends on, Equity Interests of the Corporation in connection with the
consummation of the Distribution;

 

(8)   after the Holding Company Merger, payments to the
Parent pursuant to this clause (8), (i) to enable the Parent to pay the Federal,
state, local, or foreign tax liabilities of itself, and of the Corporation and
its Subsidiaries for which it is liable; such payment shall be determined
assuming that the Parent, the Corporation, and the Subsidiaries file a
consolidated Federal (and where actually filed, consolidated, combined, unitary
or similar returns for state, local or foreign purposes) tax return with the
Parent as the Parent and the Corporation and the Subsidiaries as members and
that the Parent has no substantial assets other than the stock of the
Corporation and any tax payments shall either be used by the Parent to pay such
tax liabilities within 90 days of the Parent’s receipt of such payment or
refunded to the payee, and (ii) in an aggregate amount not to exceed $10
million per year in order to pay legal and accounting expenses, payroll and
other compensation expenses in the ordinary course of business, and other
corporate overhead expenses in the ordinary course of business; and

 

(9)   for the avoidance of doubt, the distribution of any
Equity Interests of any Subsidiary of the Corporation for the purpose of
establishing a holding company structure.

 

In determining the aggregate
amount of Restricted Payments made subsequent to the Issue Date in accordance
with clause (B) of the immediately preceding paragraph, amounts expended
pursuant to clauses (2)(A), (4), (5), (7), (8) and (9) shall be excluded in
such calculation and amounts expended pursuant to clauses (1), (2)(B), (3) and
(6) shall be included in such calculation; or

 

(c)  amend, alter, repeal or waive any provision
of the Corporation’s Articles of Incorporation, as it may be amended from time
to time, or the Corporation’s By-Laws, as they may be amended from time to
time, to alter or change the powers, designations, preferences, rights and
qualifications, limitations or restrictions of Series A Preferred.

 

6

 

SECTION
6.  Redemption

 

(a)       Except
as set forth in this Section 6(a), the Series A Preferred shall be mandatorily
redeemed by the Corporation on the twelfth anniversary of the Issue Date (the
“Initial Mandatory Redemption Date”). 
On the Initial Mandatory Redemption Date, the Corporation shall have the
option to delay the mandatory redemption of the Series A Preferred until the
fifteenth anniversary of the Issue Date (the “Extended Mandatory Redemption
Date”).  On the Extended Mandatory
Redemption Date, the Corporation shall have the option to delay the mandatory
redemption of the Series A Preferred until the seventeenth anniversary of the
Issue Date (the “Final Mandatory Redemption Date”).

 

(b)       At
the Initial Mandatory Redemption Date, each share of Series A Preferred shall
be redeemed, at the option of the Corporation, for an amount of cash, Common
Stock or a combination of cash and Common Stock, the fair market value of
which, when combined with any cash paid in connection with such redemption,
shall be equal to the greater of (i) the Stated Value or (ii) the average
Closing Sale Price of the Common Stock into which such Series A Preferred is
then convertible for the 20 consecutive trading days immediately preceding the
Initial Mandatory Redemption Date; provided, that, if the
redemption price is based on the Stated Value and the Corporation chooses to
redeem the Series A Preferred for Common Stock or for a combination of cash and
Common Stock, (x) such Common Stock must be listed on a United States national
securities exchange or quoted on the Nasdaq Stock Market, and (y) such Common
Stock to be issued in redemption of the Series A Preferred shall not represent
more than 35% of the fully diluted common equity of the Corporation.

 

(c)       If
the Corporation delays the mandatory redemption of the Series A Preferred in
accordance with Section 6(a) above, the Corporation shall have the option at
any time after the Initial Mandatory Redemption Date or Extended Mandatory
Redemption Date, as applicable, to redeem each share of Series A Preferred for
an amount of cash, Common Stock or a combination of cash and Common Stock, at
the option of the Corporation, the fair market value of which, when combined
with any cash paid in connection with such redemption, shall be equal to the
greater of (i) the Stated Value or (ii) the average Closing Sale Price of the
Common Stock into which such Series A Preferred is then convertible for the 20
consecutive trading days immediately preceding such redemption; provided,
that, if the redemption price is based on the Stated Value and the
Corporation chooses to redeem the Series A Preferred for Common Stock or for a
combination of cash and Common Stock, such Common Stock must be listed on a
United States national securities exchange or quoted on The Nasdaq Stock Market
and such Common Stock to be issued in redemption of the Series A Preferred
shall not represent more than 35% of the fully diluted common equity of the
Corporation.

 

(d)       At
the Final Mandatory Redemption Date, the Corporation shall redeem each share of
Series A Preferred for cash in an amount equal to the greater of (1) the Stated
Value or (2) the Closing Sale Price of the Common Stock into which the Series A
Preferred is then convertible (which Closing Sale Price shall be equal to the
average Closing Price for the 20 consecutive trading days immediately preceding
the Final Mandatory Redemption Date, if the Common Stock is then traded on a
U.S. securities exchange or, is reported by the National Association of
Securities Dealers Automated Quotation system or, by the National Quotation
Bureau Incorporated).

 

(e)       Notice
of any redemption of shares of Series A Preferred pursuant to this Section 6
(the “Redemption Notice”) shall be mailed not less than 30 days and not more
than 90 days prior to the date fixed for redemption to each holder of shares of
Series A Preferred to be redeemed, at such holder’s address as it appears on
the transfer books of the Corporation, notifying each such holder of the
redemption to be effected and specifying the redemption date (the “Redemption
Date”), redemption price (the “Redemption Price”), whether the Redemption Price
will be payable in cash, Common Stock, or a combination of cash and Common
Stock, the place at which payment may be obtained and requesting each such
holder to surrender to the Corporation, in the manner and at the place
designated, such holder’s certificate or certificates representing the shares
of Series A Preferred to be redeemed. 
On or after the Redemption Date, each holder of Series A Preferred who
has not previously elected to convert its shares of 

 

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Series A Preferred into Common
Stock pursuant to Section 7 hereof shall surrender to the Corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price
of such shares shall be payable to the order of the person whose name appears
on such certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled.  In
order to facilitate the redemption of shares of Series A Preferred, the Board
may fix a record date for the determination of the holders of shares of Series
A Preferred to be redeemed, not more than 60 days or less than 10 days prior to
the date fixed for such redemption.

 

(f)        From
and after any Redemption Date, unless there shall have been a default in
payment of the Redemption Price, all rights of the holders of shares of Series
A Preferred shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever.

 

(g)       On
or prior to any Redemption Date, the Corporation shall deposit the aggregate
Redemption Price of all shares of Series A Preferred with a bank or trust
corporation having aggregate capital and surplus in excess of $100,000,000 as a
trust fund for the benefit of the respective holders of the shares of Series A
Preferred not yet redeemed, with irrevocable instructions and authority to the
bank or trust corporation to pay the Redemption Price for such shares to their
respective holders on or after the Redemption Date upon receipt of notification
from the Corporation that such holder has surrendered his share certificate to
the Corporation pursuant to section 3(e) above.  As of the Redemption Date, the deposit shall constitute full
payment of the Redemption Price for the shares of Series A Preferred Stock to
their holders, and from and after the Redemption Date the shares so called for
redemption shall be redeemed and deemed to be no longer outstanding, and the
holders thereof shall cease to be stockholders with respect to such shares and
shall have no rights with respect thereto except the right to receive from the
bank or trust corporation payment of the Redemption Price of the shares, without
interest, upon surrender of certificates therefor.  Such instructions shall also provide that any moneys deposited by
the Corporation pursuant to this Section 6(g) for the redemption of shares
thereafter converted into shares of the Corporation’s Common Stock pursuant to
Section 7 hereof prior to the Redemption Date shall be returned to the
Corporation forthwith upon such conversion. 
The balance of any moneys deposited by the Corporation pursuant to this
Section 6(g) remaining unclaimed at the expiration of one (1) year following
the Redemption Date shall thereafter be returned to the Corporation upon its
request expressed in a resolution of the Board of Directors of the Corporation.

 

SECTION
7.  Conversion

 

(a)       Subject
to the terms and conditions of this Section 7, the holder of any share or
shares of Series A Preferred shall have the right, at his, her or its option at
any time, to convert any such shares of Series A Preferred into such number of
fully paid and nonassessable whole shares of Common Stock (the “Conversion
Rate”) as is obtained by dividing (i) the Stated Value per share then in effect
plus (A) if such conversion occurs prior to the Final Quarterly Dividend
Payment Date, the increase in the Stated Value which would have occurred on the
Quarterly Dividend Payment Date next following such conversion, pro rated to
the date of such conversion,  (B) if
such conversion occurs after the Final Quarterly Dividend Payment Date, the
amount of any accumulated but unpaid Participating Dividends as of the date of
such conversion, or (C) if such conversion occurs during any period after the
Initial Mandatory Redemption date during which the Corporation has delayed the
mandatory redemption of the Series A Preferred pursuant to Section 6(a) above,
the increase in the Stated Value as a result of any Dividends that the shares
of the Series A Preferred are entitled to pursuant to Section 4(b), pro rated
to the date of such conversion by (ii) the conversion price of $17.00 per
share, or, if there has been an adjustment of the conversion price, by the
conversion price as last adjusted and in effect at the date any share or shares
of Series A Preferred are surrendered for conversion (such price, or such price
as last adjusted, being referred to herein as the “Conversion Price”).  Such right of conversion shall be exercised
by the holder thereof by giving written notice to the Corporation that the
holder elects to convert a stated number of shares of Series

 

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A Preferred into Common Stock
and by surrender of a certificate or certificates for the shares so to be
converted to the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by notice in writing
to the holder or holders of the Series A Preferred) at any time during its
usual business hours on the date set forth in such notice, together with a
statement of the name or names (with address), subject to compliance with
applicable laws to the extent such designation shall involve a transfer, in
which the certificate or certificates for shares of Common Stock shall be
issued.

 

(b)           (i)            Immediately
upon the completion of a sale of the Corporation’s Common Stock in a firm
commitment, underwritten public offering registered under the Securities Act of
1933, as amended (the “Securities Act”), other than a registration relating
solely to a transaction under Rule 145 under the Securities Act (or any
successor rule thereto) or to an employee benefit plan of the Corporation (a
“Qualified IPO”), at a price offered to the public of $22.00 per share or
greater, as adjusted in the same manner as the Conversion Price for any
transaction that has resulted in an adjustment to the Conversion Price, the
Series A Preferred shall be automatically converted into Common Stock at the
Conversion Rate.

 

(ii)           In
the event that the Corporation completes a Qualified IPO at a price offered to
the public of less than $22.00 per share, as adjusted in the same manner as the
Conversion Price for any transaction that has resulted in an adjustment to the
Conversion Price, the Corporation shall have the option to cause each share of
the Series A Preferred to be mandatorily converted at a conversion rate equal
to the product of (x) the Conversion Rate, multiplied
by (y) the quotient of (a) $22.00, as adjusted in the same manner as the
Conversion Price for any transaction that has resulted in an adjustment to the
Conversion Price, divided by (b)
the price per common share offered to the public in such Qualified IPO; provided,
that, if the Corporation does not exercise its option to cause the
Series A Preferred to be mandatorily converted pursuant to this Section
7(b)(ii), each share of Series A Preferred shall automatically convert into
Common Stock at the Conversion Rate on the first day that the average of the
Closing Sales Prices per share of Common Stock exceeds $23.50, as adjusted in
the same manner as the Conversion Price for any transaction that has resulted
in an adjustment to the Conversion Price, for 20 consecutive trading days; provided,
further, that if the Series A Preferred is not converted at the option
of the Corporation pursuant to this Section 7(b)(ii), the Corporation shall
have the option to cause each share of the Series A Preferred to be mandatorily
converted at any time at a conversion rate equal to the product of (x) the
Conversion Rate, multiplied by
(y) the quotient of  (a) $23.50, as
adjusted in the same manner as the Conversion Price for any transaction that
has resulted in an adjustment to the Conversion Price, divided by (b) the average of the Closing
Sales Prices for the 20 consecutive trading days immediately preceding the date
the notice of such conversion is mailed to the holders of the Series A
Preferred.

 

(iii)          Upon
any conversion of Series A Preferred in accordance with Section 7(b)(ii), the
Corporation shall mail written notice thereof to the address of such holder as
shown on the books of the Corporation, which notice shall state the applicable
Conversion Rate and setting forth in reasonable detail the method of
calculation of the Conversion Rate. 
Promptly after surrender of the certificate or certificates for the
share or shares of the Series A Preferred that are the subject of the
conversion notice, the Corporation shall issue and deliver, or cause to be
issued and delivered, to the holder, registered in such name or names as such
holder may direct, subject to compliance with applicable laws to the extent
such designation shall involve a transfer, a certificate or certificates for
the number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Series A Preferred.

 

(c)           Promptly after the receipt by the Corporation of the
written notice referred to in Section 7(a) above and surrender of the
certificate or certificates for the share or shares of the Series A Preferred
to be converted, the Corporation shall issue and deliver, or cause to be issued
and

 

9

 

delivered, to the holder,
registered in such name or names as such holder may direct, subject to
compliance with applicable laws to the extent such designation shall involve a
transfer, a certificate or certificates for the number of whole shares of
Common Stock issuable upon the conversion of such share or shares of Series A
Preferred.  To the extent permitted by
law, such conversion shall be deemed to have been effected and the Conversion
Price shall be determined as of the close of business on the date on which such
written notice shall have been received by the Corporation and the certificate
or certificates for such share or shares shall have been surrendered as
aforesaid, and at such time the rights of the holder of such shares or shares
of Series A Preferred shall cease, and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby.

 

(d)       (i)                No
fractional shares shall be issued upon conversion of the Series A Preferred
into Common Stock and the number of shares of Common Stock to be issued shall
be rounded down to the nearest whole share. 
If any fractional interest in a share of Common Stock would, except for the
provisions of this Section 7(d), be deliverable upon any such conversion, the
Corporation, in lieu of delivering the fractional share thereof, shall pay to
the holder surrendering the Series A Preferred for conversion an amount in cash
equal to the current value of such fractional interest based upon the Closing
Sale Price of the Common Stock on the trading day prior to the date of the
notice of conversion.

 

(ii)               In
case the number of shares of Series A Preferred represented by the certificate
or certificates surrendered pursuant to Section 7(a) exceeds the number of
shares converted, the Corporation shall, upon such conversion, execute and
deliver to the holder thereof, at the expense of the Corporation, a new
certificate or certificates for the number of shares of Series A Preferred
represented by the certificate or certificates surrendered which are not to be
converted.

 

(e)       In the event that the Corporation shall declare or
pay, without consideration, any dividend or other distribution on the then outstanding
shares of Common Stock payable in Common Stock or in any right to acquire
Common Stock for no consideration, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by stock split, reclassification or otherwise than by payment of a
dividend in Common Stock or in any right to acquire Common Stock), or in the
event that the then outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Common Stock, then the applicable Conversion Price for the Series A
Preferred in effect immediately prior to such event shall, concurrently with
the effectiveness of such event, be proportionately decreased or increased, as
appropriate.  In the event that the
Corporation shall declare or pay, without consideration, any dividend on the
then outstanding shares of Common Stock payable in any right to acquire Common
Stock for no consideration, then the Corporation shall be deemed to have made a
dividend payable in Common Stock in an amount of shares equal to the maximum
number of shares issuable upon exercise of such rights to acquire Common Stock.

 

(f)        In the event that the Corporation shall declare or
pay, without consideration, any dividend or other distribution on the then
outstanding shares of Common Stock payable in securities of the Corporation
other than Common Stock or in any right to acquire securities of the
Corporation other than Common Stock for no consideration and other than as
otherwise adjusted in this Section 7, then in each such event provision shall
be made so that the holders of the Series A Preferred shall be entitled to
receive a proportionate share of any such dividend or distribution as though
they were the holders of the number of shares of Common Stock of the
corporation into which their shares of Series A Preferred are convertible as of
the record date fixed for the determination of the holders of Common Stock of
the corporation entitled to receive such dividend or other distribution.

 

10

 

(g)       If the Common Stock issuable upon conversion of the
Series A Preferred shall be changed into the same or a different number of
shares of any other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for in Section 7(e) above or a merger or other
reorganization referred to in Section 3(d) above), the Conversion Price then in
effect shall, concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted so that the Series A Preferred
shall be convertible into, in lieu of the number of shares of Common Stock
which the holders would otherwise have been entitled to receive, a number of
shares of such other class or classes of stock equivalent to the number of
shares of Common Stock that would have been subject to receipt by the holders
upon conversion of the Series A Preferred immediately before that change.  In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 7 with
respect to the rights of the holders of Series A Preferred after the capital
reorganization, reclassification or other action to the end that the provisions
of this Section 7 (including adjustment of the Conversion Price then in effect
and the number of shares issuable upon conversion of the Series A Preferred)
shall be applicable after such action and be as nearly equivalent as possible.

 

(h)       Upon
any adjustment of the Conversion Price, then and in each such case the
Corporation shall give written notice thereof, by first class mail, postage
prepaid, addressed to each holder of shares of Series A Preferred at the
address of such holder as shown on the books of the Corporation (or its
transfer agent, if any), which notice shall state the Conversion Price
resulting from such adjustment, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.

 

(i)          In case at any time:

 

(i)    the
Corporation shall declare any dividend upon its Common Stock payable in cash or
stock or make any other distribution to the holders of its Common Stock;

 

(ii)   the
Corporation shall offer for subscription pro rata to the holders of its Common
Stock any additional shares of stock of any class or other rights;

 

(iii)  there
shall be any reorganization, recapitalization or reclassification of the
capital stock of the Corporation (a “Reorganization”) or the Corporation shall
enter into an agreement with respect to any transaction described in Section
3(d) hereof (a “Change of Control Transaction”); or

 

(iv)  there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Corporation;

 

then, in any one or more of said cases, the
Corporation shall give, by first class mail, postage prepaid, addressed to each
holder of any shares of Series A Preferred at the address of such holder as
shown on the books of the Corporation (or its transfer agent, if any), (A) at
least 10 days’ prior written notice of the date on which the books of the
Corporation (or its transfer agent) shall close or a record shall be taken for
such dividend, distribution or subscription rights or for determining rights to
vote in respect of any such Reorganization or Change of Control Transaction,
and (B) in the case of any such Reorganization or Change of Control
Transaction, at least 10 days’ prior written notice of the date when the same
shall take place.  Such notice in
accordance with the foregoing clause (A) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (B) shall also specify the date on

 

11

 

which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such Reorganization or Change of Control Transaction, as the
case may be.

 

(j)        The
Corporation will at all times reserve and keep available out of its authorized
but unissued Common Stock, solely for the purpose of issuance upon the
conversion of the Series A Preferred as herein provided, such number of shares
of Common Stock as shall then be issuable upon the conversion of all
outstanding shares of Series A Preferred. 
All shares of Common Stock which shall be so issued shall be duly and
validly issued and fully paid and nonassessable and free from all taxes, liens
and charges arising out of or by reason of the issue thereof, and, without
limiting the generality of the foregoing, the Corporation covenants that it
will from time to time take all such action as may be requisite to assure that
the par value per share of the Common Stock is at all times equal to or less
than the effective Conversion Price. 
The Corporation will take all such action within its control as may be
necessary on its part to assure that all such shares of Common Stock may be so
issued without violation of any applicable law or regulation, or of any
requirements of any national securities exchange upon which the Common Stock of
the Corporation may be listed.

 

(k)       Shares
of Series A Preferred that are converted into shares of Common Stock as
provided herein shall not be reissued.

 

(l)        The
issuance of certificates for shares of Common Stock upon conversion of the
Series A Preferred shall be made without charge to the holders thereof for any
issuance tax in respect thereof, provided that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the holder of Series A Preferred which is being converted.

 

(m)      The
Corporation will not, by amendment of its Articles of Incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 7 and in the
taking of all such action as may be necessary or appropriate in order to
protect the conversion rights of the holders of the Series A Preferred against
impairment.

 

SECTION 8. 
Voting Except as otherwise required by law or as expressly set
forth herein, the holders of the Series A Preferred shall vote together with
the holders of Common Stock on all matters to be voted on by the shareholders
of the Corporation, and each holder of Series A Preferred shall be entitled to
one vote for each whole share of Common Stock that would be issuable to such
holder upon the conversion of all the shares of Series A Preferred held by such
holder on the record date for the determination of stockholders entitled to
vote; provided, however, that, no holder of the Series A
Preferred will be entitled to vote as a result of increases in the Stated Value
of the Series A Preferred after the Issue Date until any applicable waiting
period under the Hart Scott Rodino Anitrust Improvements Act of 1976, as
amended, shall have expired or been terminated to the extent that such waiting
period would be triggered by such holder’s acquisition of shares of Series A
Preferred or as a result of increases in the Stated Value thereof after the
Issue Date.  In the event any matter
requires a separate vote of the holders of the Series A Preferred as a class as
a matter of law or as expressly set forth herein, the approval of two-thirds of
the shares of the Series A Preferred voting in connection with such matter
shall be necessary to approve such matter.

 

SECTION 9. 
Restriction of Participation in Reorganization Each holder of
shares of Series A Preferred, by its acceptance thereof, shall be deemed to
have agreed that it shall not participate in the Reorganization Transactions
with respect to the shares of the Series A Preferred.  As used herein, “Reorganization Transactions” shall mean one or
more dividends on, or repurchases or redemptions of,

 

12

 

equity interests of the
Corporation (including the cash settlement of employee stock options or other
employee incentive plans) prior to March 31, 2004 in an aggregate amount not to
exceed $300.0 million plus (1) net cash proceeds from the sale of shares of the
Series A Preferred, (2) the net cash proceeds (on an after tax basis) received
from the installment payment due in January 2004 in connection with the
antitrust litigation settlement with Hillenbrand Industries, Inc., which amount
shall not exceed $47.0 million, (3) the estimated tax benefit to the
Corporation from the recapitalization, including the exercise or repurchase of
stock options in connection therewith, which amount shall not exceed $40.0
million and (4) the cash proceeds received, if any, from the exercise of stock
options repurchased in connection with the recapitalization.

 

SECTION 10. 
Definitions

 

“Acquired Indebtedness” means Indebtedness of a Person or any
of its Subsidiaries (1) existing at the time such Person becomes a Restricted
Subsidiary of the Corporation or at the time it merges or consolidates with the
Corporation or any of its Restricted Subsidiaries or (2) which becomes
Indebtedness of the Corporation or a Restricted Subsidiary in connection with
the acquisition of assets from such Person, and in each case not incurred by
such Person or its Subsidiary in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary of the
Corporation or such acquisition, merger or consolidation.

 

“Affiliate” means, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person.  The term “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise; and terms
“controlling” and “controlled” have meanings correlative of the foregoing.

 

“Asset Acquisition” means (1) an Investment by the Corporation or
any Restricted Subsidiary of the Corporation in any other Person pursuant to
which such Person shall become a Restricted Subsidiary of the Corporation or
any Restricted Subsidiary of the Corporation, or shall be merged with or into
the Corporation or any Restricted Subsidiary of the Corporation, or (2) the
acquisition by the Corporation or any Restricted Subsidiary of the Corporation
of the assets of any Person (other than a Restricted Subsidiary of the
Corporation) which constitute all or substantially all of the assets of such
Person or comprises any division or line of business of such Person or any
other properties or assets of such Person other than in the ordinary course of
business.

 

“Asset Sale” means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Corporation or any of its Restricted Subsidiaries (including any Sale and
Leaseback Transaction) to any Person other than the Corporation or a Restricted
Subsidiary of the Corporation of:

 

(1)          any Capital Stock of any Restricted
Subsidiary of the Corporation; or

 

(2)          any other property or assets of the
Corporation or any Restricted Subsidiary of the Corporation other than in the
ordinary course of business; provided, however, that Asset Sales shall not
include:

 

(a)   a transaction or series of
related transactions for which the Corporation or its Restricted Subsidiaries
receive aggregate consideration of less than $5.0 million,

 

13

 

(b)   the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Corporation as permitted under the “Merger, Consolidation and Sale of Assets”
covenant of the High Yield Indenture or any such disposition that constitutes a
“Change of Control” under the High Yield Indenture,

 

(c)   sales of accounts
receivable, equipment and related assets (including contract rights) of the
type specified in the definition of “Qualified Securitization Transaction” to a
Securitization Entity for the fair market value thereof, including cash in an
amount at least equal to 75% of the fair market value thereof,

 

(d)   transfers of accounts
receivable, equipment and related assets (including contract rights) of the
type specified in the definition of “Qualified Securitization Transaction” (or
a fractional undivided interest therein) by a Securitization Entity in a
Qualified Securitization Transaction,

 

(e)   Investments and Restricted
Payments that are not prohibited by the High Yield Indenture, or

 

(f)    the distribution of any
Equity Interests of any Subsidiary of the Corporation for the purpose of
establishing a holding company structure in compliance with the “Merger, Consolidation
and Sale of Assets” covenant of the High Yield Indenture.

 

“Board of Directors” means, as to any Person, the board of
directors of such Person.

 

“Capital Contribution” means any contribution to the equity of
the Corporation from a direct or indirect parent of the Corporation for which
no consideration is given.

 

“Capital Stock” means (1) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person and (2) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person, as adjusted in the same manner as the
Conversion Price for any transaction that has resulted in an adjustment to the
Conversion Price

 

“Capitalized Lease Obligation” means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.

 

“Closing Sale Price” on any date shall mean the closing per
share sale price (or if no closing sale price is reported, the average of the
average bid and the average ask prices) for the Common Stock as reported in
composite transactions for the principal U.S. securities exchange on which the
Common Stock is traded or, if the Common Stock is not listed on a U.S. national
or regional securities exchange, as reported by the National Association of
Securities Dealers Automated Quotation system or by the National Quotation
Bureau Incorporated.  In the absence of
such a quotation, “Closing Sale Price” shall be determined in good faith by the
Board of Directors of the Corporation, based on the advice of a non-affiliated
investment banking firm selected by the Corporation reasonably acceptable to the
holders of two-thirds of the outstanding shares of Series A Preferred.

 

“Common Stock” of any Person means any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person’s common stock,

 

14

 

whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation,
all series and classes of such common stock.

 

“Consolidated EBITDA” means, with respect to any Person, for
any period, the sum (without duplication) of

 

(1)          Consolidated Net Income, and

 

(2)          to the extent Consolidated Net Income has
been reduced thereby,

 

(A)      all income taxes of such Person and its
Restricted Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses or taxes attributable to sales or dispositions outside the
ordinary course of business) and any payments to the Parent pursuant to clause
(8) of the last paragraph of Section 5(b) above,

 

(B)        Consolidated Interest Expense,

 

(C)        the aggregate charges for depreciation,
amortization and impairment of goodwill or other intangible assets of such
Person and its Restricted Subsidiaries for such period,

 

(D)       the unrealized foreign currency losses of such
Person and its Restricted Subsidiaries for such period,

 

(E)         other non-cash charges of such Person and its
Restricted Subsidiaries for such period, less (i) any non-cash charges increasing
Consolidated Net Income during such period and (ii) the amount of all cash
payments made by such Person or any of its Restricted Subsidiaries during such
period, to the extent such payments relate to non-cash charges that were added
back in determining Consolidated EBITDA for such period or any prior period,

 

(F)         for purposes of determining the Consolidated
Fixed Charge Coverage Ratio or the Leverage Ratio (and the components thereof)
for any Four Quarter Period that includes the Issue Date, the Transaction
Expenses,

 

(G)        management fees paid pursuant to the Management
Agreement paid within the twelve month period immediately prior to the Issue
Date; provided that no further management fee payments are made after August
31, 2003, or required to be made, thereunder,

 

(H)       cash expenses for stock option and stock
repurchase for the twelve month period immediately prior to the Issue Date and
cash expenses related thereto incurred on or after the Issue Date, and

 

(I)            research and development expense write-offs
during the twelve month period immediately prior to the Issue Date,

 

in each case as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in
accordance with GAAP.

 

“Consolidated Fixed Charge Coverage Ratio” means, with respect
to any Person, the ratio of Consolidated EBITDA of such Person during the four
full fiscal quarters (the “Four Quarter
Period”)

 

15

 

ending on or prior to the date
of the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the “Transaction Date”)
to Consolidated Fixed Charges of such Person for the Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, “Consolidated EBITDA” and “Consolidated Fixed Charges” shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to:

 

(1)          the incurrence or repayment of any
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital purposes
pursuant to working capital facilities, occurring during the Four Quarter
Period or at any time subsequent to the last day of the Four Quarter Period and
on or prior to the Transaction Date, as if such incurrence or repayment, as the
case may be (and the application of the proceeds thereof), occurred on the
first day of the Four Quarter Period and

 

(2)          any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need
to make such calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable for
Acquired Indebtedness and also including any Consolidated EBITDA (provided that
such Consolidated EBITDA shall be included only to the extent includable
pursuant to the definition of “Consolidated Net Income”) attributable to the
assets which are the subject of the Asset Acquisition or Asset Sale during the
Four Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition (including the
incurrence, assumption or liability for any such Acquired Indebtedness)
occurred on the first day of the Four Quarter Period.

 

If such Person or any of its
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the incurrence of
such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of
such Person had directly incurred or otherwise assumed such guaranteed
Indebtedness. Furthermore, in calculating “Consolidated Fixed Charges” for
purposes of determining the denominator (but not the numerator) of this
“Consolidated Fixed Charge Coverage Ratio,”

 

(1)          interest on outstanding Indebtedness
determined on a fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to have accrued at a
fixed rate per annum equal to the rate of interest on such Indebtedness in
effect on the Transaction Date;

 

(2)          if interest on any Indebtedness actually
incurred on the Transaction Date may optionally be determined at an interest
rate based upon a factor of a prime or similar rate, a eurocurrency interbank
offered rate, or other rates, then the interest rate in effect on the
Transaction Date will be deemed to have been in effect during the Four Quarter
Period; and

 

(3)          notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.

 

“Consolidated Fixed Charges” means, with respect to any Person
for any period, the sum, without duplication, of (1) Consolidated Interest
Expense, plus (2) the product of (A) the amount of all dividend payments on any
series of Preferred Stock of such Person (other than (x) dividends paid in
Qualified Capital Stock and (y) dividends on the Series A Preferred, the net
proceeds of which will be used for the

 

16

 

Distribution, to the extent
that they are paid in kind or accrete) paid, accrued or scheduled to be paid or
accrued during such period times (B) a fraction, the numerator of which is one
and the denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of such Person, expressed as a
decimal.

 

“Consolidated Indebtedness” means on any date, with respect to
the Corporation and its Restricted Subsidiaries on a Consolidated basis, all
Indebtedness of the Corporation and its Restricted Subsidiaries which by its
terms or by the terms of any instrument or agreement relating thereto matures
more than one year after the date of incurrence thereof, and any such
Indebtedness maturing within one year from the date of incurrence which is
directly or indirectly renewable or extendible at the option of such Person to
a date more than one year from such date of incurrence (including an option of
such Person under a revolving credit or similar agreement obligating the lender
or lenders to extend credit over a period of more than one year from such date
of incurrence) and all Guarantee Obligations of the Corporation and its
Restricted Subsidiaries on such date in respect of any such Indebtedness of
Persons other than the Corporation and its Restricted Subsidiaries.

 

“Consolidated Interest Expense” means, with respect to any
Person for any period, the sum of, without duplication:

 

(1)          the aggregate of the interest expense of such
Person and its Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, including without limitation,

 

(A)      any amortization of debt discount,

 

(B)        the net costs under Interest Swap Obligations,

 

(C)        all capitalized interest, and

 

(D)       the interest portion of any deferred payment
obligation, but excluding amortization or write-off of deferred financing
costs;

 

but, in all
cases, excluding dividends on the Series A Preferred, the net proceeds of which
will be used for the Distribution, to the extent that they are paid in kind or
accrete, except to the extent that they constitute Disqualified Capital Stock;
and

 

(2)          the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.

 

“Consolidated Net Income” means, with respect to any Person,
for any period, the aggregate net income (or loss) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP minus, after the Holding Company Merger, any payments to
the Parent pursuant to clause (8) of the last paragraph of Section 5(b) above;
provided that there shall be excluded therefrom:

 

(1)          after-tax gains from asset sales or
abandonments or reserves relating thereto,

 

(2)          after-tax items classified as extraordinary
or nonrecurring gains,

 

(3)          the net income (but not loss) of any Restricted
Subsidiary of the referent Person to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is restricted by a contract, operation of law or otherwise,

 

17

 

(4)          the net income of any Person in which the
referent Person has an interest, other than a Restricted Subsidiary of the
referent Person, except to the extent of cash dividends or distributions paid
to the referent Person or to a Restricted Subsidiary of the referent Person by
such Person,

 

(5)          any restoration to income of any contingency
reserve in accordance with GAAP, except to the extent that provision for such
reserve was made out of Consolidated Net Income accrued at any time following
the Issue Date,

 

(6)          income or loss attributable to discontinued
operations (including, without limitation, operations disposed of during such
period whether or not such operations were classified as discontinued),

 

(7)          in the case of a successor to the referent
Person by consolidation or merger or as a transferee of the referent Person’s
assets, any earnings of the successor corporation prior to such consolidation,
merger or transfer of assets,

 

(8)          after-tax gains from the installment payment
due in January 2004 in connection with the anti-trust litigation settlement
with Hillenbrand Industries, Inc., and

 

(9)          tax benefits from the exercise of employee
stock options to the extent proceeds from such exercise are used to fund the
Distribution.

 

“Continuing Directors” means, as of the date of determination,
any member of the Board of Directors of the Corporation, or, after a Holding
Company Merger, Parent who (1) was a member of the Board of Directors of the
Corporation on the Issue Date or (2) was nominated for election or elected to
the Board of Directors of the Corporation or, after a Holding Company Merger,
Parent, with the approval of a majority of the Continuing Directors who were
members of such Board of Directors at the time of such nomination or election.

 

“Credit Agreement” means the Credit Agreement to be dated on or
about the Issue Date, among the Corporation, the lenders party thereto in their
capacities as lenders thereunder, Morgan Stanley Senior Funding Inc., as
Administrative Agent, and Credit Suisse First Boston, acting through its Cayman
Islands Branch, as Syndication Agent, together with the documents related
thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented, replaced, restated or
otherwise modified from time to time, including any agreement and related
documents (including, without limitation, any loan agreement, note, note
purchase agreement and indenture) extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder (provided that such increase in borrowings is
permitted by Section 5(a) above) or adding Restricted Subsidiaries of the
Corporation as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement and related documents or any
successor or replacement agreement and related documents and whether by the same
or any other agent, lender, group of lenders or otherwise and whether through
any credit facilities or other borrowing or lending arrangements, including
through issuing senior or subordinated notes.

 

“Currency Agreement” means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Corporation or any Restricted Subsidiary of the Corporation against
fluctuations in currency values.

 

“Disqualified Capital Stock” means that portion of any Capital
Stock (other than shares of the Series A Preferred)  which, by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a

 

18

 

sinking fund obligation or
otherwise, or is redeemable at the sole option of the holder thereof on or
prior to the Final Mandatory Redemption Date; provided that any Capital Stock
that would not constitute Disqualified Capital Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an “asset sale” or “change of
control” occurring prior to the Final Mandatory Redemption Date shall not
constitute Disqualified Capital Stock if the “asset sale” or “change of
control” provisions applicable to such Capital Stock specifically provides that
such Person will not repurchase or redeem any such stock pursuant to such
provision prior to the Corporation’ s repurchase of the Series A Preferred.

 

“Distribution” means one or more dividends on, or repurchases
or redemptions of, Equity Interests (including the cash settlement of employee
stock options or other employee incentive plans) prior to March 31, 2004 in an
aggregate amount not to exceed $300 million plus (1) net cash proceeds from the
sale of Preferred Stock completed prior to March 31, 2004, (2) the net cash
proceeds (on an after tax basis) received from the installment payment due in
January 2004 in connection with the antitrust litigation settlement with
Hillenbrand Industries, Inc., which amount shall not exceed $47 million, (3)
the tax benefit to the Corporation from the recapitalization, including the
exercise or repurchase of stock options in connection therewith, which amount
shall not exceed $40 million and (4) the cash proceeds received from the
exercise of stock options repurchased in connection with the recapitalization.

 

“Equity Interests” of a Person means Capital Stock or
partnership, participation or membership interests of such Person and all
warrants, options or other rights to acquire Capital Stock or partnership,
participation or membership interests of such Person (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock or
partnership, participation or membership interests of such Person).

 

“Exchange Act” means the Securities Exchange Act of 1934, as
amended.

 

“Existing Notes” means the Corporation’ s existing 9 5/8%
Senior Subordinated Notes due 2007, Series A and the 9 5/8% Senior Subordinated
Notes due 2007, Series B and the related guarantees.

 

“Fremont” means Fremont Partners, L.P. and its affiliates.

 

“GAAP” means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, as in effect on the Issue Date.

 

“Guarantee Obligation”: as to any Person (the “guaranteeing
person”), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in
effect guaranteeing any Indebtedness, leases, dividends or other obligations
(the “primary obligations”) of any other third Person (the “primary obligor”)
in any manner, whether directly or indirectly, including, without limitation,
any obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the
purchase or payment of any such primary obligation or (2) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment
of such primary obligation or (iv) otherwise to assure or hold harmless the
owner of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include endorsements of

 

19

 

instruments for deposit or
collection in the ordinary course of business. 
The amount of any Guarantee Obligation of any guaranteeing person shall
be deemed to be the lower of (x) an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee Obligation
is made and (y) the maximum amount for which such guaranteeing person may be
liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which
such guaranteeing person may be liable are not stated or determinable, in which
case the amount of such Guarantee Obligation shall be such guaranteeing
person’s maximum reasonably anticipated liability in respect thereof as
determined by the guaranteeing person in good faith.

 

“High Yield Notes” means the Corporation’s 7 3/8% Senior
Subordinated Notes due 2013, issued pursuant to an indenture (the “High Yield
Indenture”) dated August 11, 2003.

 

“Holding Company Merger” means a merger of the Corporation and
one of its Subsidiaries for the purposes of establishing a holding company
structure.

 

“Indebtedness” means with respect to any Person, without duplication,

 

(1)          all Obligations of such Person for borrowed
money,

 

(2)          all Obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments,

 

(3)          all Capitalized Lease Obligations of such
Person,

 

(4)          all Obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations and all Obligations under any title retention agreement (but
excluding trade accounts payable and other accrued liabilities arising in the
ordinary course of business that are not overdue by 90 days or more or are
being contested in good faith by appropriate proceedings),

 

(5)          all Obligations for the reimbursement of any
obligor on any letter of credit, banker’ s acceptance or similar credit
transaction,

 

(6)          guarantees and other contingent obligations
in respect of Indebtedness of other Persons of the type referred to in clauses
(1) through (5) above and clause (8) below,

 

(7)          all Obligations of any other Person of the
type referred to in clauses (1) through (6) which are secured by any Lien on
any property or asset of such Person, the amount of such Obligation being
deemed to be the lesser of the fair market value of such property or asset or
the amount of the Obligation so secured,

 

(8)          all Obligations under Currency Agreements and
Interest Swap Obligations of such Person, and

 

(9)          all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such Disqualified Capital
Stock being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends, if any. For purposes hereof, the “maximum fixed repurchase price” of
any Disqualified Capital Stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Capital Stock
as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the High Yield
Indenture, and if such price is based upon, or measured by, the fair market
value of such

 

20

 

Disqualified Capital Stock, such fair market value shall be determined
in good faith by the Board of Directors of the issuer of such Disqualified
Capital Stock.

 

For purposes hereof, the amount
of any Indebtedness referred to in clause (8) of the preceding paragraph shall
be the net amounts (including by offset of amounts payable thereunder),
including any net termination payments, required to be paid to a counterparty
rather than any notional amount with regard to which payments may be
calculated.

 

“Interest Swap Obligations” means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or indirectly,
such Person is entitled to receive from time to time periodic payments
calculated by applying either a floating or a fixed rate of interest on a
stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the
same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements.

 

“Investment” means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition by such Person of any
Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by, any other Person. “Investment” shall exclude extensions
of trade credit by the Corporation and its Restricted Subsidiaries on commercially
reasonable terms in accordance with normal trade practices of the Corporation
or such Restricted Subsidiary, as the case may be.

 

“Leverage Ratio” means at any time, the ratio of (a)
Consolidated Indebtedness at such time to (b) Consolidated EBITDA for the most
recent period of four consecutive fiscal quarters.

 

“Lien” means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof and
any agreement to give any security interest).

 

“Management Agreement” means the management agreement among the
Corporation, Fremont and RCBA, in effect on the Issue Date.

 

“Obligations” means all obligations for principal, premium,
interest, penalties, fees, commissions, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing any
Indebtedness.

 

“Parent” means, after the Holding Company Merger, any Person
that, directly or indirectly, holds all or substantially all of the Qualified
Capital Stock of the Corporation.

 

“Permitted Holders” means RCBA, Fremont, James R. Leininger,
M.D., and his Affiliates and, after the Holding Company Merger, any Parent.

 

“Permitted Investments” means:

 

(1)          Investments by the Corporation or any
Restricted Subsidiary of the Corporation in any Person that is or will become
immediately after such Investment a Restricted Subsidiary of the Corporation or
that will merge or consolidate into the Corporation or a Restricted Subsidiary
of the Corporation;

 

(2)          Investments in the Corporation by any
Restricted Subsidiary of the Corporation; provided that any Indebtedness
evidencing such Investment is unsecured and subordinated, pursuant to a written

 

21

 

agreement, to the Corporation’ s obligations under the High Yield Notes
and the High Yield Indenture;

 

(3)          Investments in cash and cash equivalents;

 

(4)          loans and advances to employees and officers
of the Corporation and its Restricted Subsidiaries in the ordinary course of
business for bona fide business purposes not in excess of $10.0 million at any
one time outstanding pursuant to this clause (4);

 

(5)          Currency Agreements and Interest Swap
Obligations entered into in the ordinary course of the Corporation’ s or its
Restricted Subsidiaries’ businesses and otherwise in compliance with the High
Yield Indenture;

 

(6)          Investments in Unrestricted Subsidiaries not
to exceed $10.0 million at any one time outstanding pursuant to this clause
(6);

 

(7)          Investments in securities of trade creditors
or customers received pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of such trade creditors or
customers;

 

(8)          Investments made by the Corporation or its
Restricted Subsidiaries as a result of consideration received in connection
with an asset sale;

 

(9)          Investments existing on the date of the High
Yield Indenture;

 

(10)    accounts receivable, advances, loans, guarantees or
extensions of credit created or acquired in the ordinary course of business,
consistent with past or industry practice;

 

(11)    any Investment by the Corporation or a Wholly Owned
Restricted Subsidiary of the Corporation in a Securitization Entity or any
Investment by a Securitization Entity in any other Person in connection with a
Qualified Securitization Transaction; provided that any Investment in a
Securitization Entity is in the form of a purchase money note or an equity
interest;

 

(12)    Investments committed to by the Corporation or its
Restricted Subsidiaries on the Issue Date not to exceed $1.5 million in the
aggregate pursuant to this clause (12);

 

(13)    Investments in Strategic Joint Ventures not to
exceed $20.0 million outstanding at any one time pursuant to this clause (13);
and

 

(14)    any Investment in any Person solely in exchange for
Qualified Capital Stock or, after the Holding Company Merger, Capital Stock of
the Parent, or from a Capital Contribution or the net cash proceeds of any
substantially concurrent sale of the Corporation’ s Qualified Capital Stock.

 

“Person” means an individual, partnership, corporation,
unincorporated organization, limited liability company, trust or joint venture,
or a governmental agency or political subdivision thereof.

 

“Preferred Stock” of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.

 

“Qualified Capital Stock” means any Capital Stock that is not
Disqualified Capital Stock.

 

22

 

“Qualified Securitization Transaction” means any transaction or
series of transactions that may be entered into by the Corporation or any of
its Subsidiaries pursuant to which the Corporation or any of its Subsidiaries
may sell, convey or otherwise transfer to (1) a Securitization Entity (in the
case of a transfer by the Corporation or any of its Subsidiaries) and (2) any
other Person (in the case of a transfer by a Securitization Entity), or may
grant a security interest in, any accounts receivable or equipment (whether now
existing or arising or acquired in the future) of the Corporation or any of its
Subsidiaries, and any assets related thereto including, without limitation, all
collateral securing such accounts receivable and equipment, all contracts and
contract rights and all guarantees or other obligations in respect of such
accounts receivable and equipment, proceeds of such accounts receivable and
equipment and other assets (including contract rights) which are customarily
transferred or in respect of which security interests are customarily granted
in connection with asset securitization transactions involving accounts
receivable and equipment.

 

“RCBA” means Blum Capital Partners, L.P. and its Affiliates.

 

“Refinance” means, in respect of any security or Indebtedness,
to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such security
or Indebtedness in whole or in part. “Refinanced” and “Refinancing” shall have
correlative meanings.

 

“Restricted Subsidiary” of any Person means any Subsidiary of
such Person which at the time of determination is not an Unrestricted
Subsidiary.

 

“SEC” means the Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Securitization Entity” means a Wholly Owned Restricted
Subsidiary of the Corporation (or another Person in which the Corporation or
any Subsidiary of the Corporation makes an Investment and to which the
Corporation or any Subsidiary of the Corporation transfers accounts receivable
or equipment and related assets) which engages in no activities other than in
connection with the financing of accounts receivable or equipment and which is
designated by the Board of Directors of the Corporation as a Securitization
Entity

 

(1)          no portion of the Indebtedness or any other
Obligations (contingent or otherwise) of which

 

(A)      is guaranteed by the Corporation or any
Subsidiary of the Corporation (excluding guarantees of Obligations (other than
the principal of, and interest on, Indebtedness) pursuant to Standard
Securitization Undertakings),

 

(B)        is recourse to or obligates the Corporation or
any Subsidiary of the Corporation in any way other than pursuant to Standard
Securitization Undertakings or

 

(C)        subjects any property or asset of the
Corporation or any Subsidiary of the Corporation, directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than pursuant to
Standard Securitization Undertakings,

 

(2)          with which neither the Corporation nor any
Subsidiary of the Corporation has any material contract, agreement, arrangement
or understanding other than on terms no less favorable to the Corporation or
such Subsidiary than those that might be obtained at the time from Persons that
are

 

23

 

not Affiliates of the Corporation, other than fees payable in the
ordinary course of business in connection with servicing receivables of such
entity, and

 

(3)          to which neither the Corporation nor any
Subsidiary of the Corporation has any obligation to maintain or preserve such
entity’s financial condition or cause such entity to achieve certain levels of
operating results.

 

“Standard Securitization Undertakings” means representations,
warranties, covenants and indemnities entered into by the Corporation or any
Subsidiary of the Corporation which are reasonably customary in an accounts
receivable or equipment securitization transaction.

 

“Strategic Joint Venture” means a corporation, partnership or
other entity engaged in a business which is related to that of the Corporation
or any of its Restricted Subsidiaries or which provides services, products or intellectual
property to the Corporation or any of its Restricted Subsidiaries or uses the
products, services or intellectual property of the Corporation or any of its
Restricted Subsidiaries.

 

“Subsidiary,” with respect to any Person, means (1) any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (2) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.

 

“Transaction Expenses” means the expenses relating to the
offering of the High Yield Notes, execution and initial borrowings under the
Credit Agreement, the redemption of the Existing Notes, the sale of the
Preferred Stock the net proceeds of which are used in connection with the
Distribution, the Distribution and the interest expense on the Existing Notes
after the Issue Date.

 

“Unrestricted Subsidiary” of any Person means:

 

(1)          any Subsidiary of such Person that at the
time of determination shall be or continue to be designated an Unrestricted
Subsidiary by the Board of Directors of such Person in the manner provided
below and

 

(2)          any Subsidiary of an Unrestricted Subsidiary.

 

The Board of Directors may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Corporation
or any Restricted Subsidiary of the Corporation that is not a Subsidiary of the
Subsidiary to be so designated; provided that each Subsidiary to be so
designated and each of its Subsidiaries has not at the time of designation, and
does not thereafter, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to any Indebtedness pursuant
to which the lender has recourse to any of the assets of the Corporation or any
of its Restricted Subsidiaries (other than the assets of such Restricted
Subsidiary to be designated an Unrestricted Subsidiary and its Subsidiaries).

 

The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if
immediately after giving effect to such designation, the Corporation’s Leverage
Ratio is no more than 5.5 to 1, unless such designated Subsidiary shall, at the
time of designation, have no Indebtedness outstanding other than Indebtedness
that can be incurred pursuant to Section 5(a) above.

 

24

 

Notwithstanding the foregoing,
to the extent Federal Express Trust No. 1991-B and Federal Express Trust No.
1991-A are Subsidiaries of the Corporation, each such entity will be an
Unrestricted Subsidiary of the Corporation unless and until the Board of
Directors of the Corporation designates it to be a Restricted Subsidiary in
accordance with the foregoing provisions.

 

“Wholly Owned Restricted Subsidiary” of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than, in the case of a foreign Restricted Subsidiary,
directors’ qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person or
any Wholly Owned Restricted Subsidiary of such Person.

 

 

[Signature Page Follows]

 

25

 

IN WITNESS
WHEREOF, the Corporation has caused the Statement of Designation to be duly
executed in its corporate name on this      day of
August, 2003.

 

 

	
  Kinetic
  Concepts, Inc.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
  Dennert O.
  Ware

  
	
  Title:

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
  Dennis E.
  Noll

  
	
  Title:

  	
  Senior Vice-President,
  General Counsel and Secretary

  

 

This instrument was
acknowledged before me on
                             
by Dennert O. Ware, President and Chief Executive Officer and, Dennis E. Noll,
as Secretary of Kinetic Concepts, Inc.

 

 

	
   

  	
   

  
	
  Notary Public

  
	
   

  
	
  (Seal, if
  any)

  

 

 

[Signature Page to
Statement of Designations]Exhibit 10.10

 

WAIVER AND CONSENT

 

THIS WAIVER AND CONSENT (this “Waiver
and Consent”), dated December
       , 2002 but effective for all purposes
as of September 27, 2002, is executed by KINETIC CONCEPTS, INC., a Texas
corporation (the “Company”),
JAMES R. LEININGER (“Pledgor”),
each of the SHAREHOLDERS of the Company under that certain Agreement Among
Shareholders (the “Shareholders’ Agreement”),
dated November 5, 1997, by and among the Company and the Shareholders of the
Company named therein (such shareholders, other than Pledgor, referred to
herein as the “Shareholders”),
JPMORGAN CHASE BANK, a New York
banking corporation (“Chase”),
in its capacity as administrative agent for the Lenders (as defined herein) (in
such capacity, together with its successors in such capacity, “Administrative Agent”), and Chase and
BANK ONE, NA, in their capacity as lenders (together with their respective
successors and assigns, individually a “Lender”
and collectively the “Lenders”)
and as issuing lenders.  (Capitalized terms
not defined herein shall have the same meanings set forth in the Shareholders’
Agreement).

 

RECITALS

 

WHEREAS, Pledgor is a party to that certain Amended and Restated Credit
Agreement (the “Credit Agreement”),
dated as of September 27, 2002, among Pledgor, Administrative Agent and the
Lenders; and

 

WHEREAS, the Lenders have agreed to make certain extensions of credit
to Pledgor and certain affiliates of Pledgor pursuant to the terms of the
Credit Agreement, conditioned on the indebtedness and obligations of Pledgor
and such affiliates under the Credit Agreement and the other loan documents (as
defined in the Credit Agreement) (such indebtedness and obligations as
referenced and defined in the Credit Agreement being also referred to herein as
the “Obligations”) being
secured by, among other collateral, such of Pledgor’s shares as constitute
19.947% of the outstanding Common Stock of the Company (the “Shares”), pursuant to that certain
Security and Pledge Agreement (the “Security
and Pledge Agreement”) to be entered into by and between
Pledgor, and Administrative Agent, for the benefit of Lenders; and

 

WHEREAS, the agreements of the Lenders under the Credit Agreement are
further conditioned on the execution and delivery of this Consent and Waiver by
the Company and the Shareholders evidencing certain agreements of the Company
and the Shareholders with respect to the rights of the Administrative Agent and
the Lenders under the Security and Pledge Agreement; and

 

WHEREAS, the Company and the Shareholders have agreed to enter into
this Consent and Waiver conditioned upon the agreements of the Administrative
Agent and the Lenders set forth herein.

 

NOW THEREFORE, for valuable consideration hereby acknowledged, the
Company, Pledgor, each of the Shareholders, the Administrative Agent and the
Lenders, hereby agree as follows:

 

 

1.  Waiver and Consent.

 

(a)                                  Notwithstanding
the provisions of Section 2.01 and Section 2.02 of the Shareholders’ Agreement,
each of the Company and the Shareholders hereby consent (i) to the pledge of
the Shares by Pledgor to Administrative Agent for the benefit of the Lenders
under the Security and Pledge Agreement and, subject to the provisions set
forth herein, any exercise of the rights or remedies with respect to a
disposition of the Shares pursuant to the Security and Pledge Agreement, and
(ii) subject to the provisions set forth herein, to any subsequent Transfer by
Administrative Agent or any Holder (as defined herein) to any Person who agrees
to be bound by the Shareholders’ Agreement;

 

(b)                                 Should
the Administrative Agent elect to accept in full or partial satisfaction of any
indebtedness secured under the Security and Pledge Agreement any or all of the
Shares pursuant to Section 9.620 of the Texas Business and Commerce Code, in
connection with the exercise of its rights and remedies under the Security and
Pledge Agreement, each of the Company and the Shareholders hereby consent to
such acceptance by the Administrative Agent and, except as otherwise expressly
set forth herein, waive any rights to a proposal under Section 9.621 of the
Texas Business and Commerce Code; and

 

(c)                                  Subject
to the provisions set forth herein, each of the Company and the Shareholders
hereby waive any and all rights provided under Section 2.03 of the Shareholders’
Agreement, including but not limited to all tag-along and Participation Offer
rights, in connection with the Pledge, resulting from any Foreclosure
Disposition (as hereinafter defined), and, in the event that the Administrative
Agent on behalf of the Lenders, or any of the Lenders individually, or any of
their respective affiliates acquires the Shares pursuant to a Foreclosure
Disposition, any subsequent Transfer by the Administrative Agent or such Lender
or affiliate made to any Person, provided however, in the case of any such
subsequent transfer by the Administrative Agent, any Lender or any such
affiliate, such rights are waived only to the extent of those Shares are
transferred for consideration equal to or less than $50,000,000, in the
aggregate.  Pledgor, the Shareholders
and the Company agree that the Participation Offer rights shall be suspended in
connection with any sale, transfer or conveyance made by each of the
Shareholders, but only to the extent that the aggregate consideration for the
shares transferred by any such Shareholder are equal to or less than
$50,000,000.  Upon the later of (i) the
termination of the Security and Pledge Agreement or (ii) a subsequent Transfer
of the Shares by Administrative Agent or any Holder to any Person in connection
with a disposition of the Shares, all of the rights, duties and obligations of
the Pledgor, the Shareholders and any transferee who agrees to be bound by the
Shareholders’ Agreement with respect to the Participation Offer rights under
Section 2.03 shall be fully reinstated.

 

2.  Notice of Default.  Pledgor
covenants and agrees to promptly deliver to the Shareholders and the Company
upon receipt thereof, and in any event within three (3) business days of the
receipt thereof, any Default Notice (as such term is defined in the Security
and Pledge Agreement) under the Security and Pledge Agreement and any
subsequent communication, written or oral, regarding such default and any
proposed sale or transfer of the Shares, including without limitation, a Foreclosure
Disposition.

 

3.  Notice of Foreclosure
Disposition; Public Sale.  In the event that the Lenders elect to direct the Administrative Agent to
conduct a sale of any of the Shares, or any portion thereof, in

 

 

connection with the exercise any of its remedies under the Security and
Pledge Agreement (a “Foreclosure
Disposition”), then, in the
case of a Foreclosure Disposition which is to be a public sale:

 

(a)                                  Each
of the Company and the Shareholders shall receive written notice from the
Administrative Agent of the time and place of such Foreclosure Disposition and
the Note Purchase Price as of such date not less than ten (10) business days
prior to the date of such Foreclosure Disposition, such notice to be given in
accordance with the provisions of Section 15 hereof (the “Foreclosure Sale Notice”), and such
Foreclosure Disposition shall not occur prior to the expiration of the
Pre-Foreclosure Option Period (as defined in Section 4 below).  If the Company and/or any of the
Shareholders agree to purchase any or all of the Shares in the Foreclosure
Disposition, then the closing of such purchases shall take place on the
forty-fifth (45th) day of such agreement, unless the Administrative
Agent and all such purchasers agree to a different closing date.

 

(b)                                 The
Foreclosure Disposition shall be conditioned upon the right of the Company and
the Shareholders to approve the public sale purchaser within a period of ten
(10) business days following the date of their receipt of Foreclosure Notice
(as hereinafter defined), and shall not be deemed to be consummated until the
obtainment (or deemed obtainment) of the approvals contemplated by Section
3(c) below; provided, however, that in the event that the Administrative
Agent on behalf of the Lenders that are Lenders as of the date hereof, or any
assignee which is a nationally or state chartered bank, federal savings bank,
quasi-governmental lending agency or similar banking or lending institution, or
any of such Lenders individually, or any of their respective affiliates shall
be the public sale purchaser at a Foreclosure Disposition, then such sale shall
be deemed approved by the Company and the Shareholders and no further approval
as provided in this Section 3 shall be required.

 

(c)                                  The
Administrative Agent shall deliver to the Company and each of the Shareholders
written notice of the occurrence of such conditional Foreclosure Disposition
and the name of the public sale purchaser (the “Foreclosure
Notice”).  Within ten
(10) business days following receipt of the Foreclosure Notice, the Company and
each of the Shareholders shall deliver to the Administrative Agent, in writing,
either (i) its approval of the public sale purchaser as set forth in the
Foreclosure Notice, or (ii) its election to purchase the Obligations from the
Lenders pursuant to the provisions of Section 6 below.  The failure of the Company or any of the
Shareholders to deliver its written approval of the public sale purchaser or
election to purchase the Obligations prior to the expiration of such ten (10)
business day period shall be deemed to constitute the approval of the public
sale purchaser as set forth in the Foreclosure Notice and, unless one of the
Company or any of the Shareholders shall deny its approval of the public sale
purchaser, the Administrative Agent shall have the right to consummate the
Foreclosure Disposition, provided that as a condition precedent to such
transfer, such public sale purchaser becomes a party to and agrees to be bound
by all terms and conditions of the Shareholders’ Agreement.

 

4.  Pre-Foreclosure Purchase Option.  Prior to any
Foreclosure Disposition, the Administrative Agent and each of the Lenders
agrees that the Company and the Shareholders shall have the exclusive option to
purchase (i) the Obligations (the “Pre-Foreclosure
Note Option”) at the price
and upon the terms and conditions set forth in Section 6 hereof or (ii)
the Shares (the “Pre-Foreclosure
Purchase Option”) at price
(the “Pre-Foreclosure Purchase
Price”) equal to the

 

 

Appraised Value (as defined in the Security and Pledge Agreement) of
such Shares (the “Pre-Foreclosure
Shares”).

 

(a)                                  To
exercise the Pre-Foreclosure Note Option or Pre-Foreclosure Purchase Option,
the Company and/or Shareholders (a “Pre-Foreclosure Exercising
Party”) shall deliver to the Administrative Agent written notice
(the “Pre-Foreclosure Purchase Notice”)
of its intention to exercise the Pre-Foreclosure Note Option or Pre-Foreclosure
Purchase Option not later than ten (10) business days following the delivery of
the Foreclosure Sale Notice (the “Pre-Foreclosure Purchase
Option Exercise Period”).

 

(b)                                 If
the Company and/or Shareholders do not exercise the Pre-Foreclosure Note
Option, but the Company and/or any of the Shareholders have elected to exercise
the Pre-Foreclosure Purchase Option prior to the expiration of the
Pre-Foreclosure Note Option Exercise Period, then the closing of the
Pre-Foreclosure Purchase Option shall occur on or before the forty-fifth (45th)
day after the Pre-Foreclosure Purchase Notice is delivered.  To the extent that more than one of the
Company and/or the Shareholders desire to exercise such option to acquire the
Pre-Foreclosure Shares, then such option shall be an option exercisable first
by the Company and then to the extent not fully exercised by the Company,
jointly by the Shareholders with respect to the remaining Pre-Foreclosure
Shares to the extent of their respective pro rata interests (as defined below);
provided, however, in no event shall the option to acquire the Pre-Foreclosure
Shares be exercisable with respect to less than the number of Shares that have
an aggregate Pre-Foreclosure Purchase Price equal to the Note Purchase Price
or, if the Pre-Foreclosure Purchase Price for all of the Pre-Foreclosure Shares
is less than or equal to the Note Purchase Price, all of the Pre-Foreclosure
Shares.  For purposes of this Section
4(b), the term “pro rata interest” shall mean the ratio of the number of
shares of Common Stock held by a Pre-Foreclosure Exercising Party (other than
the Company) to the number of shares of Common Stock held by all
Pre-Foreclosure Exercising Parties (other than the Company).  At such closing, the Administrative Agent
shall deliver any and all certificates, instruments and/or other documents
representing the Pre-Foreclosure Shares, free and clear of the security
interests of the Lenders, in the form reasonably requested by the
Pre-Foreclosure Exercising Party, but without recourse or warranty, express or
implied, and the Pre-Foreclosure Exercising Party shall deliver a bank or certified
check (or wire transfer) to the Administrative Agent, in an amount equal to the
Pre-Foreclosure Purchase Price.

 

(c)                                  Pledgor
acknowledges and agrees that a transfer of the Pre-Foreclosure Shares pursuant
this Section 4 shall constitute a commercially reasonable sale under the
applicable provisions of the Uniform Commercial Code as in effect in the State
of Texas (the “UCC”) and a
proper disposition of the collateral pursuant to the security interest granted
to the Administrative Agent for the benefit of the Lenders under the Security
and Pledge Agreement, and Pledgor shall have no right to contest the amount of
the consideration or credit given with respect to the Lender Acquired Shares in
accordance with this Section 4.

 

(d)                                 Notwithstanding
anything in this Section 4 or otherwise in this Waiver and Consent to
the contrary, nothing herein shall preclude the Administrative Agent and/or the
Lenders, or any of them, from taking steps permitted by applicable laws
preliminary to the conduct of a public or private sale or other disposition in
accordance with the rights and remedies of the Lenders under the Security and
Pledge Agreement and/or the UCC or otherwise under the Loan Documents.

 

 

5.  Private Sale Offers and Rights of
First Refusal.  If the Company and/or Shareholders do not
exercise the Pre-Foreclosure Note Option or Pre-Foreclosure Purchase Option
prior to the expiration of the Pre-Foreclosure Purchase Option Exercise Period,
then, in the event of a proposed Foreclosure Disposition which is to be a
private sale pursuant to an offer for the purchase and sale of the Shares, or
any portion thereof, which the Lenders desire to accept (a “Proposed Private Sale Offer”), then the Administrative Agent shall deliver to
the Company and the Shareholders written notice of the Proposed Private Sale
Offer in accordance with the provisions of Section 5(a) below (the “Private Sale Notice”), and the Company and the Shareholders shall
have the right to purchase the Shares which are the subject of the Proposed Private
Sale Offer (the “Private
Sale Offered Shares”) on the
same terms and conditions as the Proposed Private Sale Offer in accordance with
and subject to the provisions of Section 5(b) below.

 

(a)                                  The
Administrative Agent shall deliver to the Company and to each of the
Shareholders a Private Sale Notice prior to its acceptance of any Proposed
Private Sale Offer, in the manner and at the addresses set forth in Section
15 hereof.  The Private Sale Notice
shall disclose the terms of the Proposed Private Sale Offer, including the
number of Private Sale Offered Shares, the aggregate purchase price for the
Private Sale Offered Shares, the name of the proposed transferee, the method of
payment, the closing date of such proposed transfer, and all other material terms
and conditions of the Proposed Private Sale Offer and the Note Purchase Price
as of such date.

 

(b)                                 On
receipt of the Private Sale Notice, the Company and each of the Shareholders
(and their respective nominees) shall have the right and option to acquire the
Private Sale Offered Shares, on the same terms and conditions as set forth in
the Proposed Private Sale Offer, except that (i) the closing date shall be the
date which is forty-five (45) days following the expiration of the Private Sale
Offer Notice Period (as defined below), (ii) if the Proposed Private Sale Offer
specifies consideration other than cash, the consideration shall be the cash
equivalent of the consideration specified in the Proposed Private Sale Offer,
and (iii) to the extent that more than one of the Company and/or the
Shareholders desire to exercise such option to acquire the Private Sale Offered
Shares, then such option shall be an option exercisable first by the Company
and then to the extent not fully exercised by the Company, jointly by the
Shareholders with respect to the remaining Private Sale Offered Shares to the
extent of their respective pro rata interests (as defined below); provided,
however, in no event shall the option to acquire the Private Sale Offered
Shares be exercisable with respect to less than the entirety of the Private
Sale Offered Shares.  If either the
Company and/or any Shareholder elects to exercise its option to acquire the
Private Sale Offered Shares (a “Private Sale Exercising
Party”), such Private Sale Exercising Party shall give notice to
the Administrative Agent within ten (10) business days of its receipt of such
Private Sale Offer Notice (the “Private Sale Offer Notice
Period”).  For purposes
of this Waiver and Consent, the term “pro rata interest” shall mean the ratio
of the number of shares of Common Stock held by a Private Sale Exercising Party
(other than the Company) to the number of shares of Common Stock held by all
Private Sale Exercising Parties (other than the Company).  For purposes of this Section 5.5(b), the
term “cash equivalent” shall mean (i) the value ascribed to the consideration
by mutual agreement of the Administrative Agent and the Private Sale Exercising
Parties within five (5) business days of the expiration of the Private Sale Offer
Notice Period or (ii) if no such agreement is reached within five (5) business
days of the expiration of the Private Sale Offer Notice Period, the value
ascribed to such consideration by a nationally-recognized investment bank or
appraisal firm engaged by the tenth (10th) business day after the
expiration of the Private Sale Offer Notice Period by the Private Sale
Exercising Parties and reasonably acceptable to the Administrative Agent (the

 

 

fees and
expenses of which shall be borne by Pledgor), which firm shall use a valuation
methodology supplied by the Private Sale Exercising Parties and reasonably
acceptable to the Administrative Agent, and which firm shall be directed to
provide its valuation within thirty (30) days of its engagement.

 

(c)                                  At
the closing of any sale of the Private Sale Offered Shares to a Private Sale
Exercising Party pursuant to the provisions of this Section 5, the
Administrative Agent shall deliver any and all certificates, instruments and/or
other documents representing the Private Sale Offered Shares, free and clear of
the security interests of the Lenders, in the form reasonably requested by the
Private Sale Exercising Party but without recourse or warranty, express or
implied, and the Private Sale Exercising Party shall deliver a bank or
certified check (or wire transfer) to the Administrative Agent in an amount
equal to the aggregate purchase price set forth in the Proposed Private Sale
Offer.

 

(d)                                 If
none of the Company and any of the Shareholders elects to exercise the option
to acquire the Private Sale Offered Shares pursuant to this Section 5,
then, prior to the expiration of the Private Sale Offer Notice Period, each of
the Company and each Shareholder shall deliver to the Administrative Agent, in
writing, either (i) its consent to the Transfer pursuant to the Proposed
Private Sale Offer, or (ii) its election to purchase the Obligations from the
Lenders pursuant to the provisions of Section 6 below.  The failure of the Company or any
Shareholder to deliver its written consent or election to purchase the
Obligations prior to the expiration of the Private Sale Offer Notice Period
shall be deemed to constitute the consent of such party to the Transfer of the
Private Sale Offered Shares pursuant to the terms of the Proposed Private Sale
Offer, and, if (x) there shall be no Private Sale Exercising Party pursuant to
the provisions of this Section 5 (or if any such Private Sale Exercising
Party shall fail to consummate the acquisition of the Private Sale Offered
Shares as set forth herein) and (y) and neither the Company nor any of the
Shareholders elects to purchase the Obligations from the Lenders pursuant to
the provisions of Section 6 below, then the Administrative Agent shall
have the right to transfer the Private Sale Offered Shares to the proposed
transferee on the same terms and conditions set forth in the Private Sale Offer
Notice, provided that as a condition precedent to such transfer, such proposed
transferee becomes a party to and agrees to be bound by all terms and conditions
of the Shareholders’ Agreement and such condition shall not be waived or
modified.

 

(e)                                  Notwithstanding
anything in this Section 5 or otherwise in this Waiver and Consent to
the contrary, nothing herein shall preclude the Administrative Agent and/or the
Lenders, or any of them, from taking steps permitted by applicable laws
preliminary to the conduct of a private sale or other disposition in accordance
with the rights and remedies of the Lenders under the Security and Pledge
Agreement and/or the UCC or otherwise under the Loan Documents.

 

(f)                                    Pledgor
acknowledges and agrees that a transfer of the Shares pursuant this Section
5 shall constitute a commercially reasonable sale under the UCC and a
proper disposition of the collateral pursuant to the security interest granted
to the Administrative Agent for the benefit of the Lenders under the Security
and Pledge Agreement, and Pledgor shall have no right to contest the amount of
the consideration or credit given with respect to the Lender Acquired Shares in
accordance with this Section 5.

 

 

6.  Note Purchase Obligation.  If any of the
Company or the Shareholders elect to purchase the Obligations from the Lenders
(whether one or more, the “Note
Purchasing Party”), (a)
pursuant to Section 4(a) or (b) in lieu of (i) granting its approval or
deemed approval of public sale purchaser disclosed in a Foreclosure Notice,
(ii) granting its consent or deemed consent to a Transfer pursuant to a
Proposed Private Sale Offer, or (iii) becoming a Private Sale Exercising Party
pursuant to the provisions of Section 5 above, as applicable, Lenders
agree to sell and transfer to the Note Purchasing Party, and the Note
Purchasing Party agrees to purchase and assume the Leininger Term Notes,
Designated Affiliate Term Notes and L/C Obligations (as each is defined in the
Credit Agreement) (the Leininger Term Notes, Designated Affiliate Term Notes
and L/C Obligations are collectively, the “Term Notes”),
including all of the rights, interests and obligations of the Lenders under
those of the Loan Documents (as such term is defined under the Credit
Agreement) more particularly described on Annex B attached hereto (the “Assigned Loan Documents”), for a purchase price equal to the amount then
due under the Term Notes (the “Note
Purchase Price”), including
all accrued but unpaid interest, and all reasonable out-of-pocket fees and
expenses incurred by the Lenders in connection with the enforcement of the Loan
Documents as set forth in the Foreclosure Sale Notice or Private Sale Notice,
as applicable.

 

(a)                                  The
sale and assignment of the Assigned Loan Documents to the Shareholders shall
occur on or before forty-five (45) days after the expiration of the
Pre-Foreclosure Purchase Option Exercise Period or Private Sale Offer Notice
Period, as applicable.  To the extent
that more than one of the Company and/or the Shareholders elect to acquire the
Assigned Loan Documents in accordance with Section 6(a), then such
option shall be an option exercisable first by the Company and then to the
extent not fully exercised by the Company, shall be exercised jointly by the
remaining Note Purchasing Parties to the extent of their respective pro rata
interests (as defined below) unless otherwise agreed to by the Note Purchasing
Parties; provided, however, in no event shall the option to acquire the Term
Notes be exercisable with respect to less than the entirety of the Term
Notes.  For purposes of this Section
6(b), the term “pro rata interest” shall mean the ratio of the number of
shares of Common Stock held by a Note Purchasing Party (other than the Company)
to the number of shares of Common Stock held by all Note Purchasing Parties
(other than the Company).  At such
closing, the Administrative Agent and the Lenders shall deliver an instrument
of assignment which is reasonably acceptable to the Lenders and the Note
Purchasing Party (subject to the provisions of Section 6(b) below),
endorse the Term Notes to the Note Purchasing Party (or its designee), without
recourse or warranty (subject to the provisions of Section 6(b) below),
and deliver to the Note Purchasing Party the originals of the Term Notes and
the other Assigned Loan Documents, the certificates evidencing the Shares, the
stock powers held by the Administrative Agent with respect thereto, and such
other instruments of conveyance or assignment as shall be reasonably necessary
to transfer to the Note Purchasing Party the Obligations and the rights and
interests of the Lenders under the Assigned Loan Documents free and clear of
liens and encumbrances (subject to the provisions of Section 6(b)
below), and the Shareholders shall deliver a bank or certified check (or wire
transfer) to the Administrative Agent, in an amount equal to the Note Purchase
Price, together with such other acknowledgements of receipt and assumption of
the obligations of the Administrative Agents and the Lenders under the Assigned
Loan Documents, including but not limited to the obligations to fund the
outstanding Letters of Credit (as defined in the Credit Agreement), if any, up
to the face amount of such L/C Obligations set forth on Annex B, subject
to the terms and conditions thereof.

 

 

(b)                                 Lenders’
assignment of the Term Notes and the other Assigned Loan Documents will be
without recourse, warranty or representation, express or implied, except that
each of the Lenders will represent and warrant to the Note Purchasing Party (i)
the amount of the unpaid principal balance and accrued interest due and owing
in respect of the Term Notes as of the date of the assignment, (ii) the amounts
to be funded under any of the outstanding Letters of Credit, and (iii) that
such Lender has not sold, assigned or pledged its interest in the Loan
Documents in whole or in part to any person or entity that is not a party to
such assignment.

 

(c)                                  The
Company and the Shareholders acknowledge and agree that, upon the conveyance to
the Note Purchasing Party of the Assigned Loan Documents, the maturity date of
the Term Notes shall be automatically be reinstated and extended to the date
which is one (1) year from the date of the conveyance of the Assigned Loan
Documents.  Pledgor acknowledges and
agrees that, upon the conveyance to the Note Purchasing Party of the Assigned
Loan Documents, the Obligations shall continued to be secured by all of the
collateral (or any portion thereof, at the option of the Note Purchasing Party)
securing the Obligations under the Loan Documents enforceable as of the date of
the Foreclosure Notice.  The Note
Purchasing Party agrees to act reasonably and to cooperate with the Lenders in
consummating the sale and assignment of the Lenders’ interest in the Term
Notes.

 

(d)                                 The
Administrative Agent and the Lenders agree that the Obligations under the Loan
Documents shall not be increased without the consent of the Company and the
Shareholders which shall not be unreasonably withheld.

 

(e)                                  The
rights granted to the Company and the Shareholders under this Section 6
shall not require any notice to or consent of any of the Company or the
Shareholders with respect to any of the Loan Documents or the exercise of any
of the rights or remedies of the Lenders thereunder except as specifically set
forth in this Agreement with respect to the exercise of the remedies of the
Lenders under the Security and Pledge Agreement (in the event of the election
of the Lenders to exercise such rights and remedies), it being understood and
agreed by the Company and the Shareholders that the Loan Documents, and any and
all of the terms or provisions thereof, may be exercised, waived, modified,
amended, supplemented, released, renewed or extended by the Lenders in the sole
and absolute discretion.

 

7.  Company and Shareholder Purchase Option. 

 

(a)                                  If
the Company and/or the Shareholders do not exercise the Pre-Foreclosure Note
Option or Pre-Foreclosure Purchase Option prior to the expiration of the
Pre-Foreclosure Purchase Option Exercise Period, then, if the Administrative
Agent on behalf of the Lenders, or any of the Lenders individually, or any of
their respective affiliates (such acquiror referred to herein as the “Holder”), shall acquire all or any
portion of the Shares in connection with the exercise of the rights and
remedies of the Lenders under the Security and Pledge Agreement, whether
pursuant to a Foreclosure Disposition or otherwise (the “Lender
Acquired Shares”), the Administrative Agent shall give written
notice thereof promptly following such acquisition of the Shares, and each of
the Lenders that the Company and Shareholders shall have the exclusive option
to purchase all of the Lender Acquired Shares (the “Purchase
Option”), exercisable during the period set forth in Section
7(b), at a purchase price equal to the amount of the consideration paid or
credit given with respect to the Lender Acquired Shares plus two percent
(2%) of such amount (the “Exercise Price”).  Each of

 

 

the
Administrative Agent and the Lenders agrees to cause any affiliate thereof who
becomes a Holder to acknowledge that its acquisition of the Shares is subject
to the provisions of this Waiver and Consent.

 

(b)                                 To exercise the
Pre-Foreclosure Purchase Option, the Company and/or Shareholders (a “Purchase Option Exercising Party”)
shall deliver to the Holder of the Lender Acquired Shares written notice (the “Purchase Option Notice”) of its
intention to exercise the Purchase Option not later than ten (10) business days
following the delivery of the notice specified in Section 7(a) (the “Purchase Option Exercise Period”),
and the closing of the Purchase Option shall occur on or before the forty-fifth
(45th) day after the Purchase Option Notice is delivered.  To the extent that more than one of the
Company and/or the Shareholders desire to exercise such option to acquire the
Lender Acquired Shares, then such option shall be an option exercisable first
by the Company and then to the extent not fully exercised by the Company,
jointly by the Shareholders with respect to the remaining Lender Acquired
Shares to the extent of their respective pro rata interests (as defined below);
provided, however, in no event shall the option to acquire the Lender Acquired
Shares be exercisable with respect to less than the entirety of the Lender
Acquired Shares.  For purposes of this Section
7(b), the term “pro rata interest” shall mean the ratio of the number of
shares of Common Stock held by a Purchase Option Exercising Party (other than
the Company) to the number of shares of Common Stock held by all Purchase
Option Exercising Parties (other than the Company).  At such closing, the Holder of the Lender Acquired Shares shall
deliver any and all certificates, instruments and/or other documents
representing the Lender Acquired Shares free and clear of the security
interests of the Lenders, in a form reasonably requested by the Purchase Option
Exercising Party, but without recourse or warranty, express or implied, and the
Purchase Option Exercising Party shall deliver a bank or certified check (or
wire transfer) to the Holder of the Lender Acquired Shares, in an amount equal
to the Exercise Price for the Lender Acquired Shares.

 

(c)                                  Pledgor acknowledges
and agrees that it shall have no right to contest the validity or propriety of
any transfer of the Shares which may be made by the Holder pursuant to this Section
7, or the amount of the consideration or credit given with respect to the
Lender Acquired Shares.

 

(d)                                 At
the expiration of the Purchase Option Exercise Period, the Purchase Option and
all rights and obligations associated therewith and described herein shall
automatically and with no further action expire and terminate.

 

(e)                                  Notwithstanding
anything in this Section 7 or otherwise in this Waiver and Consent to
the contrary, nothing herein shall preclude the Administrative Agent and/or the
Lenders, or any of them, from marketing the Lender Acquired Shares, in
compliance with applicable laws, at any time to any third party.

 

8.  Proposed Purchase Offers and
Rights of First Refusal.  If all or any portion of the Shares shall be acquired by a Holder in
connection with the exercise of the rights and remedies of the Lenders under
the Security and Pledge Agreement, whether pursuant to a Foreclosure
Disposition or otherwise, and neither the Company nor any Shareholder does not
exercise the Purchase Option prior to the expiration of the Purchase Option
Exercise Period, then, if the Holder of the Shares obtains an offer for the
sale and purchase of the Shares which the Holder desires to accept from any
third party pursuant to a bona fide offer or private placement (a “Proposed

 

 

Purchase Offer”), the Administrative Agent shall deliver to the Company and the
Shareholders written notice of the Proposed Purchase Offer in accordance with
the provisions of Section 8(a) below (the “Offer Notice”) and
the Company and the Shareholders shall have the right to purchase the Lender
Acquired Shares which are the subject of the Proposed Purchase Offer (the “Offered Shares”) on the same terms and conditions as the
Proposed Purchase Offer in accordance with and subject to the provisions of Section
8(b) below.

 

(a)                                  The
Holder shall deliver to the Company and to each of the Shareholders prior to
its acceptance of any Proposed Purchase Offer, in the manner and at the
addresses set forth in Section 15 hereof, the Offer Notice.  The Offer Notice shall disclose the terms of
the Proposed Purchase Offer, including the number of Offered Shares, the aggregate
purchase price for the Offered Shares, the name of the proposed transferee, the
method of payment, the closing date of such proposed transfer, and all other
material terms and conditions of the Proposed Purchase Offer.

 

(b)                                 On
receipt of the Offer Notice, the Company and each of the Shareholders shall
have the right and option to acquire the Offered Shares, on the same terms and
conditions as set forth in the Offer Notice, except that (i) the closing date
shall be the date which is forty-five (45) days following the expiration of the
Right of First Refusal Notice Period (as defined below), (ii) if the Proposed
Purchase Offer specifies consideration other than cash, the consideration shall
be the cash equivalent of the consideration specified in the Proposed Purchase
Offer, and (iii) to the extent that more than one of the Company and/or the
Shareholders desire to exercise such option to acquire the Offered Shares, then
such option shall be an option exercisable first by the Company and then to the
extent not fully exercisable by the Company, jointly by the Shareholders with
respect to the remaining Offered Shares to the extent of their respective pro
rata interests; provided, however, in no event shall the option to acquire the
Offered Shares be exercisable with respect to less than the entirety of the
Offered Shares.  If either the Company
and/or any Shareholder elects to exercise its option to acquire the Offered
Shares pursuant to this Section 8 (an “Exercising
Party”), such Exercising Party shall give notice to the Holder
of the Lender Acquired Shares within ten (10) business days of its receipt of
such Offer Notice (the “Right of First Refusal
Notice Period”).  For
purposes of this Section 8.5(b), the term “cash equivalent” shall mean (i) the
value ascribed to the consideration by mutual agreement of the Administrative
Agent and the Exercising Parties within five (5) business days of the
expiration of the Right of First Refusal Notice Period or (ii) if no such
agreement is reached within five (5) business days of the expiration of the
Right of First Refusal Notice Period, the value ascribed to such consideration
by a nationally-recognized investment bank or appraisal firm engaged by the
tenth (10th) business day after the expiration of the Right of First
Refusal Notice Period by the Exercising Parties and reasonably acceptable to
the Administrative Agent (the fees and expenses of which shall be borne by
Pledgor), which firm shall use a valuation methodology supplied by the
Exercising Parties and reasonably acceptable to the Administrative Agent, and
which firm shall be directed to provide its valuation within thirty (30) days
of its engagement.

 

(c)                                  If
any of the Company or any of the Shareholders do not elect to exercise its
option to acquire the Offered Shares pursuant to this Section 8 (a “Non-Exercising Party”), then, prior
to the expiration of the Right of First Refusal Notice Period, such
Non-Exercising Party shall deliver to the Administrative Agent, in writing, its
consent or denial of consent to the acceptance by the Holder of the Proposed
Purchase Offer and a Transfer pursuant to the Proposed Purchase Offer
(conditioned upon the failure of any of the Company or any Shareholder to
become an Exercising

 

 

Party pursuant
to the provisions of this Section 8), which consent shall not be
unreasonably withheld.  The failure of a
Non-Exercising Party to deliver its written consent or denial of consent prior
to the expiration of the Right of First Refusal Notice Period shall be deemed
to constitute the consent of such Non-Exercising Party to the Transfer of the
Offered Shares pursuant to the terms of the Offer Notice.  Notwithstanding the giving of any consent to
the acceptance and Transfer, it shall be provided that as a condition precedent
to such Transfer that such proposed transferee becomes a party to and agrees to
be bound by all terms and conditions of the Shareholders’ Agreement and such
condition shall not be waived or modified.

 

(d)                                 At
the closing of any sale of the Offered Shares to an Exercising Party pursuant
to the provisions of this Section 8, the Holder of the Offered Shares
shall deliver any and all certificates, instruments and/or other documents
representing the Offered Shares free and clear of the security interest of the
Lenders and in a form reasonably requested by the Company and/or Shareholders
acquiring the Offered Shares, but without recourse or warranty, express or
implied, and the Company and/or Shareholders shall deliver a bank or certified
check (or wire transfer) to the Holder of the Offered Shares in an amount equal
to the aggregate purchase price set forth in the Offer Notice.

 

9.  Right of Inspection and Audit.  The Company hereby
covenants and agrees to permit the Administrative Agent or any of its agents or
representatives, including but not limited to any accountants, investment
bankers, attorneys and other financial, business or legal consultants, to visit
and inspect the financial records and statements, inventory or properties of
the Company, to discuss the affairs, finances, and accounts of the Company and
to otherwise assist Administrative Agent in conducting an appraisal of the
Shares and a valuation of the equity of the Company, during normal business
hours, at any reasonable time and from time to time (“Appraisal and Marketing
Investigations”).  It shall be a condition to the Company’s
obligation to provide any information that the Administrative Agent and any
other party or entity receiving such information shall enter into a
confidentiality agreement in the form of Annex A hereto.  Such inspection right shall commence upon
receipt of a bona fide Default Notice under Section 2 and continue
during any Event of Default (as defined in the Security and Pledge Agreement)
and shall terminate upon the earliest to occur of (i) consummation of an
initial public offering of the Company’s equity securities, (ii) acceptance of
any or all of the Shares by the Administrative Agent in full or partial
satisfaction of any indebtedness secured under the Security and Pledge
Agreement, (iii) consummation of a Foreclosure Disposition, and (iv)
consummation of a private placement or other disposition of any or all of the
Shares.  The Administrative Agent agrees
that the scope of the Appraisal and Marketing Investigations shall be limited
to only that information deemed by the Company to be reasonably necessary to
appraise the Shares and value the equity of the Company.  The Administrative Agent agrees that any
such information received from the Company shall be kept confidential and shall
not be disclosed to any other party or entity, except for the Lenders,
affiliated entities of the Administrative Agent and/or the Lenders deemed
reasonably acceptable by the Company, and their respective agents,
representatives and successors.  The
Administrative Agent shall use the same degree of care as the Administrative
Agent takes to preserve and safeguard its own proprietary information.  Any costs, fees and expenses incurred by the
Administrative Agent and/or or the Lenders in connection with any inspection or
Appraisal and Marketing Investigations shall be the sole obligation of Pledgor.

 

 

10.  Other Shareholder Rights
Agreements.

 

(a)                                  Upon
acceptance by the Administrative Agent, for the benefit of the Lenders, of any
or all of the Shares in full or partial satisfaction of the Obligations, or
upon a Transfer of the Shares by the Administrative Agent to any Person in
connection with Administrative Agent’s exercise of any of the rights or
remedies under the Security and Pledge Agreement or otherwise, the
Administrative Agent, any other Holder or any other such transferee shall agree
in writing to become a party to the Shareholders’ Agreement and to be bound by
all of its terms and provisions; provided, however, neither the Administrative
Agent, any other Holder nor any other transferee of the Shares shall be
entitled to the rights, duties, and obligations set forth in Section 3 or
Section 4 of the Shareholders’ Agreement with respect to any acquired Shares
(other than the obligation to vote their shares in accordance with Section 3.01
for directors of the Company which votes shall not be made cumulatively).

 

(b)                                 Notwithstanding
a Transfer of the Shares to the Administrative Agent, the Lenders or any other
third party, Pledgor shall continue to be bound to all of the terms and
conditions of the Shareholders’ Agreement; provided, however, the rights set
forth in Section 3.01, Section 4 and Section 5.01 of the Shareholders’
Agreement shall automatically terminate solely with respect to Pledgor or any
transferee of Pledgor or any subsequent transferee in the event that Pledgor
shall hold title to less than fifty percent (50%) of the shares of Common Stock
of the Company held as of November 5, 1997.

 

(c)                                  Except to the extent
set forth herein, the Shareholders’ Agreement shall remain in full force and
effect and the Shares shall at all times remain subject to all of terms and
provisions of the Shareholders’ Agreement.

 

11.  Release of Shares upon Exercise of Drag-Along Rights.  In the event of a Required Sale, the Seller shall
deliver a copy of any Required Sale Notice to the Administrative Agent.  From and after receipt of such Required Sale
Notice and for so long as the Shares shall remain subject to the Security
Agreement and Pledge, the Administrative Agent and the Lenders shall cooperate
in good faith with the Seller in connection with consummating the Required Sale
(including, without limitation, releasing the Shares to be sold from the
Security and Pledge Agreement and the Credit Agreement upon the payment to it
of the consideration payable to Pledgor incident to the consummation of the
Required Sale to the extent of, in the case of cash consideration, the amount
of the Obligations, the giving of consents and the voting of any Common Stock
held by the Administrative Agent to approve such Required Sale).  On the Required Sale Date, the
Administrative Agent shall deliver, free and clear of the security interests of
the Lenders, a certificate or certificates and/or other instrument or
instruments for all Shares, duly endorsed and in proper form for transfer, to
the Third Party in the manner and at the address indicated in the Required Sale
Notice but conditioned upon the delivery to the Administrative Agent of the
consideration payable to Pledgor incident to the consummation of the Required
Sale to the extent of, in the case of cash consideration, the amount of the
Obligations.

 

12.  No Termination or Amendment of Shareholders’ Agreement.  The Company, Pledgor and each of the Shareholders
hereby covenant and agree not to vote in favor of, or cause, the termination of
the Shareholders’ Agreement, or vote in favor of, or cause, any modification,
extension, renewal, amendment, replacement or alteration of any of the terms of
the Shareholders’

 

 

Agreement without the prior written consent of the Administrative
Agent, which consent shall not be unreasonably withheld.

 

13.  Pledgor Covenant.  Pledgor
covenants and agrees that upon any sale or transfer of the Shares by the
Administrative Agent or any Holder to the Company or any Shareholders in
accordance with this Agreement, Pledgor shall deliver to such purchaser at
closing a certificate signed by the Pledgor attesting that good title is being
passed to the Shares free and clear of all encumbrances.  Notwithstanding the foregoing, the delivery
of such certificate shall not be a condition precedent to consummating any such
transaction

 

14.  Restrictive Legend.  Pledgor
acknowledges and agrees that each certificate representing the Shares shall
bear a legend as follows until the later of (i) the termination of the Security
and Pledge Agreement or (ii) a subsequent Transfer of the Shares by
Administrative Agent or any Holder to any Person in connection with a
disposition of the Shares:

 

“THE
SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A WAIVER AND
CONSENT, DATED DECEMBER      , 2002 BUT EFFECTIVE FOR
ALL PURPOSES AS OF SEPTEMBER 27, 2002, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY, AND SAID SHARES MAY NOT BE SOLD OR TRANSFERRED
EXCEPT IN STRICT ACCORDANCE WITH THE TERMS OF THAT AGREEMENT.  A COPY OF SAID AGREEMENT WILL BE FURNISHED
WITHOUT CHARGE TO THE SHAREHOLDER UPON RECEIPT BY THE COMPANY AT ITS PRINCIPAL
PLACE OF BUSINESS OR REGISTERED OFFICE OF A WRITTEN REQUEST FROM THE HOLDER REQUESTING
SUCH A COPY.”

 

15.  Notices.  All
notices given with respect to this Waiver and Consent shall be in writing and
shall be deemed to have been properly given or served for all purposes (i) if
sent by a nationally recognized overnight carrier for next business day
delivery, on the first business day following deposit of such notice with such
carrier unless such carrier confirms such notice was not delivered, then on the
day such carrier actually delivers such notice, or (ii) if personally
delivered, on the actual date of delivery, or (iii) if sent by certified U.S.
Mail, return receipt requested postage prepaid, on the fifth business day
following the date of mailing, or (iv) if sent by facsimile, then on the actual
date of delivery (as evidenced by a facsimile confirmation) provided that a
copy of the facsimile and confirmation is also sent by regular U.S. Mail,
addressed as follows:

 

 

	
  If to Pledgor:

  	
   

  	
  8122 Datapoint Drive, Suite 1000

  
	
   

  	
   

  	
  San Antonio, Texas  78229

  
	
   

  	
   

  	
  Facsimile:  (210) 614-5841

  
	
   

  	
   

  	
  Attention:  Thomas W. Lyles,
  Jr., President

  

 

 

	
  If to Administrative Agent:

  	
   

  	
  JPMorgan Chase Bank

  
	
   

  	
   

  	
  1020 N.E. Loop 410

  
	
   

  	
   

  	
  San Antonio, Texas  78265-7531

  
	
   

  	
   

  	
  Facsimile:  (210) 829-6126

  
	
   

  	
   

  	
  Attention:  David P. McGee,
  President

  
	
   

  	
   

  	
   

  
	
  with copy to:

  	
   

  	
  Jackson Walker L.L.P.

  
	
   

  	
   

  	
  112 E. Pecan Street, Suite 2100

  
	
   

  	
   

  	
  San Antonio, Texas  78205

  
	
   

  	
   

  	
  Facsimile: (210) 978-7790

  
	
   

  	
   

  	
  Attention:  Eileen E. Sommer,
  Esq.

  
	
   

  	
   

  	
   

  
	
  If to the Company:

  	
   

  	
  Kinetic Concepts, Inc.

  
	
   

  	
   

  	
  8023 Vantage

  
	
   

  	
   

  	
  San Antonio, Texas  78203

  
	
   

  	
   

  	
  Facsimile:

  	
  (210) 255-6993

  
	
   

  	
   

  	
  Attention:

  	
  Dennis Noll, Vice President

  
	
   

  	
   

  	
   

  	
  General Counsel

  
	
   

  	
   

  	
   

  
	
  If to the Shareholders:

  	
   

  	
  Richard C. Blum & Associates, L.P.

  
	
   

  	
   

  	
  909 Montgomery Street, Suite
  400

  
	
   

  	
   

  	
  San Francisco, CA  94133

  
	
   

  	
   

  	
  Facsimile:

  	
  (415) 434-3130

  
	
   

  	
   

  	
  Attention:

  	
  Murray Indick, Esq.

  
	
   

  	
   

  	
   

  	
  Partner and General Counsel

  
	
   

  	
   

  	
   

  
	
  and

  	
   

  	
  Fremont Partners, L.P.

  
	
   

  	
   

  	
  199 Fremont Street, Suite 2300

  
	
   

  	
   

  	
  San Francisco, CA  94105

  
	
   

  	
   

  	
  Facsimile:  (415) 284-8191

  
	
   

  	
   

  	
  Attention:  Kevin Baker, Esq.

  
	
   

  	
   

  	
   

  
	
  with copy to:

  	
   

  	
  Skadden, Arps, Slate, Meagler & Flom LLP

  
	
   

  	
   

  	
  525 University Avenue, Suite 1100

  
	
   

  	
   

  	
  Palo Alto, CA  94403

  
	
   

  	
   

  	
  Facsimile: (650) 470-4570

  
	
   

  	
   

  	
  Attention:  Kenton J. King,
  Esq.

  
	
   

  	
   

  	
   

  
	
  and

  	
   

  	
  Richard Welch

  
	
   

  	
   

  	
  8122 Datapoint Drive, Suite 1000

  
	
   

  	
   

  	
  San Antonio, Texas  78229

  
	
   

  	
   

  	
  Facsimile:  (210) 614-5841

  
	
   

  	
   

  	
  Attention:  Thomas W. Lyles,
  Jr., Esq.

  

 

 

	
  and

  	
   

  	
  Robert Welch

  
	
   

  	
   

  	
  8122 Datapoint Drive, Suite 1000

  
	
   

  	
   

  	
  San Antonio, Texas  78229

  
	
   

  	
   

  	
  Facsimile:  (210) 614-5841

  
	
   

  	
   

  	
  Attention:  Thomas W. Lyles,
  Jr., Esq.

  

 

16.  Further Assurances.  Each
party hereto agrees to perform any further acts and to execute and deliver any
further documents which may be reasonably necessary to carry out the provisions
of this Waiver and Consent.

 

17.  Subsequently Acquired Shares.  For
purposes of this Consent and Waiver, the term “Shares” shall not include any
Common Stock of the Company acquired prior to the Effective Date hereof or
acquired by the Administrative Agent or any of the Lenders, in each case, that
do not constitute the Shares described in the Security and Pledge Agreement.

 

18.  Titles and Captions.  All section titles
or captions in this Waiver and Consent are for convenience only, shall not be
deemed part of this Waiver and Consent and in no way define, limit, extend or
describe the scope or intent of any provisions hereof.

 

19.  Assignment.  This
Waiver and Consent shall be binding upon and inure to the benefit of the
successors and assigns of the respective parties.  Neither this Waiver and Consent nor any right, duty or obligation
created hereby or in any shall be assignable by any party hereto other than a
Lender or a Holder.

 

20.  Choice of Law.  This
Waiver and Consent shall be construed, interpreted and governed in accordance
with the laws of the State of Texas applicable to agreements fully executed,
delivered and performed there.

 

21.  Construction.  This
Waiver and Consent shall be interpreted and construed in accordance with its
fair meaning and not for or against any party to this Waiver and Consent.

 

22.  Severability.  In the
event that any of the provisions, or portions thereof, of this Waiver and
Consent are held to be unenforceable or invalid by any court of competent
jurisdiction, the validity and enforceability of the remaining provisions, or
portions thereof, shall not be affected thereby.

 

23.  Amendment.  No
amendment or modification of this Waiver and Consent shall in any event be
effective against any party hereto unless the same shall be agreed or consented
to in writing by such party.

 

24.  Counterparts.  This
Waiver and Consent may be executed in multiple counterparts, each of which
shall be deemed an original but all of which together will constitute one and
the same instrument and facsimile signatures shall be given the same effect as
original signatures.

 

[Remainder of Page Intentionally Left Blank]

 

 

IN WITNESS WHEREOF, the parties hereto have each executed the Waiver
and Consent to be effective as of the date first above written.

 

 

	
   

  	
  COMPANY:

  
	
   

  
	
   

  	
  KINETIC CONCEPTS, INC.

  
	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
  JAMES R. LEININGER:

  
	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  James R. Leininger, M.D.

  
	
   

  
	
   

  
	
   

  	
  SHAREHOLDERS:

  
	
   

  
	
   

  	
  FREMONT PARTNERS, L.P.

  
	
   

  
	
   

  	
  By:

  	
  FP Advisors, L.L.C.

  	
   

  
	
   

  	
  Its:

  	
  General Partner

  	
   

  
	
   

  
	
   

  	
  By:

  	
  Fremont Group, L.L.C.

  	
   

  
	
   

  	
  Its:

  	
  Managing Member

  	
   

  
	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  Fremont Investors, Inc.

  
	
   

  	
  Its:

  	
  Managers

  
	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
												

 

 

	
   

  	
  RICHARD C. BLUM & ASSOCIATES, L.P.

  
	
   

  
	
   

  	
  By:

  	
  Richard C. Blum & Associates, Inc.

  	
   

  
	
   

  	
  Its:

  	
  General Partner

  	
   

  
	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  
	
   

  
	
   

  	
  THE COMMON FUND FOR

  NON-PROFIT ORGANIZATIONS

  
	
   

  
	
   

  	
  By:

  	
  Richard C. Blum & Associates, L.P.

  	
   

  
	
   

  	
  Its:

  	
  Attorney-In-Fact

  	
   

  
	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  
	
   

  
	
   

  	
  STINSON CAPITAL PARTNERS II, L.P.

  
	
   

  
	
   

  	
  By

  	
  Richard C. Blum & Associates, L.P.

  	
   

  
	
   

  	
  Its:

  	
  General Partner

  	
   

  
	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  
	
   

  
	
   

  	
  RCBA-KCI CAPITAL PARTNERS, L.P.

  
	
   

  
	
   

  	
  By

  	
  Richard C. Blum & Associates, L.P.

  	
   

  
	
   

  	
  Its:

  	
  General Partner

  	
   

  
	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
															

 

17

 

	
   

  	
  FREMONT PARTNERS SIDE-BY-SIDE, L.P.

  
	
   

  
	
   

  	
  By:

  	
  Fremont Group, L.L.C.

  	
   

  
	
   

  	
  Its:

  	
  General Partner

  	
   

  
	
   

  
	
   

  	
  By:

  	
  Fremont Investors, Inc.

  	
   

  
	
   

  	
  Its:

  	
  Manager

  	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
  FREMONT-KCI INVESTMENT COMPANY, L.L.C.

  
	
   

  
	
   

  	
  By:

  	
  FP Advisors, L.L.C.

  	
   

  
	
   

  	
  Its:

  	
  Member-Manager

  	
   

  
	
   

  
	
   

  	
  By:

  	
  Fremont Group, L.L.C.

  	
   

  
	
   

  	
  Its:

  	
  Managing Member

  	
   

  
	
   

  
	
   

  	
  By:

  	
  Fremont Investors, Inc.

  
	
   

  	
  Its:

  	
  Managers

  
	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  
	
   

  
	
   

  	
  FREMONT PURCHASER II, INC.

  
	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
														

 

 

	
   

  	
  FREMONT ACQUISITION COMPANY II, L.L.C.

  	 

	
   

  	 

	
   

  	
  By:

  	
  Fremont Partners, L.P.

  	
   

  	 

	
   

  	
  Its:

  	
  Member

  	
   

  	 

	
   

  	 

	
   

  	
  By:

  	
  FP Advisors, L.L.C.

  	
   

  	 

	
   

  	
  Its:

  	
  General Partner

  	
   

  	 

	
   

  	 

	
   

  	
  By:

  	
  Fremont Group, L.L.C.

  	
   

  	 

	
   

  	
  Its:

  	
  Managing Member

  	
   

  	 

	
   

  	 

	
   

  	
  By:

  	
  Fremont Investors, Inc.

  	
   

  	 

	
   

  	
  Its:

  	
  Manager

  	
   

  	 

	
   

  	 

	
   

  	
  By:

  	
   

  	 

	
   

  	
  Name:

  	
   

  	 

	
   

  	
  Title:

  	
   

  	 

	
   

  	 

	
   

  	 

	
   

  	
  FREMONT ACQUISITION COMPANY IIA, L.L.C.

  	 

	
   

  	 

	
   

  	
  By:

  	
  FP Advisors, L.L.C.

  	
   

  
	
   

  	
  Its:

  	
  Non-Member Manager

  	
   

  
	
   

  	 

	
   

  	
  By:

  	
  Fremont Group, L.L.C.

  	
   

  	 

	
   

  	
  Its:

  	
  Managing Member

  	
   

  	 

	
   

  	 

	
   

  	
  By:

  	
  Fremont Investors, Inc.

  	
   

  	 

	
   

  	
  Its:

  	
  Manager

  	
   

  	 

	
   

  	 

	
   

  	
  By:

  	
   

  	 

	
   

  	
  Name:

  	
   

  	 

	
   

  	
  Title:

  	
   

  	 

																								

 

 

	
   

  	
  FREMONT OFFSHORE PARTNERS, L.P.

  
	
   

  
	
   

  	
  By:

  	
  FP Advisors, L.L.C.

  	
   

  
	
   

  	
  Its:

  	
  General Partner

  	
   

  
	
   

  
	
   

  	
  By:

  	
  Fremont Group, L.L.C.

  	
   

  
	
   

  	
  Its:

  	
  Managing Member

  	
   

  
	
   

  
	
   

  	
  By:

  	
  Fremont Investors, Inc.

  	
   

  
	
   

  	
  Its:

  	
  Manager

  	
   

  
	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  
	
   

  
	
   

  	
  RICHARD WELCH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Richard Welch

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ROBERT WELCH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Robert Welch

  
	
   

  
	
   

  
	
  AGREED AND ACCEPTED:

  
	
   

  
	
  ADMINISTRATIVE AGENT:

  
	
   

  
	
  JPMORGAN CHASE BANK,

  
	
  a New York banking corporation

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  David P. McGee

  
	
   

  	
  President

  
												

 

 

	
  LENDERS:

  
	
   

  
	
  JPMORGAN CHASE BANK,

  
	
  a New York banking corporation

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  David P. McGee

  
	
   

  	
  President

  
	
   

  
	
   

  
	
  BANK ONE, NA

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
					

 

 

ANNEX A

FORM OF CONFIDENTIALITY AGREEMENT

 

 

ANNEX B

LOAN DOCUMENTS

 

 

1.                                       Credit
Agreement.

 

2.                                       Term
Note dated September 27, 2002, in the original principal amount of $16,608,175,
executed by Pledgor and payable to the order of Chase.

 

3.                                       Term
Note dated September 27, 2002, in the original principal amount of 11,641,825,
executed by Pledgor and payable to the order of Bank One.

 

4.                                       Continuing
and Unlimited Guaranty, dated effective as of September 27, 2002, executed by
Pledgor in favor of the Administrative Agent for the benefit of the Lenders
with respect to Guaranteed Extensions of Credit issued for the account of The
Core Group, Inc.

 

5.                                       Continuing
and Unlimited Guaranty, dated effective as of September 27, 2002, executed by
Pledgor in favor of the Administrative Agent for the benefit of the Lenders
with respect to Guaranteed Extensions of Credit issued for the account of
LynMed Capital, Inc.

 

6.                                       Continuing
and Unlimited Guaranty, dated effective as of September 27, 2002, executed by
Pledgor in favor of the Administrative Agent for the benefit of the Lenders
with respect to Existing Letters of Credit issued for the account of the
Designated Affiliate Borrowers named therein.

 

7.                                       Security
and Pledge Agreement, dated effective as of September 27, 2002 executed by
Pledgor in favor of the Administrative Agent for the benefit of the Lenders.

 

8.                                       Covenant
Ranch Cash Collateral Agreement, dated effective as of September 27, 2002,
executed by Leininger in favor of the Administrative Agent for the benefit of
the Lenders.

 

9.                                       Renewal
and Extension Deed of Trust, Absolute Assignment of Rents, Security Agreement
and Financing Statement, dated effective as of September 27, 2002, executed by
Leininger to David L. Mendez, Trustee, covering certain tracts of land in
Kendall County and Gillespie County, Texas.

 

10.                                 Deed
of Trust, Absolute Assignment of Rents, Security Agreement and Financing
Statement, dated effective as of September 27, 2002, executed by Leininger to
David L. Mendez, Trustee, covering certain tracts of land in Comal County,
Texas.

 

11.                                 Deed
of Trust, Absolute Assignment of Rents, Security Agreement and Financing
Statement, dated effective as of September 27, 2002, executed by Leininger and
his wife, Cecilia Leininger, to David L. Mendez, Trustee, covering certain
tracts of land in Comal County, Texas.

 

 

12.                                 Deed
of Trust, Absolute Assignment of Rents, Security Agreement and Financing
Statement, dated effective as of September 27, 2002, executed by Willow
Springs, Ltd. to David L. Mendez, Trustee, covering certain tracts of land in
Bandera County, Texas.

 

13.                                 Deed
of Trust, Absolute Assignment of Rents, Security Agreement and Financing
Statement, dated effective as of September 27, 2002, executed by Covenant Ranch
I, L.C. to David L. Mendez, Trustee, covering certain tracts of land in Webb
County, Texas.

 

14.                                 Term
Note dated September 27, 2002, in the original principal amount of $4,703,200,
executed by The Core Group, Inc. and payable to the order of Chase.

 

15.                                 Term
Note dated September 27, 2002, in the original principal amount of $3,296,800,
executed by The Core Group, Inc. and payable to the order of Bank One.

 

16.                                 Term
Note dated September 27, 2002, in the original principal amount of $2,939,500,
executed by LynMed Capital, Inc. and payable to the order of Chase.

 

17.                                 Term
Note dated September 27, 2002, in the original principal amount of $2,060,500,
executed by LynMed Capital, Inc. and payable to the order of Bank One.

 

18.                                 Letter
of Credit Application dated December 20, 2001, executed by American Gem
Seafoods, Inc., MCMI Food Company and Harry Lees in favor of Chase, as Issuing Lender,
with respect to Letter of Credit No. D-220597, in the face amount of
$4,000,000, issued to RLI Insurance Company for the account of American Gem
Seafoods, Inc., MCMI Food Company and Harry Lees.

 

19.                                 Letter
of Credit Application, executed by MCMI Food Company in favor of Chase, as
Issuing Lender, with respect to Letter of Credit No. D-211160, in the face
amount of $150,000, issued to Zurich American Insurance Company for the account
of MCMI Food Company.

 

20.                                 Letter
of Credit Application dated August 6, 1999, executed by ATX Technologies,
Inc.  in favor of Chase, as Issuing
Lender, with respect to Letter of Credit No. D-291414, in the face amount of
$3,000,000, issued to Freeport #2, L.P. for the account of ATX Technologies,
Inc.

 

21.                                 Letter
of Credit Application dated April 5, 2000, executed by Covenant Classic
Schools, LLC in favor of Chase, as Issuer, with respect to Letter of Credit No.
D-299684, in the face amount of $117,242, issued to Del Norte Center Limited
Partnership for the account of Covenant Classic Schools, LLC.

 

22.                                 Letter
of Credit Application dated August, 2001, executed by James R. Leininger in
favor of Bank One, as Issuing Lender, with respect to Letter of Credit No.
STR18411, in the face amount of $575,000, issued to General Electric Capital
Corporation for the account of James R. Leininger.

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