Exhibit 10.5


 


EXECUTION COPY


 


 


KINETIC CONCEPTS, INC.


 


SERIES A PREFERRED STOCK PURCHASE AGREEMENT


 

















 


KINETIC CONCEPTS, INC.


 


SERIES A PREFERRED STOCK PURCHASE AGREEMENT


 


This Series A
Preferred Stock Purchase Agreement (together with the schedules and exhibits
hereto, this “Agreement”) is entered into as of August 11, 2003, by and
among Kinetic Concepts, Inc., a Texas corporation (the “Company”), and each of the
investors named in Schedule I hereto (the “Investors”).


 


The Company
proposes to issue and sell to the Investors the number of shares of its Series
A Convertible Participating Preferred Stock, par value $0.001 per share, set
forth in Schedule I (the “Series A
Preferred Stock”) pursuant to the provisions of a Statement of
Designations, Preferences and Rights of the Series A Convertible Participating
Preferred Stock (the “Statement of Designations”) in the form
attached hereto as Exhibit A to be executed by the Company on the
Closing Date (as defined below). The Series A Preferred Stock will be offered
without being registered under the Securities Act of 1933, as amended (the “Securities
Act”), to the Investors in compliance with the exemption from
registration provided by Section 4(2) of the Securities Act or Regulation D of
the rules and regulations promulgated thereunder.


 


On the Closing
Date, the Investors and the Company will enter into an Investors’ Rights
Agreement (the “Investors’ Rights Agreement”), in the form attached hereto as Exhibit
B, which will, among other things, govern the rights of the Investors to
cause the Company to register the shares of its Common Stock (as defined below)
issuable upon conversion of the Series A Preferred Stock (the “Conversion
Shares”).


 


As part of a
series of transactions that are expected to be consummated concurrently with
the sale of the Series A Preferred Stock, the Company (i) has entered into a
Placement Agreement, pursuant to which the Company has agreed to issue and sell
$205,000,000 principal amount of its 7 3/8% Senior Subordinated Notes due 2013
(the “Notes”)
and (ii) has entered into or will enter into a Credit Agreement, dated as of
August 11, 2003, by and among the Company, Morgan Stanley Senior Funding, Inc.,
as Administrative Agent, Morgan Stanley & Co. Incorporated, as Collateral
Agent, Credit Suisse First Boston, as Syndication Agent, Morgan Stanley Senior
Funding, Inc. and Credit Suisse First Boston Corporation, as Joint Lead
Arrangers and Joint Book Managers, and the Lenders named therein (the “New Senior Credit Facility”).  The closing of the sale of the Notes and the
New Senior Credit Facility are contingent upon one another, but are not
contingent on the consummation of the sale of the Series A Preferred Stock.


 


This
Agreement, the Investors’ Rights Agreement and the Statement of Designations
collectively are referred to herein as the “Series
A Preferred Stock Documents.”


 

















 


The Offering
Memorandum dated July 23, 2003 in connection with the Notes, which has
previously been delivered to the Investors solely in connection with their
diligence relating to the Series A Preferred Stock, is referred to herein as
the “Notes Offering Memorandum.”  The transactions contemplated by the Series
A Preferred Stock Documents and the Notes Offering Memorandum, including the
issuance of the Notes and the entering into of the New Senior Credit Facility,
collectively are referred to herein as the “Transactions.”


 


1.             Representations
and Warranties.


 


(a)           The Company represents and warrants to, and agrees
with, the Investors that:


 


(i)            The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of Texas, has the
requisite corporate power and authority to own its property and to conduct its
business as described in the Notes Offering Memorandum and is duly qualified to
transact business and is in good standing as a foreign corporation in each
jurisdiction in which the conduct of its business or its ownership or leasing
of property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not reasonably be expected to
have a material adverse effect on the financial position, earnings,
results of operations, stockholders’ equity or business affairs of the Company
and its subsidiaries, taken as a whole (a “Material Adverse Effect”).


 


(ii)           The authorized capital stock of the Company consists
of:


 


(A)    Preferred
Stock. 50,000,000 shares of Preferred Stock, par value $0.001 (the “Preferred Stock”), of which 264,000 shares
have been designated Series A Convertible Participating Preferred Stock. The
rights, privileges and preferences of the Series A Preferred Stock will be as
stated in the Statement of Designations. 
Immediately prior to the Transactions, no shares of Preferred Stock were
issued and outstanding.  Immediately
following the consummation of the Transactions, other than the number of shares
of Series A Preferred Stock set forth on Schedule I, no shares of
Preferred Stock will be issued and outstanding.


 


(B)    Common Stock. 150,000,000 shares of common
stock, par value $0.001 (“Common Stock”), of which 71,128,556 shares were issued and outstanding as of July 23, 2003.
As of such date, options to exercise up to 16,671,398 shares of Common Stock
had been granted by the Company, out of an authorized option pool of 18,319,876 shares of Common Stock under the Stock Option Plans (as
defined in Section 1(a)(iii) hereof), copies of which were previously delivered
to the Investors.  No shares of Common
Stock have been issued by the Company since July 21, 2003, other than shares of
Common Stock issued upon the exercise of options outstanding as of such date
pursuant to the Stock Option Plans.  The
outstanding shares of capital stock of the Company are all duly and validly
authorized and issued, fully paid and nonassessable, and were issued in
accordance with the registration or qualification provisions of the Securities
Act and any relevant state securities laws and federal and state securities 


 


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regulations,
or pursuant to valid exemptions therefrom.


 


(iii)          Except for (A) the conversion
privileges of the Series A Preferred Stock as set forth in the Statement of
Designations, (B) the rights provided in that certain Agreement Among
Shareholders (the “Shareholder Agreement”),
dated November 5, 1997, by and among the Company and the shareholders of the
Company named therein (the “Shareholders”),
as amended or modified, by (x) that certain Waiver and Consent, dated December
2002 but effective for all purposes as of September 27, 2002, by and among the
Company, the Shareholders, JPMorgan Chase Bank (the “Administrative Agent”) and Bank One, N.A., (y) that certain
Joinder and Amendment, dated as of June 25, 2003, by and among the Company and
the other parties thereto and (z) that certain Waiver and Amendment to the
Shareholder Agreement to be entered into, in connection with the Transactions,
by and among the Company, the Shareholders and the Administrative Agent, (C)
options to purchase shares of the Company’s Common Stock granted pursuant to
the company’s stock option plans (collectively, the “Stock Option Plans”) and (D)
the rights provided in the Investors’ Rights Agreement, there are no
outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal or similar rights) or agreements, orally or
in writing, for the purchase or acquisition from or by the Company of any
shares of its capital stock.


 


(iv)          Each subsidiary of the Company has
been duly organized, is validly existing as a corporation, limited liability
company, or limited partnership, as the case may be, in good standing under the
laws of the jurisdiction of its organization, has the requisite corporate,
limited liability company, or limited partnership power and authority, as the case
may be, to own its property and to conduct its business as described in the
Notes Offering Memorandum and is duly qualified to transact business and is in
good standing as a foreign entity in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be
in good standing would not have a Material Adverse Effect; all of the issued
shares of capital stock, membership interests or partnership interests, as the
case may be, of each  “significant
subsidiary” of the Company (as such term is defined in Rule 1-02 of Regulation
S-X) (hereafter, “significant subsidiary”) have been duly and validly authorized
and issued, are fully paid and non-assessable and are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances, equities
or claims, except, (x) as of the date hereof, those that arise in connection
with the Second Amended and Restated Credit and Guarantee Agreement, dated as
of April 4, 2002, among the Company, the subsidiaries of the Company party
thereto, the lenders party thereto, and Bank of America, N.A., as
administrative agent for the Existing Lenders (as amended, restated, or
otherwise modified to the date hereof, together with all documents and
agreements related thereto, the “Old Credit
Facility”), (y) as of the Closing Date, those that arise in
connection with the New Senior Credit Facility and (z) for those set forth in
the Notes Offering Memorandum.  Schedule
II hereto sets forth the name and jurisdiction of organization of each
subsidiary of the Company.


 


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(v)           This Agreement has been duly
authorized, executed and delivered by the Company.


 


(vi)          The Company has the requisite power
and authority to execute and deliver the Series A Preferred Stock Documents and
perform its obligations thereunder, and all requisite corporate action required
to be taken for the due and valid authorization, execution and delivery of each
of the Series A Preferred Stock Documents and the consummation of the
transactions contemplated thereby have been duly and validly taken.


 


(vii)         The Series A Preferred Stock that is
being purchased by the Investors hereunder, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and nonassessable, and
will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Series A Preferred Stock Documents and under
applicable state and federal securities laws. 
The Conversion Shares have been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Statement of Designations,
will be duly and validly issued, fully paid, and nonassessable and will be free
of restrictions on transfer other than restrictions on transfer under this
Agreement and the Series A Preferred Stock Documents and under applicable state
and federal securities laws and regulations. 
Neither the issuance, sale or delivery of the Series A Preferred Stock,
nor the issuance sale or deliver of the Conversion Shares, is subject to any
preemptive right of shareholders of the Company or to any right of first
refusal or other right in favor of any shareholder or other person, other than
such rights as have been terminated or waived on or before the Closing Date.


 


(viii)        The Investors’ Rights Agreement has been
duly authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
receivership, moratorium and similar laws relating or affecting creditors’ rights
and remedies generally and equitable principles of general applicability
(whether applied by a court of law or equity) and except as rights to
indemnification and contribution under the Investors’ Rights Agreement may be
limited under applicable law.


 


(ix)           The execution and delivery by the
Company, and the performance by the Company of its obligations under, the
Series A Preferred Stock Documents will not contravene any provision of
applicable law or the articles of incorporation or by-laws of the Company or
any agreement or other instrument binding upon the Company or any of its
subsidiaries, or any judgment, order or decree of any governmental body, agency
or court having jurisdiction over the Company or any of its subsidiaries except
for such contraventions (other than those of the by-laws or the articles of
incorporation of the Company or any of its subsidiaries) as would not
reasonably be expected to have a Material Adverse Effect, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its
obligations under the Series A Preferred Stock Documents, except (A) such as
may be required by the Securities Act or blue sky laws of the various states in


 


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connection
with the offer and sale of the Series A Preferred Stock and by federal and
state securities laws with respect to the Company under the Investors’ Rights
Agreement, (B) for those consents, approvals authorizations, orders,
qualifications and other actions that have been obtained or taken, and any
filings that have been made, as of the date hereof or (C) such as are
unnecessary in connection with the termination of the Old Credit Facility and
entering into the New Credit Facility.


 


(x)            None of the Company or its
subsidiaries is (A) in violation of its charter or by-laws, (B) in default, and
no event has occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any term,
covenant or condition contained in any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by which
it is bound or to which any of its property or assets is subject or (C) in
violation of any law, ordinance, governmental rule, regulation or court decree
to which it or its property or assets may be subject, except, in the case of
clause (B) and (C), for any default or violation that would not have a Material
Adverse Effect.


 


(xi)           The financial statements, together
with the related schedules and notes, included in the Notes Offering Memorandum
present fairly the financial position of the Company and its consolidated
subsidiaries at the dates indicated and their results of operations,
stockholders’ equity and cash flows for the periods specified, and such
financial statements have been prepared in conformity with the generally
accepted accounting principles in the United States (“GAAP”) applied on a consistent basis throughout
the periods involved.  The financial
information contained in the Notes Offering Memorandum under the headings
“Summary—Summary Consolidated Financial Information and Other Data” and
“Selected Consolidated Financial Data” is derived from the accounting records
of the Company and its subsidiaries and fairly presents the information
purported to be shown thereby.  The
other historical financial and statistical information and data included in the
Notes Offering Memorandum are, in all material respects, fairly presented.


 


(xii)          There has not occurred any change, or
any development involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Notes Offering
Memorandum, except as would not have a Material Adverse Effect.


 


(xiii)         There are no legal or governmental
proceedings pending or, to the Company’s knowledge, threatened to which the
Company or any of its subsidiaries is a party or to which any of the properties
of the Company or any of its subsidiaries is subject other than proceedings
accurately described in all material respects in the Notes Offering Memorandum
and proceedings that would not reasonably be expected to have a Material
Adverse Effect, or materially effect the power or ability of the Company to
perform its obligations under the Series A Preferred Stock Documents.


 


(xiv)        The Company and its subsidiaries (A) are
in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the 


 


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protection of
human health and safety, the environment, natural resources or relating to the
use, handling, storage, transportation, disposal, release or discharge of
hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental
Laws”), (B) have received all permits, licenses or other approvals
required under applicable Environmental Laws to conduct their respective
businesses (“Environmental Permits”)
and (C) are in compliance with all terms and conditions of any such
Environmental Permit, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
would not reasonably be expected to have a Material Adverse Effect.


 


(xv)         There are no outstanding or ongoing
environmental-related obligations, costs or liabilities under any Environmental
Laws, and there are no facts or circumstances
known to the Company that would reasonably be expected to give rise to such
obligations, costs or liabilities in the future (including, without
limitation, any capital, operating or remedial expenditures required for
investigation, clean-up or closure of the real property owned or operated by
the Company and its subsidiaries, compliance with Environmental Laws or any
Environmental Permits, or potential liabilities to third parties pursuant to any
claims by them against the Company, its subsidiaries, or the real property
owned or operated by the Company and its subsidiaries pursuant to Environmental
Laws) which would reasonably be expected to have a Material Adverse Effect.


 


(xvi)        The Company and each of its subsidiaries
possess all material licenses, certificates, authorizations and permits
(collectively, “Governmental Licenses”)
issued by, and have made all declarations and filings with, the appropriate
federal, state or foreign regulatory agencies or bodies, including, without
limitation, the United States Food and Drug Administration and Department of
Health and Human Services, which are necessary or desirable for the ownership
of their respective properties or the conduct of their respective businesses
now operated by them, except where the failure to possess or make the same
would not, singularly or in the aggregate, reasonably be expected to have a
Material Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except where the invalidity of such Governmental Licenses or
the failure of such Governmental Licenses to be in full force and effect would
not, singularly or in the aggregate, reasonably be expected to have a Material
Adverse Effect;  and none of the Company
or any of its subsidiaries has received notification of any revocation or
modification of any such Governmental Licenses or has any reason to believe
that any such Governmental Licenses will not be renewed in the ordinary course,
except where such revocation, modification or nonrenewal, would not singularly
or in the aggregate, reasonably be expected to have a Material Adverse Effect.


 


(xvii)       The Company and each of its subsidiaries
have filed all material federal, state, local and foreign income and franchise
tax returns required to be filed through the date hereof and have paid all
material taxes due thereon, and no tax deficiency has been determined adversely
to the Company or any of its subsidiaries which has had (nor does the Company
or any of its subsidiaries have any knowledge of any tax 


 


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deficiency
which, if determined adversely to the Company or any of its subsidiaries, would
reasonably be expected to have) a Material Adverse Effect.


 


(xviii)      The Company and each of its subsidiaries
carry, or are covered by, insurance covering their respective properties,
operations, personnel and businesses, which insurance is in such amounts and
insures against such losses and risks as are adequate to protect the Company
and its subsidiaries and their respective businesses.  None of the Company or any of its subsidiaries has received
notice from any insurer or agent of such insurer that material capital
improvements or other material expenditures are required or necessary to be
made in order to continue such insurance.


 


(xix)         The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (A) transactions are executed in accordance
with management’s general or specific authorizations, (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (C) access to assets is permitted only in accordance with
management’s general or specific authorization and (D) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences, to
the extent necessary.


 


(xx)          The
Company and each of its subsidiaries own or possess adequate rights under all
patents, trademarks, service marks, trade names, copyrights, and know-how
(including trade secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures) (collectively, “Intellectual Property Rights”) known by the
Company to be necessary for the conduct of their respective businesses, except
where the failure to possess such rights would not have a Material Adverse
Effect.  To the Company’s knowledge, the
conduct of business by the Company and each of its subsidiaries does not
infringe or conflict with any Intellectual Property Rights of others, except where
any such infringement or conflict would not have a Material Adverse Effect.  Except as described in the Notes
Offering Memorandum, the Company and its subsidiaries have not received any
written notice of any claim of infringement or conflict with, any Intellectual
Property Rights of others that, if determined adversely to the Company or any
of its subsidiaries, would, individually or in the aggregate, have a Material
Adverse Effect.


 


(xxi)         The Company and each of its
subsidiaries have good and marketable title in fee simple to, or have valid rights
to lease or otherwise use, all items of real and personal property which are
material to the business of the Company and its subsidiaries, in each case free
and clear of all liens, encumbrances, claims and defects and imperfections of
title except those that (A) as of the date hereof, arise in connection with the
Old Credit Facility or, as of the Closing Date, the New Senior Credit Facility
or (B) do not materially interfere with the use made and proposed to be made of
such property by the Company and its subsidiaries or that would not be
reasonably expected to have a Material Adverse Effect.


 


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(xxii)        No labor disturbance by, or dispute
with, the employees of the Company or any of its subsidiaries exists or, to the
knowledge of the Company and its subsidiaries, is threatened that would
reasonably be expected to have a Material Adverse Effect.


 


(xxiii)       No “prohibited transaction” (as defined
in Section 406 of the Employee Retirement Income Security Act of 1974, as
amended from time to time, including the regulations and published
interpretations thereunder (“ERISA”),
or Section 4975 of the Internal Revenue Code of 1986, as amended from time to
time (the “Code”)) or “accumulated
funding deficiency” (as defined in Section 302 of ERISA) or any of the
reportable events set forth in Section 4043(c) of ERISA (other than events with
respect to which the 30-day notice requirement under Section 4043 of ERISA has
been waived) has occurred with respect to any employee benefit plan of the
Company or any of its subsidiaries which would have a Material Adverse Effect
on the Company and its subsidiaries taken as a whole, each such employee
benefit plan is in compliance with applicable law, including ERISA and the
Code, except where such noncompliance, individually or in the aggregate, would
not have a Material Adverse Effect, the Company and each of its subsidiaries
have not incurred and do not expect to incur liability under Title IV of ERISA
with respect to the termination of, or withdrawal from, any pension plan for
which the Company or any of its subsidiaries would have any liability that
would have a Material Adverse Effect; and each such pension plan maintained by
the Company or its subsidiaries that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification, in each case, except where any such failure to qualify or
loss of qualification would not have a Material Adverse Effect.


 


(xxiv)       Neither the Company nor, to the best
knowledge of the Company and its subsidiaries, any director, officer, agent,
employee or other person associated with or acting on behalf of the Company or
any of its subsidiaries has (A) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity, (B) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds, (C)
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977, (D) made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment or (E) violated or is in violation of any
federal, state, or foreign laws pertaining to health care fraud and abuse,
except where such uses, violations or payments, singularly or in the aggregate,
would not be reasonably expected to have a Material Adverse Effect.


 


(xxv)        The Company and each of its subsidiaries
are not, and after giving effect to the Transactions and the application of the
proceeds thereof as described in the Notes Offering Memorandum, will not be,
required to register as an “investment company” as such term is defined in the
Investment Company Act of 1940, as amended.


 


(xxvi)       None of the Company, any of its
subsidiaries or any affiliate (as defined in Rule 501(b) of Regulation D under
the Securities Act, an “Affiliate”) of the Company or any of its subsidiaries
has directly, or through any agent, (A) sold, offered 


 


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for sale,
solicited offers to buy or otherwise negotiated in respect of, any security (as
defined in the Securities Act) which is or will be integrated with the sale of
the Series A Preferred Stock in a manner that would require the registration
under the Securities Act of the Series A Preferred Stock or (B) offered,
solicited offers to buy or sold the Series A Preferred Stock by any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.


 


(xxvii)      Assuming that the representations and
warranties of the Investors set forth in Section 1(b) hereof are true and
correct, it is not necessary in connection with the offer, sale and delivery of
the Series A Preferred Stock to the Investors in the manner contemplated by
this Agreement to register the offering of the Series A Preferred Stock under
the Securities Act.


 


(xxviii)     (A) Each document, or portions thereof,
filed or to be filed pursuant to the Securities and Exchange Act of 1934, as
amended (the “Exchange Act”), and incorporated by reference in the Notes
Offering Memorandum complied or will comply when so filed in all material
respects with the Exchange Act and the applicable rules and regulations of the
Securities and Exchange Commission (the “SEC”) thereunder and (B) the Notes Offering
Memorandum do not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in the Notes Offering Memorandum based upon information
relating to any placement agent furnished to the Company and the Guarantors in
writing by such placement agent for use therein.


 


(b)           Representations
and Warranties of the Investors.  Each
Investor hereby represents and warrants as to itself only that:


 


(i)            Such
Investor has full power and authority to enter into this Agreement and the
Series A Preferred Stock Documents to which it is a signatory, and each such
agreement constitutes its valid and legally binding obligation, enforceable in
accordance with its terms except (A) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors’ rights generally, (B) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies and (C) to the extent the indemnification provisions
contained in the Transactions Documents may be limited by applicable federal or
state securities laws.


 


(ii)           This
Agreement is made with such Investor in reliance upon such Investor’s
representation to the Company, which by such Investor’s execution of this Agreement
such Investor hereby confirms, that the Series A Preferred Stock to be received
by such Investor and the Conversion Shares will be acquired for investment for
such Investor’s own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, except to or for the account of
affiliated entities 


 


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meeting the
investment criteria set forth in this Section 1(b), and that such Investor has
no present intention of selling, granting any participation in, or otherwise
distributing the same other than to affiliated entities meeting the investment
criteria set forth herein. By executing this Agreement, such Investor further
represents that such Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of
the Series A Preferred Stock or the Conversion Shares, except to or for the
account of affiliated entities meeting the investment criteria set forth in
this Section 1(b).


 


(iii)          Such
Investor believes that such Investor has received all the information such
Investor considers necessary or appropriate in deciding whether to purchase the
Series A Preferred Stock.  Such Investor
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series A Preferred
Stock and the business, properties, prospects and financial condition of the
Company. The foregoing, however, does not limit or modify the representations
and warranties of the Company in Section 1(a) of this Agreement or the right of
the Investors to rely thereon.


 


(iv)          Such
Investor is experienced in evaluating and investing in private placement
transactions of securities of companies in a similar stage of development and
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Series A Preferred Stock. If other than an individual, Investor also
represents it has not been organized for the purpose of acquiring the Series A
Preferred Stock.


 


(v)           Such
Investor is an “accredited investor” within the meaning of Rule 501 of
Regulation D, under the Securities Act of 1933, as amended (the “Act”),
as presently in effect.


 


(vi)          Such
Investor understands that the shares of Series A Preferred Stock it is
purchasing are characterized as “restricted securities” under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Series A Preferred Stock may be resold without
registration under the Act, only in certain limited circumstances. In this
connection, such Investor represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.


 


(vii)         Such
Investor understands and agrees that, to the extent applicable, each
certificate or other document evidencing any of the Series A Preferred Stock or
any Conversion Shares shall be endorsed with the legends substantially in the
form set forth below (it being understood and agreed that the legend in Section
1(vii)(B) below shall be removed by the Company following the termination of
the Investors’ Rights Agreement referred to in Section 1(vii)(B) below in accordance
with its terms):


 


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  (A)

  	
   

  	
  “THE
  SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
  ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED, ASSIGNED,
  PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT OR UNLESS
  THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY
  SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
  REQUIRED.”

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (B)

  	
   

  	
  “THE
  SECURITIES EVIDENCED BY THIS CERTIFICATE ARE ALSO SUBJECT TO AN INVESTORS’
  RIGHTS AGREEMENT DATED AS OF AUGUST 11, 2003 (THE “INVESTORS’ RIGHTS
  AGREEMENT”), WHICH CONTAINS PROVISIONS REGARDING (I) CERTAIN RESTRICTIONS ON
  THE TRANSFER OF SUCH SECURITIES, (II) CERTAIN RIGHTS OF FIRST OFFER AND
  CO-SALE RIGHTS APPLICABLE TO THIS SECURITY AND (III) CERTAIN OTHER MATTERS. A
  COPY OF SUCH INVESTORS’ RIGHTS AGREEMENT IS AVAILABLE FOR INSPECTION AT THE
  PRINCIPAL OFFICE OF THE COMPANY.  ANY
  TRANSFER OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE IN VIOLATION OF THE
  INVESTORS’ RIGHTS AGREEMENT IS NULL AND VOID.”

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (C)

  	
   

  	
  “THE COMPANY WILL FURNISH TO ANY SHAREHOLDER,
  WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT THE PRINCIPAL PLACE OF
  BUSINESS OR REGISTERED OFFICE, AND THERE IS ON FILE IN THE OFFICE OF THE
  SECRETARY OF STATE OF TEXAS, A FULL STATEMENT OF (I) THE DENIAL OF PREEMPTIVE
  RIGHTS SET FORTH IN THE AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS
  AMENDED, OF THE COMPANY AND (II) THE DESIGNATIONS, PREFERENCES, LIMITATIONS
  AND RELATIVE RIGHTS OF EACH CLASS OF SHARES OF THE COMPANY OR ANY SERIES
  THEREOF TO THE EXTENT THEY HAVE BEEN FIXED AND DETERMINED AND THE AUTHORITY
  OF THE BOARD OF DIRECTORS TO FIX AND DETERMINE THE DESIGNATIONS, PREFERENCES,
  LIMITATIONS AND RELATIVE RIGHTS OF SUBSEQUENT SERIES.”

  



 


11

















 


	
   

  	
  (D)

  	
   

  	
  Any legend imposed or required by
  the Company’s Bylaws or applicable state securities or other laws.

  



 


2.             Agreements
to Sell and Purchase.  The
Company hereby agrees to sell to the several Investors, and each Investor, upon
the basis of the representations and warranties herein contained, but subject
to the conditions hereinafter stated, agrees, severally and not jointly, to
purchase from the Company the respective number of shares of Series A Preferred
Stock set forth in Schedule I hereto opposite its name at a purchase
price of $1,000.00 per share (the “Purchase Price”);provided, however,
that any of the Investors identified in Schedule II.B or Schedule
II.C  may direct the Company to
apply any or all proceeds payable to such Investor in connection with the
repurchase of shares of the Company’s Common Stock and vested stock options, as
contemplated by the Notes Offering Memorandum, that is consummated
substantially concurrently with the Closing (as defined in Section 3 below) as
an offset to the Purchase Price in lieu of such Investor’s receipt of cash from
the Company in respect of the repurchase of such shares or vested stock
options.  The Series A Preferred Stock
will have the preferences and rights set forth in the Statement of
Designations.


 


3.             Payment and Delivery.  The purchase and sale of the Series A
Preferred Stock under this Agreement (the “Closing”) shall be held on August 11, 2003,
(the “Closing
Date”), at the offices of Skadden, Arps, Slate, Meagher & Flom,
LLP, at 525 University Avenue, Suite 1100, Palo Alto, California 94301 or at
such other time and place as the Company and the Investors may agree. At the
Closing, subject to the terms and conditions hereof, the Company will deliver
to the Investors certificates, dated the date of the Closing, in such
denominations and registered in such name or names as the Investors may
designate by notice to the Company, representing the shares of Series A
Preferred Stock to be purchased by the Investors from the Company at the
Closing, against payment by each Investor of the purchase price therefor by
wire transfer of immediately available funds.


 


4.             Conditions to the Investors’ Obligations.
The several obligations of the Investors to purchase and pay for the Series A
Preferred Stock on the Closing Date are subject to each of the following
conditions, the waiver of which shall not be effective against any Investor who
does not consent thereto:


 


(a)           The representations and warranties of
the Company contained in Section 1(a) (i) that are qualified by “materiality”
or “Material Adverse Effect” shall be true on and as of the Closing Date and
(ii) that are not qualified by “materiality” or “Material Adverse Effect” shall
be true and correct in all material respects on and as of the Closing Date, in
each case, with the same effect as though such representations and warranties
had been made on and as of the Closing Date.


 


(b)           The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.


 


(c)           There shall have been no material
adverse change in the financial condition of the Company since June 30, 2003.


 


12

















 


(d)           The Investors shall have received on
the Closing Date an opinion of Cox & Smith Incorporated, counsel for the
Company, dated the Closing Date, to the effect set forth in Exhibit C.  Such opinion shall be rendered to the
Investors at the request of the Company and shall so state therein.


 


(e)           As of the
Closing Date, there shall be no lawsuits, injunctions or governmental
proceedings, whether pending or, to the Company’s knowledge, threatened,
challenging the sale of the Series A Preferred Stock or any of the other
Transactions.


 


(f)            The shareholders of the Company
shall have approved an amendment to the Company’s Articles of Incorporation
authorizing the issuance of the Series A Preferred Stock and the Board of
Directors of the Company shall have taken all requisite action to duly and
validly adopt the Statement of Designations.


 


(g)           As a condition to the obligations of
Goldman, Sachs & Co. (“Goldman”) and DLJ Merchant Banking Partners
III, L.P. (“DLJ”, and together with Goldman, the “Non-Sponsors”) under this
Agreement, the Company shall have consummated each of the following
transactions on terms materially consistent with the descriptions thereof
contained in the Notes Offering Memorandum:  (i) the purchase of an aggregate of at least 100,000 shares of
Series A Preferred Stock (the “Sponsor Sale”) by any combination of
Fremont Partners, Blum Capital Partners, L.P. and James R. Leininger, M.D.
(collectively, the “Sponsors”), or their respective affiliates,
pursuant to this Agreement and the other Series A Preferred Stock Documents;
(ii) the issuance and sale of $205 million principal amount of the Company’s
Series A 7 3/8% Senior Subordinated Notes Due 2013; (iii) the entering into a
new senior credit facility, consisting of a $480.0 million term loan facility
and a $100.0 million revolving credit facility (the “New Senior Credit Facility”),
and the borrowing of $480 million in term loans under the New Senior Credit
Facility; (iv) the repayment of all outstanding principal and interest under,
and the termination of, the Company’s existing senior credit facility; and (v)
the commencement of an offer to purchase for cash up to $589,404,000 of the
Company’s outstanding common stock and vested stock options at a purchase price
of $17 per share (the transactions set forth in clauses (i) through (v),
collectively, the “Closing Date Transactions”).


 


(h)           The Company and each of the Investors
shall have entered into the Investors’ Rights Agreement.


 


(i)            The Company shall have paid (A) to
DLJ Merchant Banking III, Inc., or its designated affiliates, transaction fees
of $740,000 and arranger fees of $256,945, (B) Goldman, or its designated
affiliates, transaction fees of $700,000 and arranger fees of $243,055, (C) to
Fremont Partners III, L.L.C. transactions fees of $1,000,000 and  to Fremont Partners, L.L.C. transaction fees
of $517,440, (D) transaction fees of $1,002,440 to Blum Capital Partners, L.P.
and (E) to certain of the Sponsors and the Director Investors the additional
transaction fees set forth in Schedule I.B. and Schedule I.C.  The Company, DLJ Merchant Banking III, Inc.
and Goldman acknowledge that the fees in (A) and (B) are paid pursuant to that
certain Commitment Letter and Term Sheet from DLJ and addressed to the Company,
dated as of July 23, 2003.


 


(j)            The Investors and Ropes & Gray
LLP, counsel to the Non-Sponsors, shall 


 


13

















 


have received certificates of
(i) the President or Chief Financial Officer of the Company dated as of the
Closing Date and certifying as to the accuracy of or satisfaction of the
conditions set forth in clauses (a) through (c) and (e) through (g) of this
Section 4, and (ii) the Secretary or an Assistant Secretary of the Company
dated as of the Closing Date and certifying (x) that attached thereto is a true
and complete copy of all resolutions adopted by the Board of Directors and the
shareholders of the Company authorizing the execution, delivery and performance
of the Series A Preferred Stock Documents, the issuance, sale and delivery of
the Series A Preferred Stock and the reservation, issuance  and delivery of the Conversion Shares, and
that all such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by the
Series A Preferred Stock Documents, (y) that the Articles of Incorporation have
not been amended since August 4, 2003 and (z) to the incumbency and specimen
signature of each officer of the Company executing any of the Series A
Preferred Stock Documents, the stock certificates representing the Series A
Preferred Stock and any certificate or instrument furnished pursuant hereto.


 


5.             Conditions of the Company’s Obligations at Closing.  The obligations of the Company to each
Investor under this Agreement are subject to the fulfillment on or before the
Closing of each of the following conditions by such Investor:


 


(a)           The representations and warranties of
such Investor contained in Section 1(b) (i) that are qualified by “materiality”
or “Material Adverse Effect” shall be true on and as of the Closing Date and
(ii) that are not qualified by “materiality” or “Material Adverse Effect” shall
be true and correct in all material respects on and as of the Closing Date, in
each case, with the same effect as though such representations and warranties
had been made on and as of the Closing.


 


(b)           Such Investor shall have delivered
the purchase price specified, and in the manner provided, in Section 3.


 


(c)           The Company shall have consummated
each of the Closing Date Transactions on terms reasonably satisfactory to the
Company.


 


(d)           The
Company shall have received solvency and fairness opinions from Valuation
Research in connection with the Transactions, in form and substance reasonably
satisfactory to the Company.


 


(e)           All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful issuance
and sale of the Series A Preferred Stock pursuant to this Agreement shall be
duly obtained and effective as of the Closing.


 


(f)            Such Investor shall have entered
into the Investors’ Rights Agreement.


 


(g)           The shareholders of the Company shall
have approved an amendment to the Company’s Articles of Incorporation
authorizing the issuance of the Series A Preferred Stock and the Board of
Directors of the Company shall have taken all requisite action to duly and 


 


14

















 


validly adopt the Statement of
Designations.


 


6.             Covenants of the Company. In further
consideration of the agreements of the Investors contained in this Agreement,
the Company, covenants with each Investor as follows:


 


(a)           The Company shall adopt and file with
the Secretary of State of Texas on or before the Closing Date the Statement of
Designations.


 


(b)           On or prior to the Closing, the Board
of Directors of the Company (or a committee thereof) shall authorize (i) the
sale and issuance to the Investors of an aggregate of up to 270,000 shares of
Series A Preferred Stock and (ii) the issuance of the Conversion Shares.  The Series A Preferred Stock will have the
rights, preferences, privileges and restrictions set forth in the Statement of
Designations.


 


(c)           On or
immediately following the Closing, the Company shall pay the reasonable fees
and expenses (not to exceed $120,000 in the aggregate) of the Non-Sponsors,
provided, that such amount shall be applied first to pay the fees and expenses
of Ropes & Gray LLP, special counsel to the Non-Sponsors, and one local
counsel to the Non-Sponsors, and secondly, to pay the fees and expenses of the
Non-Sponsors Investors in a manner agreed upon by the Non-Sponsors, including
any consultants to the Non-Sponsors; it being understood and agreed that the
Company shall also reimburse Goldman, Sachs & Co. up to $25,000 for fees
and expenses incurred by it prior to the execution of that certain Commitment
Letter and Term Sheet from Goldman, Sachs & Co. and addressed to the
Company, dated as of July 25, 2003.


 


(d)           The Company shall make all “blue sky”
filings with any state or foreign governmental authorities that are required in
connection with the offer and sale of the Series A Preferred Stock.


 


(e)           In connection with the planned recapitalization
of the Company described in the Notes Offering Memorandum, the Company shall
not use in excess of $657,000,000 to fund the repurchase of the Company’s
outstanding common stock and vested stock options, which repurchase shall be
consummated in one or more transactions between August 1, 2003 and March 31,
2004.  The Company shall repurchase such
common stock or vested options at a price equal to the fair market value
thereof as determined by the Board of Directors of the Company in its sole discretion,
which fair market value, for the initial repurchase which the Company plans to
consummate prior to September 30, 2003, shall not exceed $17 (the “Initial Repurchase Price”) per share (as
adjusted for stock splits, combinations, and the like), and which thereafter,
subject to the Board of Directors of the Company complying with its fiduciary
and other legal obligations  (as
determined in its sole discretion after consultation with legal counsel) in
making such determination, shall not exceed an amount per share on any
repurchase date equal to the product of (i) the Initial Repurchase Price and
(ii) the sum of 1 and the product of (x) 0.12 and  (y) the quotient obtained by dividing (i) the number of days that
have elapsed since the Closing Date and such repurchase date by (ii) 365.


 


(f)            The Company shall  use its best efforts to issue, on the
Closing Date, an irrevocable notice of redemption to redeem all of its
outstanding 9.625% Senior Subordinated 


 


15

















 


Notes Due 2007 (the “Redemption Notice”), provided, however,
that the Company shall issue the Redemption Notice no later than three business
days following the Closing Date.


 


7.             Survival of
Representations and Warranties; Limitation on Liability.


 


(a)           The
representations and warranties of the Company and Investors contained in or
made pursuant to this Agreement shall survive the execution and delivery of
this Agreement and the Closing for a period of one year from the Closing Date,
and shall in no way be affected by any investigation of the subject matter
thereof made by or on behalf of the Investors or the Company.


 


(b)           Notwithstanding anything contained
herein to the contrary, any liability of the Company to an Investor hereunder
shall be limited to an amount not to exceed the net proceeds received by the
Company from the sale of the Series A Preferred Stock to such Investor.


 


8.            Termination.
The Investors may terminate this Agreement by notice to the Company if, after
the execution and delivery of this Agreement and prior to the Closing Date, (a)
trading generally shall have been suspended or materially limited on, or by, as
the case may be, any of the New York Stock Exchange, the American Stock
Exchange, the Nasdaq National Market, the Chicago Board of Options Exchange,
the Chicago Mercantile Exchange or the Chicago Board of Trade, (b) trading of
any securities of the Company or its subsidiaries shall have been suspended on
any exchange or in any over-the-counter market, (c) a material
disruption in securities settlement, payment or clearance services in the
United States shall have occurred, (d) any moratorium on commercial banking
activities shall have been declared by Federal or New York State authorities or
(e) there shall have occurred any outbreak or escalation of hostilities, or any
change in financial markets or any calamity or crisis that, in the judgment of
such Investor, is material and adverse and which, singly or together with any
other event specified in this clause (e), makes it, in the judgment of such
Investor, impracticable or inadvisable to proceed with the offer, sale or
delivery of the Series A Preferred Stock on the terms and in the manner
contemplated in the Notes Offering Memorandum.


 


9.             Successors and
Assigns.  Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (including Permitted Transferees as defined in and pursuant to the
Investors’ Rights Agreement). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.


 


10.           Amendments
and Waivers.  Any term of
this Agreement may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the parties
hereto. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any securities purchased under this
Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities, and the
Company.


 


16

















 


11.           Severability.  If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.


 


12.           Entire
Agreement.  This Agreement
and the documents referred to herein constitute the entire agreement among the
parties and no party shall be liable or bound to any other party in any manner
by any warranties, representations, or covenants except as specifically set
forth herein or therein.


 


13.           Aggregation
of Stock.  All shares of the
Series A Preferred Stock held or acquired by affiliated entities or persons
shall be aggregated together for the purpose of determining the availability of
any rights under this Agreement.


 


14.           Notices.
 All notices and other communications
under this Agreement shall be in writing and mailed, delivered or sent by
facsimile transmission to: if sent to an Investor, at the address or facsimile
number (as applicable) indicated for such Investor on the signature pages
hereof or Annex A hereto, and if sent to the Company or any of its
subsidiaries, to Kinetic Concepts, Inc., 8023 Vantage Drive, San Antonio, Texas
78230, attention: General Counsel, phone number (210) 524-9000, facsimile
number (210) 255-6204.


 


15.           Counterparts.  This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.


 


16.           Applicable
Law.  This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York.


 


17.           Headings.  The headings of the sections of
this Agreement have been inserted for convenience of reference only and shall
not be deemed a part of this Agreement.


 


[Signature Page Follows]


 


17

















 


IN WITNESS
WHEREOF, the Investors and the Company have caused this Agreement to be
executed as of the date first written above.


 


 


	
   

  	
  KINETIC
  CONCEPTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


SIGNATURE PAGE TO SERIES A PREFERRED STOCK
AGREEMENT


 

















 


Accepted as of the date hereof


 


NON-SPONSOR
INVESTORS:


 


	
   

  	
  GS CAPITAL
  PARTNERS 2000, L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: GS
  Advisors 2000, L.L.C., its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GS CAPITAL
  PARTNERS 2000 OFFSHORE, L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:  GS Advisors 2000, L.L.C., its general
  partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GS CAPITAL
  PARTNERS 2000 GmbH & CO. BETEILIGUNGS KG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:  Goldman Sachs Management GP GmbH, its
  general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GS CAPITAL
  PARTNERS 2000 EMPLOYEE FUND, L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:  GS Employee Funds 2000 GP, L.L.C., its
  general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GOLDMAN
  SACHS DIRECT INVESTMENT FUND 2000, L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:  GS Employee Funds GP, L.L.C., its general
  partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
								



 


SIGNATURE PAGE TO SERIES A PREFERRED STOCK
AGREEMENT


 

















 


	
   

  	
  DLJ MERCHANT
  BANKING PARTNERS III, L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:  DLJ Merchant Banking III, Inc., its
  Managing General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DLJ MERCHANT
  BANKING III, INC., its Advisory General Partner on behalf of DLJ Offshore
  Partners III, C.V.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DLJ MERCHANT
  BANKING III, INC. as Advisory General Partner on behalf of DLJ Offshore
  Partners III-1, C.V. and as attorney-in-fact for DLJ Merchant Banking III,
  L.P., as Associate General Partner of DLJ Offshore Partners III-1, C.V.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DLJ MERCHANT
  BANKING III, INC. as Advisory General Partner on behalf of DLJ Offshore
  Partners III-2, C.V. and as attorney-in-fact for DLJ Merchant Banking III,
  L.P., as Associate General Partner of DLJ Offshore Partners III-2, C.V.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DLJ MB
  PARTNERSIII GMBH & CO. KG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:  DLJ Merchant Banking III, L.P., its
  Managing Limited Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  DLJ Merchant Banking III, Inc., its
  General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:  

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  
								



 


SIGNATURE PAGE TO SERIES A PREFERRED STOCK
AGREEMENT


 

















 


	
   

  	
  MILLENNIUM
  PARTNERS II, L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  DLJ Merchant
  Banking III, Inc., its Managing General Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MBP III PLAN
  INVESTORS, L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  DLJ LBO
  Plans Management Corporation II, its General Partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
							



 


SIGNATURE PAGE TO SERIES A PREFERRED STOCK
AGREEMENT


 

















 


	
   

  	
  SPONSOR INVESTORS:

  	 

	
   

  	 

	
   

  	
  FREMONT
  PARTNERS III, L.P.

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  FP Advisors
  III, 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
  PARTNERS III SIDE-BY-SIDE, L.P.

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  By:

  	
  Fremont
  Group, L.L.C.

  	 

	
   

  	
  Its:

  	
  General
  Partner

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
  Fremont
  Investors, Inc.

  	 

	
   

  	
   

  	
  Its:

  	
  Manager

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
  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:

  	
  Manager

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
  By:  Fremont Investors, Inc.

  	 

	
   

  	
   

  	
   

  	
  Its:  Manager

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
  By: 

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
  Name:

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  
											



 


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AGREEMENT


 

















 


	
   

  	
  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:

  	
   

  
							



 


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AGREEMENT


 

















 


	
   

  	
  BLUM
  STRATEGIC PARTNERS II, L.P.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: Blum
  Strategic GP II, L.L.C.

  	
   

  	
   

  
	
   

  	
  Its: General
  Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BLUM
  STRATEGIC PARTNERS II GmbH & Co. KG

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: Blum
  Strategic GP II, L.L.C.

  	
   

  	
   

  
	
   

  	
  Its:
  Managing Limited Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  STINSON
  CAPITAL PARTNERS II, L.P.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: Blum
  Capital Partners, L.P.

  	
   

  	
   

  
	
   

  	
  Its: General
  Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  RCBA-KCI
  CAPITAL PARTNERS, L.P.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: Blum
  Capital Partners, L.P.

  	
   

  	
   

  
	
   

  	
  Its: General
  Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  	
   

  



 


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AGREEMENT


 

















 


	
   

  	
  JAMES R.
  LEININGER, M.D.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


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AGREEMENT


 

















 


	
  DIRECTOR INVESTORS:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  JOHN P.
  BYRNES

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HARRY R.
  JACOBSON, M.D.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DAVID J.
  SIMPSON

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  C. THOMAS
  SMITH

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


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AGREEMENT


 

















 


SCHEDULE I


 


A.            NON-SPONSOR
INVESTORS


 


	
  Investor

  	
   

  	
  Shares of Series A

  Preferred Stock to be

  Purchased

  	
   

  	
  Additional
Transaction Fees

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GS Capital Partners 2000, L.P.

  	
   

  	
  18,864

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GS Capital Partners 2000 Offshore, L.P.

  	
   

  	
  6,854

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GS Capital Partners 2000 GmbH & Co.
  Beteiligungs KG

  	
   

  	
  788

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GS Capital Partners 2000 Employee Fund,
  L.P.

  	
   

  	
  5,994

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Goldman Sachs Direct Investment Fund 2000,
  L.P.

  	
   

  	
  2,500

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DLJ Merchant Banking Partners III, L.P.

  	
   

  	
  29,311

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DLJ Merchant Banking III, Inc., its
  Advisory General Partner on behalf of DLJ Offshore Partners III, C.V.

  	
   

  	
  2,018

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DLJ Merchant Banking III, Inc., as Advisory
  General Partner on behalf of DLJ Offshore Partners III-1, C.V. and as attorney-in-fact
  for DLJ Merchant Banking III, L.P., as Associate General Partner of DLJ
  Offshore Partners III-1, C.V.

  	
   

  	
  518

  	
   

  	
  —

  	
   

  
	
  DLJ Merchant Banking III, Inc., as Advisory
  General Partner on behalf of DLJ Offshore Partners III-2, C.V. and as
  attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate General
  Partner of DLJ Offshore Partners III-2, C.V.

  	
   

  	
  369

  	
   

  	
  —

  	
   

  
	
  DLJ MB PartnersIII GmbH & Co. KG

  	
   

  	
  245

  	
   

  	
  —

  	
   

  
	
  Millennium Partners II, L.P.

  	
   

  	
  99

  	
   

  	
  —

  	
   

  
	
  MBP III Plan Investors, L.P.

  	
   

  	
  4,440

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Total:

  	
   

  	
  72,000

  	
   

  	
  0

  	
   

  
							



 


I-1

















 


B.                                    SPONSOR
INVESTORS


 


	
  Investor

  	
   

  	
  Shares of Series A

  Preferred Stock to be

  Purchased

  	
   

  	
  Additional

  Transaction Fees

  	
   

  
	
  Fremont Partners III, L.P.

  	
   

  	
  47,824

  	
   

  	
  —

  	
   

  
	
  Fremont Partners III Side-By-Side, L.P.

  	
   

  	
  2,176

  	
   

  	
  —

  	
   

  
	
  Fremont Acquisition Company II, L.L.C.

  	
   

  	
  21,355

  	
   

  	
  —

  	
   

  
	
  Fremont Acquisition Company IIA, L.L.C.

  	
   

  	
  4,517

  	
   

  	
  —

  	
   

  
	
  Blum Strategic Partners II, L.P.

  	
   

  	
  2,273

  	
   

  	
  —

  	
   

  
	
  Blum Strategic Partners II GmbH and Co. KG

  	
   

  	
  47

  	
   

  	
  —

  	
   

  
	
  Stinson Capital Partners II, L.P.

  	
   

  	
  2,792

  	
   

  	
  —

  	
   

  
	
  RCBA-KCI Capital Partners, L.P.

  	
   

  	
  45,010

  	
   

  	
  —

  	
   

  
	
  James R. Leininger, M.D.

  	
   

  	
  64,006

  	
   

  	
  1,280,120

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  190,000

  	
   

  	
  $

  	
  1,280,120

  	
   

  
							



 


C.                                    DIRECTOR
INVESTORS


 


	
  Investor

  	
   

  	
  Shares of Series A

  Preferred Stock to be

  Purchased

  	
   

  	
  Additional

  Transaction Fees

  	
   

  
	
  John P. Byrnes

  	
   

  	
  1,000

  	
   

  	
  $

  	
  20,000

  	
   

  
	
  Harry R. Jacobson, M.D.

  	
   

  	
  500

  	
   

  	
  10,000

  	
   

  
	
  David J. Simpson

  	
   

  	
  250

  	
   

  	
  5,000

  	
   

  
	
  C. Thomas Smith

  	
   

  	
  44

  	
   

  	
  880

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  1,794

  	
   

  	
  $

  	
  35,880

  	
   

  



 


	
  TOTAL:

  	
   

  	
  263,794

  	
   

  	
  $1,316,000

  	
   

  



 


I-2

















 


SCHEDULE II


 


Subsidiaries of the Company


 


	
  Name

  	
   

  	
  Jurisdiction
  of Organization

  
	
   

  	
   

  	
   

  
	
  Medclaim,
  Inc.

  	
   

  	
  North
  Carolina

  
	
  KCI Holding
  Company, Inc.

  	
   

  	
  Delaware

  
	
  KCI Real
  Holdings, L.L.C.

  	
   

  	
  Delaware

  
	
  KCI
  Equi-Tron, Inc.

  	
   

  	
  Ontario,
  Canada

  
	
  KCI
  International, Inc.

  	
   

  	
  Delaware

  
	
  KCI
  Licensing, Inc.

  	
   

  	
  Delaware

  
	
  KCI
  Properties Limited

  	
   

  	
  Texas

  
	
  KCI Real
  Property Limited

  	
   

  	
  Texas

  
	
  Equi-Tron
  Mfg. Inc.

  	
   

  	
  Ontario,
  Canada

  
	
  KCI
  International Holding Company

  	
   

  	
  Delaware

  
	
  KCII
  Holdings L.L.C.

  	
   

  	
  Delaware

  
	
  KCI USA,
  Inc.

  	
   

  	
  Delaware

  
	
  KCI USA Real
  Holdings, L.L.C.

  	
   

  	
  Delaware

  
	
  KCI Medical
  Canada, Inc.

  	
   

  	
  Canada

  
	
  KCI Medical
  Australia PTY, Ltd.

  	
   

  	
  Australia

  
	
  KCI Medica
  Espana, S.A.

  	
   

  	
  Spain

  
	
  KCI Medical
  Puerto Rico, Inc.

  	
   

  	
  Puerto Rico

  
	
  European
  Medical Distributors C.V.

  	
   

  	
  Netherlands

  
	
  International
  Medical Distributors CV

  	
   

  	
  Netherlands

  
	
  KCI
  International, V.O.F.

  	
   

  	
  Netherlands

  
	
  KCI Europe
  Holding, B.V.

  	
   

  	
  Netherlands

  
	
  KCI United
  Kingdom Holdings Ltd.

  	
   

  	
  United
  Kingdom

  
	
  KCI
  (Bermuda) Holding, Ltd.

  	
   

  	
  Bermuda

  
	
  KCI Medical
  B.V.

  	
   

  	
  Netherlands

  
	
  KCI Medical
  AB

  	
   

  	
  Sweden

  
	
  KCI Medical
  Srl

  	
   

  	
  Italy

  
	
  KCI Austria
  GmbH

  	
   

  	
  Austria

  
	
  KCI Medical
  GmbH

  	
   

  	
  Switzerland

  
	
  Equipment
  Medical KCI SARL

  	
   

  	
  France

  
	
  KCI Medical
  ApS

  	
   

  	
  Denmark

  
	
  KCI Medical
  South Africa Pty Ltd.

  	
   

  	
  South Africa

  
	
  KCI Clinic
  AB

  	
   

  	
  Sweden

  
	
  KCI Clinic
  Spain SL

  	
   

  	
  Spain

  
	
  KCI Medical
  Holdings Gmbh

  	
   

  	
  Germany

  
	
  KCI Medical
  Limited

  	
   

  	
  United
  Kingdom

  
	
  KCI Ethos
  Medical Limited

  	
   

  	
  Ireland

  
	
  KCI Medical
  Belgium BVBA

  	
   

  	
  Belgium

  
	
  KCI
  Medizinprodukte Gmbh

  	
   

  	
  Germany

  
	
  KCI Therapie
  Gerate Gmbh

  	
   

  	
  Germany

  
	
  KCI Medical
  UK Ltd

  	
   

  	
  United
  Kingdom

  
	
  KCI Medical
  Products (UK) Ltd

  	
   

  	
  United
  Kingdom

  
	
  KCI Clinic
  Limited

  	
   

  	
  Ireland

  
	
  Alliance
  Investments Limited

  	
   

  	
  Ireland

  
	
  KCI Ethos
  Medical Products Limited

  	
   

  	
  Ireland

  
	
  Ethos
  Medical Research Limited

  	
   

  	
  Ireland

  
	
  Polymedics
  BVBA

  	
   

  	
  Belgium

  



 


II-1

















 


EXHIBIT A


 


STATEMENT OF
DESIGNATIONS


 

















 


EXHIBIT B


 


INVESTORS’ RIGHTS
AGREEMENT


 

















 


EXHIBIT C


 


OPINION OF COUNSEL
FOR THE COMPANY


 


August     , 2003


 


 


[INVESTORS]


 


 


 


 


Ladies
& Gentlemen:


 


We have acted as special
Texas counsel to Kinetic Concepts, Inc., a Texas corporation (the “Company”),
in connection with the Series A Preferred Stock Purchase Agreement dated as of
August     , 2003 (the “Agreement”), among the
Company and the several investors party thereto (the “Investors”).


 


The opinions expressed
below are furnished to you pursuant to subsection 4(d) of the Agreement.  Unless otherwise defined herein, the
capitalized terms used herein shall have the meanings given to them in the
Agreement.


 


In connection with this
opinion, we have examined and relied upon, among other things, originals or
copies certified or otherwise identified to our satisfaction of the following
documents: (a) the organizational documents of the Company, including, without
limitation, the Amended and Restated Articles of Incorporation, as amended, of
the Company and the Statement of Designations of the Company, as filed with the
Secretary of State of Texas on August     , 2003; (b) the
records provided to us by the Company of actions by written consent and minutes
of meetings of the shareholders, the Board of Directors of the Company and
committees of the Board of Directors of the Company; (c) each of the
Transaction Documents and all exhibits thereto; and (d) such other documents,
instruments and certificates of corporate and public officials and officers and
representatives of the Company and other persons as we have deemed necessary or
appropriate for purposes of this opinion. 
As to certain questions of fact material to our opinion, we have relied
upon certificates and statements of officers and other representatives of the
Company and certificates of public officials. 
Further, as to the certain matters of fact material to our opinion, we
have relied on the accuracy of the representations and warranties of the
Company set forth in the Transaction Documents.


 


In rendering our
opinions, we have assumed without independent investigation that (i) each party
to each Transaction Document (other than the Company) is a corporation or other
entity duly incorporated or otherwise organized and validly existing under the
laws of the jurisdiction of its incorporation or organization, (ii) each party
to each Transaction Document (other than the Company) has full power (corporate
or otherwise) and authority to execute, deliver and perform each 


 


C-1

















 


Transaction
Document to which it is a party, (iii) the execution, delivery and performance
by each party to each Transaction Document (other than the Company) to which it
is a party has been duly authorized by all necessary action (corporate or
otherwise), (iv) the execution, delivery and performance by each party to each
Transaction Document (other than the Company) to which it is a party does not
(1) contravene the certificate of incorporation, bylaws or other constituent
documents of such party, (2) violate any law, rule or regulation applicable to
such party, (3) conflict with or result in the breach of any document or
instrument binding on such party and (4) require any authorization, approval,
consent or other action by, or notice to or filing with, any governmental
authority or any other third party for the due execution, delivery or
performance by such party of any Transaction Document to which it is a party
or, if any such authorization, approval, consent, action, notice or filing is
required thereof, it has been duly obtained or made and is in full force and
effect, (v) all signatures on all documents that we examined (other than those
of the Company and officers of the Company) are genuine, (vi) the authenticity
of all documents submitted to us as originals, and (vii) the conformity to
originals of all such documents submitted to us as copies.


 


Based upon and subject
to the limitations, assumptions, qualifications and exceptions set forth
herein, we are of the opinion that:


 


1.             The Company is a corporation
validly existing under the laws of the State of Texas with all requisite
corporate power and authority to execute, deliver and perform its obligations
under the Transaction Documents.


 


2.             The execution, delivery and
performance by the Company of the Transaction Documents have been duly
authorized by all necessary corporate action on the part of the Company, and
the Transaction Documents have been duly executed and delivered.


 


3.             Each of the Transaction Documents
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms.


 


4.             The Statement of Designations has
been duly authorized by all necessary corporate action on the part of the
Company under the Texas Business Corporation Act (the “TBCA”), and has been
duly filed with the Secretary of State of Texas and has become effective in
accordance with Section 2.13.F. of the TBCA. 
The shares of Series A Preferred Stock, to be issued by the Company
under the terms of the Statement  of
Designations and the Agreement have been duly authorized and, when issued and
delivered to and paid for by the Investors pursuant to the terms of the
Agreement, will be validly issued, fully paid and nonassessable.  The shares of Common Stock issuable upon
conversion of the Series A Preferred Stock (the “Conversion Shares”) have been
duly and validly reserved for issuance by the Company and, when and if issued
upon such conversion in accordance with the Statement of Designations, will be
validly issued, fully paid and nonassessable.


 


The opinions expressed
herein are subject to the following assumptions, limitations, exceptions and
qualifications:


 


(a)           We are members of the State Bar of
Texas and are not admitted to practice in any other jurisdiction in which the
Company may transact business.  The
opinions expressed herein relate only to the presently existing laws of the
State of Texas.  We express no opinion
as to legal matters 


 


C-2

















 


governed
by any other laws, and we disclaim any opinion as to the application or effect
of any statute, rule, regulation, ordinance, order or other promulgation of any
other jurisdiction. Special rulings of authorities administering such laws or
opinions of other counsel have not been sought or obtained.  Furthermore, we invite your attention to the
fact that the Transaction Documents state that they are governed by the laws of
the State of New York.  We have made no
investigation of New York law nor consulted with counsel admitted to practice
law in the State of New York, for purposes of this opinion letter.  For purposes of this opinion letter, we have
assumed that the laws of the State of New York governing the Transaction
Documents are the same as the laws of the State of Texas.


 


(b)           No opinion is to be inferred as to
matters other than as expressly set forth above, and no opinion is to be or may
be implied or inferred herefrom.


 


(c)           The opinions set forth in paragraph 3
as to enforceability are subject to the qualification that enforcement may be
limited by:  (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer, fraudulent conveyance or other
similar laws now or hereinafter in effect relating to or affecting the rights
or remedies of creditors generally; (b) general principles of equity including,
without limitation, concepts of materiality, reasonableness, good faith and
fair dealing and the possible unavailability of specific performance, injunctive
relief or other equitable remedies, regardless of whether considered in a
proceeding in equity or at law; and (c) the applicability of Texas laws
concerning the enforceability of certain of the remedial, waiver and other
provisions of the Transaction Documents; however, it is our opinion that the
applicability of such laws referred to in clause (c) above does not
substantially interfere with the practical realization of the benefits
expressed in the Transaction Documents, except for the economic consequences of
any procedural delay which may result from the applicability of such laws.


 


This opinion is based
upon and limited to the facts known to us on this date, and except as set forth
below, we do not undertake to express any opinion or factual assurance as to
any matter or to advise any person with respect to any events or changes of
fact or law occurring subsequent to the date hereof.


 


This opinion letter has
been rendered solely for your benefit in connection with the Agreement and the
transactions contemplated thereby and may not be relied upon by any other
person without our prior written consent.


 


	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COX
  & SMITH INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  William
  J. McDonough, Jr.

  	
   

  
	
   

  	
   

  	
  For the Firm

  	
   

  



 


C-3

















 


ANNEX A


 


 


	
  KINETIC
  CONCEPTS, INC.

  	
   

  	
  Address:

  	
   

  	
  8023 Vantage
  Drive

  San Antonio, TX  78265-9608

  
	
   

  	
   

  	
  Telephone
  Number:

  	
   

  	
  (210)
  524-9000

  
	
   

  	
   

  	
  Fax Number:

  	
   

  	
  (210)
  255-6331

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  If to:

  	
   

  	
   

  	
   

  	
   

  
	
  GS CAPITAL PARTNERS 2000, L.P.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GS CAPITAL PARTNERS 2000 OFFSHORE, L.P.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GS CAPITAL PARTNERS 2000 GmbH & CO. BETEILIGUNGS KG

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GS CAPITAL PARTNERS 2000 EMPLOYEE FUND, L.P.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GOLDMAN SACHS DIRECT INVESTMENT FUND 2000, L.P.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Then to such party c/o:

  	
   

  	
  Address:

  	
   

  	
  Goldman,
  Sachs & Co.

  85 Broad Street, 10th Floor

  New York, NY 10004

  
	
   

  	
   

  	
  Telephone
  Number:

  	
   

  	
  (212)
  902-1000

  
	
   

  	
   

  	
  Fax Number:

  	
   

  	
  (212)
  357-5505

  



 


A-1

















 


	
  If to:

  	
   

  	
   

  	
   

  	
   

  
	
  DLJ MERCHANT BANKING PARTNERS III, L.P.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DLJ MERCHANT BANKING III, INC., its Advisory General Partner on
  behalf of DLJ Offshore Partners III, C.V.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DLJ MERCHANT BANKING III, INC. as Advisory General Partner on behalf
  of DLJ Offshore Partners III-1, C.V. and as attorney-in-fact for DLJ Merchant
  Banking III, L.P., as Associate General Partner of DLJ Offshore Partners
  III-1, C.V.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DLJ MERCHANT BANKING III, INC. as Advisory General Partner on behalf
  of DLJ Offshore Partners III-2, C.V. and as attorney-in-fact for DLJ Merchant
  Banking III, L.P., as Associate General Partner of DLJ Offshore Partners
  III-2, C.V.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DLJ MB PARTNERS III GMBH & CO. KG

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MILLENNIUM PARTNERS II, L.P.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MBP III PLAN INVESTORS, L.P.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Then to such party c/o:

  	
   

  	
  Address:

  	
   

  	
  DLJ Merchant
  Banking

  Eleven Madison Avenue, 16th Floor

  New York, NY 10010

  Attention:  Andrew Rush

  
	
   

  	
   

  	
  Telephone
  Number:

  	
   

  	
  (212)
  538-3149

  
	
   

  	
   

  	
  Fax Number:

  	
   

  	
  (212)
  538-0413

  



 


A-2

















 


	
  If to:

  	
   

  	
   

  	
   

  	
   

  
	
  FREMONT PARTNERS III, L.P.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

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

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FREMONT ACQUISITION COMPANY II, L.L.C.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FREMONT ACQUISITION COMPANY, IIA, L.L.C.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Then to such party c/o:

  	
   

  	
  Address:

  	
   

  	
  Fremont
  Partners

  199 Fremont Street, Suite 2300

  San Francisco, CA 94105

  
	
   

  	
   

  	
  Telephone
  Number:

  	
   

  	
  (415)
  284-8100

  
	
   

  	
   

  	
  Fax Number:

  	
   

  	
  (415)
  284-8730

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  If to:

  	
   

  	
   

  	
   

  	
   

  
	
  BLUM STRATEGIC PARTNERS II, L.P.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BLUM STRATEGIC PARTNERS II GmbH & Co. KG

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  STINSON CAPITAL PARTNERS II, L.P.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RCBA-KCI CAPITAL PARTNERS, L.P.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Then to such party c/o:

  	
   

  	
  Address:

  	
   

  	
  Blum Capital
  Partners

  909 Montgomery Street, Suite 400

  San Francisco, CA 94133

  
	
   

  	
   

  	
  Telephone
  Number:

  	
   

  	
  (415)
  434-1111

  
	
   

  	
   

  	
  Fax Number:

  	
   

  	
  (415)
  288-7293

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  JAMES R.
  LEININGER, M.D.

  	
   

  	
  Address:

  	
   

  	
  8023 Vantage
  Drive

  San Antonio, TX  78265-9608

  
	
   

  	
   

  	
  Telephone
  Number:

  	
   

  	
  (210)
  255-6493

  
	
   

  	
   

  	
  Fax Number:

  	
   

  	
  (210)
  255-6975

  



 


A-3

















 


	
  JOHN P. BYRNES

  	
   

  	
  Address:

  	
   

  	
  19387 US 19 North

  Clearwater, FL  33764

  
	
   

  	
   

  	
  Telephone Number:

  	
   

  	
  (727) 530-7700 x 8226

  
	
   

  	
   

  	
  Fax Number:

  	
   

  	
  (727) 532-4091

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HARRY R. JACOBSON, M.D.

  	
   

  	
  Address:

  	
   

  	
  Vanderbilt University Medical Center

  D-3300 Medical Center North

  Nashville, TX  37232

  
	
   

  	
   

  	
  Telephone Number:

  	
   

  	
  (615) 343-3485

  
	
   

  	
   

  	
  Fax Number:

  	
   

  	
  (615) 343-7286

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DAVID J. SIMPSON

  	
   

  	
  Address:

  	
   

  	
  2725 Fairfield Road

  Kalamazoo, MI  49002

  
	
   

  	
   

  	
  Telephone Number:

  	
   

  	
  (269) 383-7324

  
	
   

  	
   

  	
  Fax Number:

  	
   

  	
  (269) 383-7353

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C. THOMAS SMITH

  	
   

  	
  Address:

  	
   

  	
  17703 Cedar Creek Canyon

  Dallas, TX  75252

  
	
   

  	
   

  	
  Telephone Number:

  	
   

  	
  (972) 380-9120

  
	
   

  	
   

  	
  Fax Number:

  	
   

  	
  (972) 735-0196

  



 


A-4