EX-10 4 r10k00exb10-14.htm KCI Management Equity Agreement

EXHIBIT 10.14

          MANAGEMENT EQUITY AGREEMENT, dated as of ______________, between KINETIC CONCEPTS, INC., a Texas corporation (the "Company") and _________________ (the " Participant").

          WHEREAS, the Participant is now employed by the Company in a key capacity and the Company desires to have Participant remain in such employment and to allow Participant a direct proprietary interest in the Company's success in recognition of Participant's contribution to the Company, the Company has agreed to award to Participant nonqualified stock options (the "Options") to purchase shares of Common Stock; and

          WHEREAS, in connection with the foregoing, the Company's Management Equity Plan (the "Plan") will govern the terms and conditions of the Options;

          NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto agree as follows:

          1.     Definitions; Incorporation of Plan Terms. Capitalized terms used herein without definition
                  shall have the meanings assigned to them in the Plan, a copy of which is attached
                  hereto. This Agreement and the Options shall be subject to the Plan, the terms of which
                  are hereby incorporated herein by reference, and in the event of any conflict or
                  inconsistency between the Plan and this Agreement, the Plan shall govern.

          2.     Grant of Options. Subject to the terms and conditions contained herein and in the Plan,
                  the Company has granted to the Participant the total number of Options set forth on the
                  signature page hereto (which number includes _______ options (the "Liquidity Options")
                  that vest solely upon the consummation of a Liquidity Event (as defined in Section 3(b)
                  hereof)) at a per share exercise price as set forth of the signature page hereto (the
                  "Option Price"). The Options are not intended to qualify as Incentive Stock Options
                  under Section 422 of the Code. Each such Option shall entitle (subject to the terms of
                  this Agreement and the Plan) the Participant to purchase, upon payment of the Option
                  Price, one share of Common Stock. The shares of Common Stock issuable upon exercise
                  of the Options are from time to time referred to herein as the "Option Shares". For
                  purposes of the Plan and this Agreement, the Date of Grant shall be as set forth on the
                  signature page hereto. The Options shall be exercisable as hereinafter provided.

          3.     Terms and Conditions of Options. The Options evidenced hereby are subject to the
                  following terms and conditions in addition to the terms of the Plan:

                 (a)     Vesting of Options. The Options shall vest and become exercisable solely as set
                           forth below, unless the Options are previously forfeited in accordance with the Plan
                           or as indicated in this Agreement:

Number of Options

 

Vesting Time

   

First Anniversary of Date of Grant

   

Second Anniversary of Date of Grant

   

Third Anniversary of Date of Grant

   

Fourth Anniversary of Date of Grant

   

Fifth Anniversary of Date of Grant

 

(Liquidity Options)

Solely upon the earlier to occur of the
consummation of a Liquidity Event and the
tenth anniversary of the Date of Grant

                  Notwithstanding anything to the contrary contained in the Plan or this Agreement, the
                  Options shall only vest as set forth above and nothing in the Plan or this Agreement shall
                  accelerate the time of such vesting.

                 (b)     Liquidity Event. For purposes of Section 3(a) of this Agreement, a "Liquidity Event"
                          shall mean a Closing Price Event (as defined below), a Bona Fide Public Offering (as
                          defined below) or a Sale Transaction (as defined below) in which the per share price
                          of the Company's Common Stock is $9.00 or more (subject to adjustments for
                          stock splits, stock dividends or similar transactions). In the case of a Closing Price
                          Event, the per share price shall be the closing price of the Company's Common
                          Stock as reported by a national securities exchange or the Nasdaq National Market.
                          In the event of a Bona Fide Public Offering, the per share price shall be the "price to
                          the public" as set forth in the prospectus relating to the Bona Fide Public Offering.
                          In the event of a Sale Transaction, the per share price shall be the per share
                         amount distributed to shareholders for each share of Common Stock in connection
                         with such transaction. "Closing Price Event" means the closing price of the
                         Company's Common Stock as reported by a national securities exchange or the
                         Nasdaq National Market has been at least $9.00 per share for thirty consecutive
                         trading days. "Bona Fide Public Offering" means the consummation of a bona fide
                         underwritten public offering of Common Stock by the Company following the Date
                         of Grant, subsequent to which more than 20% of the outstanding Common Stock of
                         the Company is traded on a national securities exchange, the Nasdaq National
                         Market or a similar market. "Sale Transaction" shall mean any sale of two-thirds or
                         more of the then outstanding Common Stock, either through stock purchase,
                         merger, consolidation, business combination, recapitalization, or similar transaction
                         or otherwise or any sale of all or substantially all of the assets of the Company.

                 (c)     Option Period. The Options shall not be exercisable following the seventh
                          anniversary of the Date of Grant, except for the Liquidity Options which will not be
                          exercisable after the tenth anniversary of the Date of Grant. The Options shall be
                          subject to earlier termination as provided herein. Upon termination of the
                          Participant's employment with the Company and its Subsidiaries for any reason, the
                          Options, to the extent then vested, may be exercised in accordance with Section
                          8(a)(iv) of the Plan. The Options shall be exercisable during the Participant's
                          lifetime only by the Participant. Except as otherwise set forth in Section 3(a), upon
                          termination of the Participant's employment with the Company and its Subsidiaries
                          for any reason, all Options which have not theretofore vested (it being understood
                          that neither Section 8(a)(ii)(B) of the Plan nor any other section in the Plan shall
                          have the effect of accelerating the vesting of the Liquidity Options or any other
                          Options) shall terminate and be canceled without any payment therefore.

                 (d)     Notice of Exercise. Subject to Sections 3(e), 3(g) and 5(b) hereof, the Participant
                          may exercise any or all of the Options (to the extent vested and not forfeited) by
                          giving written notice to the Committee. The date of exercise of an Option shall be
                          the later of (i) the date on which the Committee receives such written notice or (ii)
                          the date on which the conditions provided in Sections 3(e), 3(g) and 5(b) hereof
                         are satisfied.

                 (e)     Payment. Prior to the issuance of a Legended Certificate pursuant to Section 3(f)
                          hereof evidencing Option Shares, the Participant shall have paid to the Company
                          the Option Price of all Option Shares purchased pursuant to exercise of such
                          Options in cash or, with the consent of the Committee (which consent shall be
                          granted in the sole discretion of the Committee), in shares of Common Stock
                          already owned by the Participant (valued at their Applicable Value) or in any
                          combination of cash or shares of Common Stock.

                 (f)     Stockholder Rights. The Participant shall have no rights as a stockholder with
                         respect to any shares of Common Stock issuable upon exercise of the Options until a
                         certificate or certificates evidencing such shares shall have been issued to the
                         Participant, and no adjustment shall be made for dividends or distributions or other
                         rights in respect of any share for which the record date is prior to the date upon
                         which the Participant shall become the holder of record thereof.

                 (g)     Limitation on Exercise. The Options shall not be exercisable unless the offer and
                          sale of the shares of Common Stock subject thereto have been registered under
                          the 1933 Act and qualified under applicable state "blue sky" laws, or the Company
                          has determined that an exemption from registration under the 1933 Act and from
                          qualification under such state "blue sky" laws is available. The Company may
                          require, as a condition to exercise of an Option, that the Participant make certain
                          representations and warranties as to the Participant's investment intent with
                          respect to the Option Shares.

                 (h)     Delivery of Certificate. As soon as practicable following the exercise of any
                          Options, a Legended Certificate evidencing the appropriate number of shares of
                          Common Stock issued in connection with such exercise shall be issued in the name
                          of the Participant.

                 (i)     Dividends and Distributions. Any shares of Common Stock or other securities of the
                         Company received by the Participant as result of a stock dividend or other
                         distribution in respect of Option Shares shall be subject to the same restrictions as
                         such Option Shares and all references to Option Shares hereunder shall be deemed
                         to include such shares of Common Stock or other securities.

          4.     Representations and Warranties.

                 (a)    The Participant has been advised that the Options and Option Shares have not been
                          registered under the 1933 Act and, therefore, cannot be resold unless they are
                          registered or unless an exemption from registration is available. The Participant is
                          acquiring the Options, and Option Shares for Participant's own account, for
                          investment and not with a view to, or for resale in connection with, the distribution
                          thereof, and the Participant has no present intention of selling, assigning,
                          transferring, distributing or otherwise disposing of, or causing the sale, assignment,
                          transfer, distribution or other disposition of, any thereof. In making the foregoing
                          representation, the Participant is aware that Participant must bear the economic
                          risk of an investment in the Options and Option Shares for an indefinite period of
                          time since, in the view of the Commission, the statutory basis for exemption from
                          registration under the 1933 Act would not be present if such representation meant
                          merely that the Participant's current intention is to hold these securities only for the
                          long-term capital gains period of the Code, or for a deferred sale, or for any fixed
                          period in the future.

                 (b)     The Participant has been given the opportunity to ask questions of, and receive
                          answers from, the Company concerning the terms and conditions of the Options
                          and Option Shares to be transferred hereunder and other related matters. The
                          Participant represents and warrants that Participant has been furnished with and
                          has carefully read the Plan and this Agreement, and that the Company has made
                          available to the Participant or Participant's agents all documents and information
                          requested by Participant or on Participant's behalf in connection with Participant's
                          investment in the Options and Option Shares and that Participant understands and
                          has evaluated the merits and risks of an investment in the Options and Option
                          Shares. In evaluating the suitability of an investment in such Options and Option
                          Shares, the Participant has not relied upon any other representations or other
                          information (whether oral or written) made by or on behalf of the Company other
                          than as contemplated by the two preceding sentences.

                 (c)     The Participant is aware of and familiar with the restrictions imposed on the
                          transfer of any Options and Option Shares, including, without limitation, the
                          restrictions contained in this Agreement and the Plan.

                 (d)     The Participant represents that this Agreement has been duly executed and
                          delivered by the Participant and constitutes a legal, valid and binding agreement of
                          the Participant, enforceable against the Participant in accordance with its terms.

          5.     Confidentiality and Competition.

                 (a)     The Participant's duties and obligations as a Company executive bring the
                           Participant into close contact with the personal and confidential affairs of the
                           Company, including matters of a business nature, such as information about costs,
                           profits, markets, sales, trade secrets, potential patents and other business
                           concepts, customer lists, plans for future development and information of a nature
                           not generally known outside of the Company ("Confidential Matters"). The
                           Participant hereby agrees:

                          (i)     during the Participant's employment with the Company, and for two (2) years
                                  after termination of the Participant's employment with the Company, to keep
                                  all Confidential Matters of the Company confidential and not to disclose to
                                  anyone outside of the Company, or otherwise use such Confidential Matters or
                                  use the Participant's knowledge of them for the Participant's benefit, except
                                  with the Company's prior written consent;

                          (ii)    to deliver promptly to the Company at the termination of the Participant's
                                  employment with the Company or at any time the Company may request, all
                                  memoranda, notices, records, reports and other documents (and all copies
                                  thereof) relating to the business of the Company or any of its subsidiaries or
                                  affiliates, including but not limited to documentation with respect to
                                  Confidential Matters which the Participant may then possess or have under
                                  the Participant's control.

                 (b)     During the Participant's employment with the Company, and for a period of two (2)
                          years following the termination of the Participant's employment with the Company,
                          the Participant shall not, directly or indirectly (whether for compensation or
                          otherwise), alone or as an officer, director, stockholder (except for investments in
                          securities of publicly traded companies), partner, employee, agent, principal,
                          consultant, creditor, representative, or in any other capacity, participate with or
                          become associated with any person, firm, partnership, corporation or other entity
                          which is engaged in a business which competes with the businesses (i) that the
                          Company is engaged in as of the date of this Agreement, (ii) that the Company is
                          actively developing as of the date of this Agreement, or (iii) that the Participant
                          assists the Company in developing or acquiring under the term of this Agreement.
                          In addition to any other rights which the Company may have under this Section 5
                          or as provided by law, the Company shall have the right to have the provisions of
                          this Section 5 specifically enforced by any court having equity jurisdiction, it being
                          acknowledged and agreed that any such breach or threatened breach will cause
                          irreparable injury to the Company and that money damages will not provide an
                          adequate remedy to the Company.

                 (c)     During the Participant's employment with the Company, and for a period of one (1)
                          year after termination of the Participant's employment with the Company, the
                          Participant shall not, directly or indirectly, solicit, offer employment (whether on a
                          full-time, part-time, temporary or consulting basis) to or hire any of the Company's
                          employees without the Company's prior written consent.

          6.     Miscellaneous.

                 (a)     No Rights to Grants or Continued Employment. The Participant shall not have any
                          claim or right to receive grants of Awards under the Plan. Neither the Plan or this
                          Agreement nor any action taken or omitted to be taken hereunder or thereunder
                          shall be deemed to create or confer on the Participant any right to be retained in
                          the employ of the Company or any Subsidiary or other Affiliate thereof, or to
                          interfere with or to limit in any way the right of the Company or any Subsidiary or
                          other Affiliate thereof to terminate the employment of the Participant at any time.

                 (b)     Tax Withholding. The Company and its Subsidiaries shall have the right, prior to
                          the delivery of any certificates evidencing shares of Common Stock to be issued
                          pursuant to this Agreement, to require the Participant to remit to the Company any
                          amount sufficient to satisfy any federal, state or local tax withholding requirements.
                          Prior to the Company's determination of such withholding liability, the Participant
                          may make an irrevocable election to satisfy, in whole or in part, such obligation to
                          remit taxes by directing the Company to withhold shares of Common Stock that
                          would otherwise be received by the Participant. Such election may be denied by
                          the Committee in its discretion, or may be made subject to certain conditions
                          specified by the Committee, including, without limitation, conditions intended to
                          avoid the imposition of liability against the Participant under Section 16(b) of the
                          1934 Act. The Company and its Subsidiaries shall also have the right to deduct
                          from all cash payments made pursuant to or in connection with any Award any
                          federal, state or local taxes required to be withheld with respect to such payments.

                 (c)     No Restriction on Right of Company to Effect Corporate Changes. Neither the Plan
                          nor this Agreement shall affect in any way the right or power of the Company or its
                          stockholders to make or authorize any or all adjustments, recapitalizations,
                          reorganizations or other changes in the Company's capital structure or its business,
                          or any merger or consolidation of the Company, or any issue of stock or of options,
                          warrants or rights to purchase stock or of bonds, debentures, preferred to or prior
                          preference stocks whose rights are superior to or affect the Common Stock or the
                          rights thereof or which are convertible into or exchangeable for Common Stock, or
                          the dissolution or liquidation of the Company, or any sale or transfer of all or any
                          part of its assets or business, or any other corporate act or proceeding, whether of
                          a similar character or otherwise.

                 (d)     1934 Act. Notwithstanding anything contained in the Plan or this Agreement to the
                          contrary, if the consummation of any transaction under the Plan or this Agreement
                          would result in the possible imposition of liability to the Participant pursuant to
                          Section 16(b) of the 1934 Act, the Committee shall have the right, in its sole
                          discretion, but shall not be obligated, to defer such transaction to the extent
                          necessary to avoid such liability, but in no event for a period in excess of 180 days.

                 (e)     Restrictions on Transfer. Options and Option Shares shall not be transferable
                          except as specifically provided in the Plan or this Agreement.

          7.     Survival; Assignment.

                 (a)     All agreements, representations and warranties made herein and in the certificates
                          delivered pursuant hereto shall survive the issuance to the Participant of the
                          Options and any Option Shares and, notwithstanding any investigation heretofore
                          or hereafter made by the Participant or the Company or on the Participant's or the
                          Company's behalf, shall continue in full force and effect. Without the prior written
                          consent of the Company, the Participant may not assign any of Participant's rights
                          thereunder except as permitted by the Plan or by will or the laws of descent and
                          distribution. Whenever in this Agreement any of the parties hereto is referred to,
                          such reference shall be deemed to include the heirs and permitted successors and
                          assigns of such party; and all agreements herein by or on behalf of the Company,
                          or by or on behalf of the Participant, shall bind and inure to the benefit of the heirs
                          and permitted successors and assigns of such parties hereto.

                 (b)     The Company shall have the right to assign any of its rights and to delegate any of
                          its duties under this Agreement to any of its Affiliates, provided, however, that
                          such assignment shall not release the Company from any duty hereunder which
                          remains unfulfilled by such an assignee.

          8.     Notices.     All notices and other communications provided for herein shall be in writing
                  and shall be delivered by hand or sent by certified or registered mail, return receipt
                  requested, postage prepaid, addressed, if to the Participant, to Participant's attention at
                  the mailing address set forth on the signature page hereto (or to such other address as
                  the Participant shall have specified to the Company in writing) and, if to the Company, to
                  the General Counsel of the Company. All such notices shall be conclusively deemed to
                  be received and shall be effective, if sent by hand delivery, upon receipt, or if sent by
                  registered or certified mail, on the fifth day after the day on which such notice is mailed.

          9.     Waiver.     The waiver by either party of compliance with any provision of this Agreement
                  by the other party shall not operate or be construed as a waiver of any other provision of
                  this Agreement, or of any subsequent breach by such party of a provision of this
                  Agreement.

         10.    Entire Agreement; Governing Law.     This Agreement and the other related agreements
                  expressly referred to herein set forth the entire agreement and understanding between
                  the parties hereto and supersede all prior agreements and understandings relating to the
                  subject matter hereof. This Agreement may be executed in one or more counterparts,
                  each of which shall be deemed to be an original, but all such counterparts shall together
                  constitute one and the same agreement. The headings of sections and subsections
                  herein are included solely for convenience of reference and shall not affect the meaning
                  of any of the provisions of this Agreement. This Agreement shall be governed by, and
                  construed in accordance with, the laws of the State of Delaware.

          IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly
authorized officer and the Participant has executed this Agreement, both as of the day and year first
above written.

KINETIC CONCEPTS, INC.

 

By: ____________________________________

Name: Dennert O. Ware
Title: President and CEO

 

Number of

Option

Date of

Options

Price

Grant

     

 

PARTICIPANT

___________________________________________

Print Name: ________________________________

Notice Address:

___________________________________________

___________________________________________