Exhibit 10.11


 


AMENDMENT AND WAIVER


 


THIS AMENDMENT AND WAIVER (the “Amendment and Waiver”), dated August
11, 2003, executed by and among Kinetic Concepts, Inc., a Texas corporation
(the “Company”), each of the shareholders (the “Shareholders”) of the Company
that are parties to that certain Agreement Among Shareholders (as amended by
that certain Joinder and Amendment Agreement dated as of June 25, 2003, the
“Shareholder Agreement”), dated November 5, 1997, and JPMorgan Chase Bank, a
New York banking corporation (“Chase”), in its capacity as administrative agent
(together with its successors in such capacity, “Administrative Agent”) to that
certain Waiver and Consent (the “Waiver and Consent”), dated December 2002 but
effective for all purposes as of September 27, 2002.


 


WHEREAS, the Company and the Shareholders are subject to the
Shareholder Agreement;


 


WHEREAS, the Company, the Shareholders, Administrative Agent, and Chase
and Bank One, NA, in their capacity as lenders (together with their respective
successors and assigns, individually a “Lender” and collectively the “Lenders”)
and as issuing lenders entered into the Waiver and Consent;


 


WHEREAS, the Company expects to: 
(1) issue an aggregate of $205.0 million principal amount of 7 3/8%
senior subordinated notes due 2013 (the “New Notes”), (2) enter 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”),
(3) redeem all of its currently outstanding senior subordinated notes due 2007
on or shortly after the date of issuance of the New Notes for a purchase price
of 104.813% of their principal amount plus accrued and unpaid interest to the
date of redemption (the “Redemption”), (4) offer up to $270.0 million of
convertible preferred stock (the “Preferred Stock”), subject to the rights,
preferences, privileges and terms that the Company’s Board of Directors or any
committee thereof shall determine, (5) use approximately $590 million to offer
to repurchase some of the Company’s outstanding shares of common stock and
vested stock options (the “Initial Share Repurchase”), which may take place in
one or more tranches between the date of issuance of the New Notes and March
31, 2004, and (6) repurchase additional shares and vested stock options with
the net proceeds from (a) an antitrust settlement with Hillenbrand Industries,
Inc., on an after-tax basis, that it expects to receive in January 2004, (b)
the cash tax benefit to the Company from the Recapitalization in an amount not
to exceed $40 million and (c) the exercise of employee stock options
(collectively, the “Recapitalization”).


 


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


 

















 


1.               Amendment


 


a.               Section 1.11 of the Shareholder
Agreement is hereby amended and restated to read in its entirety as follows:


 


1.11                           “RCBA” means Blum
Capital Partners, L.P. and /or its Affiliates listed on Schedule 1.11.


 


b.              Section 3.01 of the Shareholder Agreement
is hereby amended and restated to read in its entirety as follows:


 


3.01                           The Shareholders agree that
each shall take such steps as are required to assure that after the Closing
Time, and continuing until such time as the Common Stock shall have been the
subject of a Public Offering registered under the Securities Act, the Board of
Directors of KCI shall have at least eight (8) members, one (1) of whom shall
be a person designated by Fremont, one (1) of whom shall be a person designated
by Fremont Partners III, L.P., two (2) of whom shall be persons designated by
RCBA, one (1) of whom shall be Dr. Leininger (so long as he shall own at least
fifteen percent (15%) of the outstanding equity of KCI), one (1) of whom shall
be Dennert O. Ware (provided, however, that if Dennert O. Ware for any reason
ceases to serve KCI as its chief executive officer, then the successor chief
executive officer shall be elected to serve as director in Mr. Ware’s place),
and two (2) or more of whom shall be independent outside directors, who shall
not be affiliated with Fremont or RCBA and who shall be designated by the
unanimous vote of the Nominating Committee of the Board of Directors of KCI,
which shall comprise Dr. Leininger, one (1) director designated by Fremont, and
one (1) director designated by RCBA.


 


c.               Section 3.03 of the Shareholder
Agreement is hereby amended and restated to read in its entirety as follows:


 


3.03                           After the Closing Time, and
until such time as the Common Stock shall have been the subject of a Public
Offering registered under the Securities Act, each of Fremont, Fremont Partners
III, L.P. and RCBA shall have the following rights with respect to KCI:  (i) the right to inspect the books and records
of KCI; and (ii) the right to inspect the properties and operations of
KCI.  The rights provided to Fremont,
Fremont Partners III, L.P. and RCBA in Section 3.01 above and in this Section
3.03 are intended to enable Fremont, Fremont Partners III, L.P. and RCBA to be
operated as a “venture capital operating company” within the meaning of the
regulations of the Department of Labor set forth in 29 CFR Section
2510.3-101(d), and Section 3.01 above and this Section 3.03 shall be
interpreted accordingly.


 


2

















 


d.              A new Section 7.11 shall be added to the
Shareholder Agreement as follows:


 


7.11                           Securities
Convertible or Exchangeable into Common Stock.  The rights, obligations and restrictions set forth in Sections 2,
4 and 5 of the Shareholder Agreement, which prior to the date of this Amendment
applied to the Common Stock as that term is used in this Shareholder Agreement,
shall also apply in all respects to securities convertible or exchangeable into
Common Stock.


 


e.               Section 5.02(b) of the Shareholder
Agreement is hereby amended and restated to read in its entirety as follows:


 


(b)                                 If a Piggyback
Registration is an underwritten primary registration on behalf of KCI and the
managing underwriters advise KCI in writing that, in their opinion, the number
of total securities to be registered in such offering exceeds the number that
can be sold in an orderly manner within a price range acceptable to KCI, then
the number of securities that the managing underwriter believes may be sold in
such offering shall be allocated first to the shares being offered by KCI for
inclusion in the registration statement, then to the shares of the Shareholders
and the shareholders that are then a party to the Investors’ Rights Agreement
(the “Investors’ Rights Agreement”), dated August 11, 2003, including
any amendments thereto, by and among KCI, the Investors and the Sponsors (as
those terms are defined in the Investors’ Rights Agreement) submitted for
registration, pro rata among the Shareholders and such shareholders in accordance
with the number of shares they then hold that are entitled to registration
rights.


 


f.                 Section 5.02(c) of the Shareholder
Agreement is hereby amended and restated to read in its entirety as follows:


 


(c)                                  If a Piggyback
Registration is an underwritten secondary registration on behalf of the
shareholders of KCI’s securities and the managing underwriters advise KCI in
writing that, in their opinion, the number of total securities to be registered
in such offering exceeds the number that can be sold in an orderly manner
within a price range acceptable to the shareholders initially requesting such
registration, then the number of securities that the managing underwriter
believes may be sold in such offering shall be allocated among the Shareholders
and the shareholders that are then party to the Investors’ Rights Agreement who
are requesting shares to be included in such registration statement pro rata in
accordance with the number of shares they then hold that are entitled to
registration rights.


 


3

















 


g.                                      Schedule
1.05 is hereby amended and restated to read in its entirety as set forth on Exhibit
A hereto.


 


h.                                      Schedule
1.06 is hereby amended and restated to read in its entirety as set forth on Exhibit
B hereto.


 


2.               Waiver and Consent


 


The Shareholders hereby (1) waive any and all rights and benefits under
the Shareholder Agreement that may otherwise arise or accrue to the
Shareholders in connection with the Recapitalization or any part thereof, and
(2) consent to the Recapitalization in its entirety and each part thereof.


 


The Shareholders acknowledge and agree that: (1) this Amendment and
Waiver shall apply in full force and effect to the Recapitalization or any part
thereof notwithstanding any amendment or modification of any of the terms
thereof as may be determined by the Board of Directors of the Company, any
committee thereof or any authorized officer of the Company; and (2) nothing
herein shall be a guarantee that the Recapitalization or any part thereof shall
be consummated on the terms and subject to the conditions presently
contemplated, if at all, and the Company, acting through its Board of Directors
or any committee thereof or any authorized officer of the Company, reserves the
right to determine not to consummate the Recapitalization or any part thereof
in its or their discretion, subject to applicable law.


 


3.               Recapitalization


 


The Company and the Shareholders agree to treat (a) the redemption of
Common Stock by the Company and the acquisition of Preferred Stock by the
Shareholders in connection with the Recapitalization  (to the extent that the Shareholder and not any affiliate
acquires Preferred Stock) as a recapitalization under section 368(a)(1)(E) of
the Internal Revenue Code of 1986, as amended (the “Code”) for United States
federal income tax purposes (and where applicable state and local tax purposes)
and (b) the receipt of cash pursuant to the redemption as a dividend for
purposes of section 356(a)(2) of the Code and as not constituting an exchange
for purposes of section 302(b) of the Code.


 


4.               General


 


Notwithstanding the foregoing, except as expressly set forth herein,
the Shareholder Agreement shall remain in full force and effect without
amendment or modification thereof.


 


This Amendment and Waiver may be executed in one or more counterparts,
each of which may be either an original or a facsimile and all of which
together shall be one and the same instrument.


 


4

















 


The titles of the
Sections of this Agreement are for convenience only and shall not be
interpreted to limit or amplify the provisions of this Agreement.


 


Each provision of this Agreement shall be considered separable and if
for any reason any provision or provisions hereof are determined to be invalid
and contrary to any existing or future law, such invalidity shall not impair
the operation of or affect those portions of this Agreement that are valid.


 


 


[Signature Pages to Follow]


 


5

















 


IN WITNESS WHEREOF, this Amendment and Waiver has been duly executed by
the parties as of the day and year first above written.


 


	
   

  	
  FREMONT PARTNERS, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  FP Advisors, L.L.C.

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Fremont Group, L.L.C.

  
	
   

  	
   

  	
  Its:

  	
  Managing Member

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Fremont Investors, Inc.

  
	
   

  	
   

  	
  Its:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


	
   

  	
  BLUM CAPITAL PARTNERS, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Richard C. Blum & Associates, Inc.

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  James R. Leininger, M.D.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KINETIC CONCEPTS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					



 


 


[SIGNATURE PAGE TO AMENDMENT AND WAIVER]


 

















 


	
   

  	
  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:

  
					



 


 


[SIGNATURE PAGE TO AMENDMENT AND WAIVER]


 

















 


	
   

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

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Fremont Group, L.L.C.

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Fremont Investors, Inc.

  
	
   

  	
   

  	
  Its:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


	
   

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

  
	
   

  	
   

  
	
   

  	
  By:

  	
  FP Advisors, L.L.C.

  
	
   

  	
  Its:

  	
  Member-Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Fremont Group, L.L.C.

  
	
   

  	
   

  	
  Its:

  	
  Managing Member

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Fremont Investors, Inc.

  
	
   

  	
   

  	
  Its:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


[SIGNATURE PAGE TO AMENDMENT AND WAIVER]


 

















 


	
   

  	
  FREMONT ACQUISITION COMPANY II, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Fremont Partners, L.P.

  
	
   

  	
  Its:

  	
  Member

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  FP Advisors, L.L.C.

  
	
   

  	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Fremont Group, L.L.C.

  
	
   

  	
   

  	
  Its:

  	
  Managing Member

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Fremont Investors, Inc.

  
	
   

  	
   

  	
  Its:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


	
   

  	
  FREMONT ACQUISITION COMPANY IIA, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  FP Advisors, L.L.C.

  
	
   

  	
  Its:

  	
  Non-Member Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Fremont Group, L.L.C.

  
	
   

  	
   

  	
  Its:

  	
  Managing Member

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Fremont Investors, Inc.

  
	
   

  	
   

  	
  Its:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


[SIGNATURE PAGE TO AMENDMENT AND WAIVER]


 

















 


	
   

  	
  FREMONT OFFSHORE PARTNERS, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  FP Advisors, L.L.C.

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Fremont Group, L.L.C.

  
	
   

  	
   

  	
  Its:

  	
  Managing Member

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Fremont Investors, Inc.

  
	
   

  	
   

  	
  Its:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


	
   

  	
  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-KCI CO-INVESTMENT COMPANY II, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  FP Advisors, L.L.C.

  
	
   

  	
   

  	
  Its:

  	
  Member-Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Fremont Group, L.L.C.

  
	
   

  	
   

  	
  Its:

  	
  Managing Member

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Fremont Investors, Inc.

  
	
   

  	
   

  	
  Its:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


[SIGNATURE PAGE TO AMENDMENT AND WAIVER]


 

















 


	
   

  	
  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:

  



 


 


[SIGNATURE PAGE TO AMENDMENT AND WAIVER]


 

















 


	
   

  	
  JPMORGAN CHASE BANK,

  
	
   

  	
  a New York banking corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


 


[SIGNATURE PAGE TO AMENDMENT AND WAIVER]


 

















 


EXHIBIT A


 


Schedule 1.05


 


List of Affiliates of Fremont Partners, L.P.:


 


FP Advisors, L.L.C.


Fremont Group, L.L.C.


Fremont Investors, Inc.


Sequoia Ventures Inc.


Fremont Partners, L.L.C.


Fremont Acquisition Company II, L.L.C.


Fremont Acquisition Company IIA, L.L.C.


Fremont Offshore Partners, L.P.


Fremont Partners Side-by-Side, L.P.


Fremont-KCI Co-Investment Company, L.L.C.


Fremont Purchaser II, Inc.


Fremont-KCI Co-Investment Company II, LLC


FP Advisors III, LLC


Fremont Partners III, LLC


Fremont Partners III, L.P.


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


 

















 


EXHIBIT B


 


Schedule 1.06


 


Members of the Fremont/KCI Group:


 


Fremont Acquisition Company II, L.L.C.


Fremont Acquisition Company IIA, L.L.C.


Fremont Offshore Partners, L.P.


Fremont Partners Side-by-Side, L.P.


Fremont-KCI Co-Investment Company, L.L.C.


Fremont Purchaser II, Inc.


Fremont Partners, L.P.


Fremont Partners III, L.P.


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


Fremont-KCI Co-Investment Company II, LLC