Document:

10.13 RententionAgreementTJohnson

KEY EMPLOYEE RETENTION AGREEMENT

This Key Employee Retention Agreement (the "Agreement") is effective as of January  2008 (the "Effective Date"), by and between Teresa A. Johnson (the "Employee"), and Kinetic Concepts, Inc. ("KCI" or the "Company") (together the "Parties").

RECITALS

WHEREAS, the Employee is presently employed by the Company as Vice President, Advantage Center and has significant strategic and management responsibilities necessary to the continued successful operation of the Company’s business;

WHEREAS, the Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Employee;

WHEREAS, the Board believes that it is imperative to provide the Employee with certain severance benefits upon the Employee’s termination of employment under the circumstances described herein that provide the Employee with the financial incentive and encouragement necessary to remain with the Company on a long-term basis.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Parties agree as follows:

1.Term of Agreement.  The Company and the Employee agree that this Agreement will be in effect from the Effective Date until the termination of the Employee's employment with the Company as set forth in Section 2 herein.
2.    At-Will Employment.  While this Agreement is in effect, the Employee's employment with the Company shall continue to be at-will and, as such, may be terminated by the Employee or the Company at any time, for any reason and with or without advance notice, subject to the Company's severance obligations set forth herein.
3.    Definition of Terms.  The following terms referred to in this Agreement shall have the following meanings:

(a)    Change in Control.  A Change in Control means the first to occur of any one of the following events: (i) consummation of any sale, lease, exchange, or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company (together with the assets of the Company's direct and indirect subsidiaries) to any Person or group of related Persons, as that term is used in Section 13(d) of the Exchange Act (a "Group"), together with any affiliates thereof; or (ii) any Person or Group becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Shares representing more than 50% of the aggregate voting power of the issued and outstanding 

stock entitled to vote in the election of directors of the Company; or (iii) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company.

(b)    Qualifying Termination.  A "Qualifying Termination" shall mean the Employee's (i) termination of employment by the Company without "Cause;" or (ii) the Employee's resignation from employment for "Good Reason." 
(c)    Cause.  "Cause" shall mean conduct involving one or more of the following:  (i) the substantial and continuing failure of the Employee to render services to the Company or any subsidiary or affiliate in accordance with the Employee’s obligations and position with the Company, subsidiary or affiliate; provided that the Company or any subsidiary or affiliate provides the Employee with adequate notice of such failure and, if such failure is capable of cure, the Employee fails to cure such failure within 30 days of the notice; (ii) dishonesty, gross negligence, or breach of fiduciary duty; (iii) the Employee's indictment of, conviction of, or no contest plea to, an act of theft, fraud or embezzlement; (iv) the commission of a felony; or (v) a material breach of the terms of an agreement between the Employee and the Company or any subsidiary or affiliate on the other hand or a material breach of any Company policy.
(d)    Good Reason.  "Good Reason" shall mean one or more of the following:  (i) the material reduction of Employee’s duties and/or responsibilities, which is not cured within 30 days after the Employee provides written notice to the Company; provided, however, it shall not be considered Good Reason if, upon or following a Change in Control, the Employee's duties and responsibilities remain the same as those prior to the Change in Control but the Employee's title and/or reporting relationship is changed; (ii) the material reduction of Employee's base salary, other than across-the-board decreases in base salary applicable to all executive officers of the Company.
(e)    Disability.  For purposes of this Agreement, "Disability" shall mean that the Employee is unable, with or without reasonable accommodation, to perform one or more essential functions of his or her position as an employee of the Company as the result of his or her incapacity due to physical or mental impairment for more than 90 days (not necessarily consecutive) in any 180-day period.  
4.    Severance Benefits Upon a Qualifying Termination.  
(a)    Qualifying Termination in Connection with a Change in Control.  If the Employee experiences a Qualifying Termination upon or within 24 months following a Change of Control, then the Employee shall be entitled to receive the following severance benefits, which shall be in addition to any salary earned and vacation accrued up to and including the date of termination, as determined by the Company: (i) a severance payment in the amount of the Employee's annual base salary plus annual target bonus, payable as a lump sum payment within five business days of the date the Employee executes and returns the attached waiver and release agreement; and (ii) if the Employee timely elects COBRA health insurance continuation coverage, reimbursement of COBRA premiums for up to 12 months following the date of termination. 

(b)    Qualifying Termination not in Connection with a Change in Control.  If the Employee experiences a Qualifying Termination that is not in connection with a Change of Control as described in Section 4(a) herein, then the Employee shall be entitled to receive the following severance benefits, which shall be in addition to any salary earned and vacation accrued up to and including the date of termination, as determined by the Company: (i) a severance payment in the amount of the Employee's annual base salary, payable as a lump sum payment within five business days of the date the Employee executes and returns the attached waiver and release agreement; and (ii) if the Employee timely elects COBRA health insurance continuation coverage, reimbursement of COBRA premiums for up to 12 months following the date of termination.
5.    Termination of Employee's Employment Other than a Qualifying Termination
(a)    Termination on Account of Employee's Disability or Death.  If the Company terminates the Employee’s employment as a result of the Employee’s Disability or due to the death of the Employee, then the Employee shall not be entitled to receive any severance benefits and shall only be entitled to receive any salary earned and vacation accrued up to and including the date of termination; provided, however, that this provision shall not have any effect upon any rights the Employee or his estate may have under the terms of any Company short or long-term disability policy or life insurance policy.
(b)    Termination for Cause or Resignation without Good Reason.  If the Employee is terminated for Cause or resigns from employment without Good Reason, then the Employee shall not be entitled to receive any severance benefits and shall only be entitled to receive any salary earned and vacation accrued up to and including the date of termination.
6.    Conditions to Severance Benefits.  
(a)    No severance benefits shall be made under Sections 4(a) and (b) unless and until the Employee shall, in consideration of such benefits, execute a full waiver and release of all claims in the form attached hereto or as otherwise provided by the Company.
(b)    The Employee acknowledges and agrees that he or she is not entitled to any severance or change in control benefits provided under the terms of the 1997 KCI Severance Pay Plan or any similar agreement, plan or arrangement, other than the Company's stock option plans.
(c)    All payment of severance benefits under this Agreement shall comply with section 409A of the Internal Revenue Code.

7.    Successors.
(a)    Company’s Successors.  Any successor (or parent thereof) to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) or to all or substantially all of the Company’s business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession.  For all purposes under this Agreement, the term "Company" shall include any successor (or parent thereof) to the Company’s business and/or assets.
(b)    Employee’s Successors.  All rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  Employee shall have no right to assign any of his obligations or duties under this Amended Agreement to any other person or entity.
8.    Notice.
(a)    General.  Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid.  In the case of the Employee, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing.  In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its General Counsel.
(b)    Notice of Termination.  Any termination by the Company for Cause or by the Employee for Good Reason shall be communicated by a written notice of termination to the other party hereto.  Such notice shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated. 
9.    Arbitration.  All disputes relating to or arising out of this Agreement or otherwise in connection with the Employee's employment with, or termination from, the Company, shall be settled by binding arbitration in accordance with the Company's standard arbitration policy and procedures.
10.    Miscellaneous Provisions.

(a)    Waiver.  No provision of this Agreement shall be amended, modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee).  No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.
(b)    Choice of Law.  The validity, interpretation, construction and performance of this Amended Agreement shall be governed by the laws of the State of Texas.
(c)    Severability.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.
(d)    Employment Taxes.  All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes and other authorized deductions.
(e)    No Representations.  Each party acknowledges that it is not relying and has not relied on any promise, representation or statement made by or on behalf of the other party that is not set forth in this Amended Agreement.
(f)    Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.
(g)    Prior Agreements.  Except as specifically set forth on Exhibit A hereto, this Agreement shall supersede all prior arrangements, whether written or oral, and understandings regarding the subject matter of this Agreement. 
 
 
 
 
 
 
 

[Signatures to Follow on Next Page] 
 
 
 
 
 
 

 

        

IN WITNESS WHEREOF, each of the Parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.
	
		
	COMPANY
	KINETIC CONCEPTS, INC.

By:   /s/ Jim Cravens 
 
Title:  Senior Vice President, Human Resources

	EMPLOYEE
	Teresa A. Johnson
   /s/ Teresa A. Johnson10.14 PromotionLetterBibb

April 7, 2011

 
John Bibb
17834 Salado Draw 
San Antonio, Texas 78258

 
Dear John,
 
On behalf of KCI, it is a pleasure to confirm the promotion we recently discussed. The specific terms and conditions of your new position will be as follows: 

Position Title:                Senior Vice President, General Counsel 
Employment Status:             Regular Full-Time, Exempt 
		
	Annual Base Salary: 
	$340,000. ($14,166.66 paid semi-monthly, less all required withholdings and authorized deductions; this base salary increase is effective as of 

April 7, 2011) 
Immediate Supervisor:         Catherine Burzik, President & CEO  
Location:                 8023 Vantage Drive  
                                San Antonio, TX 78230  
Effective Date of Promotion:         April 7, 2011  

In addition to your base salary, you will be eligible for an incentive bonus opportunity with a target bonus value equal to 60% of your annual base salary as part of the Annual Incentive Bonus (AIB) program.  AIB awards will be determined based on both individual and corporate performance in the sole discretion of KCI and are made pursuant to Annual Incentive Bonus Guidelines adopted by the Compensation Committee.  This is a discretionary incentive award, subject to change or termination at KCI’s sole discretion. Any bonus awarded to you will be paid no later than March 15 of the year following the year to which such bonus relates.

As of April 7, 2011, in connection with your promotion to the Executive Committee of KCI, the Compensation Committee of the Board of Directors has approved and authorized the issuance of an equity award to you under KCI’s 2008 Omnibus Stock Incentive Plan (the “Equity Plan”).  The equity award has been approved at a target value of $550,000.  Due to the timing of your promotion and certain projects of which you are aware, the equity award will not be issued to you on your promotion date.  However, within 90 days of April 7, 2011, the Company will issue the equity award to you at the appropriate time upon the advice of legal counsel.  If the Company is unable to issue the award to you by the expiration of the 90 days, you shall have the option to receive the value of the award ($550,000) in cash (such cash award, the “Alternative Award”).  In the event of an intervening Change in Control of KCI (as defined in the Equity Plan), 

you shall be paid the Alternative Award in cash upon the consummation of the Change in Control, provided your employment with the Company has not been terminated prior to the date of the Change in Control (other than a Qualifying Termination as such term is defined in the Executive Retention Agreement).  The specific terms of the equity award when made, including without limitation, as applicable, the mix of options and restricted stock units and the number of shares subject to the award, will be calculated consistent with the Company’s Black-Scholes methodology and contain such other terms and conditions as are consistent with awards made to executive committee members.

Your position is also eligible for consideration for future annual grants. All equity grant recommendations are subject to CEO and Board of Directors approval, all grants are governed by the Equity Plan, which is subject to change, and any additional terms and conditions will be set forth in a definitive award agreement. 

As SVP, General Counsel, you will be a member of KCI’s Executive Committee and designated a Section 16 reporting officer pursuant to Section 16 of the Securities Exchange Act of 1934. 

As an Executive Committee member, you will be entitled to tax planning assistance (up to $5,000 annually) and an executive physical exam (up to $2,000 annually).

You will be asked to sign the attached Executive Retention Agreement which generally provides that in the event your employment is terminated by KCI other than for Cause (as that term is defined in the Executive Retention Agreement), you will receive a severance payment equal to one years’ base salary and one year’s bonus (or two years’ base salary and two years’ bonus if your termination other than for cause is within 24 months of a change in-control).

As a senior leader of KCI, you will not be provided a specific vacation benefit.  We would anticipate that you would take approximately four weeks of vacation a year, but you will accrue no vacation balances and no vacation balances will be banked or paid out. This letter serves to establish the entirety of your employment relationship with KCI and its subsidiaries, and supersedes any previous understanding that may have been implied or expressed, either verbally or in writing, by any representative of KCI.

Employment relationships with KCI and its subsidiaries are at-will and may be terminated by notification from either party at any time, with or without cause.

The terms and conditions of this letter are governed by the laws of the State of Texas, without regard to the application of any choice-of-law rules that would result in the application of another state’s laws.  

If you find the above terms and conditions of your promotion acceptable, please sign below and return the original to me, with a copy of this signature page to me at 210-255-6033.

[Signature page follows.]

John, I am pleased to offer this promotion opportunity to you and look forward to a mutually prosperous working relationship.

Sincerely, 

Catherine M. Burzik, 
President and CEO
Kinetic Concepts, Inc. 

UNDERSTOOD AND AGREED: 

/s/ John Bibb    ______________
Name            Date

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