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Exhibit 10.32  

 
 

KINETIC CONCEPTS, INC.
  2004 EQUITY PLAN    
    

Section 1. Purpose of Plan.  

        The name of this plan is the Kinetic Concepts, Inc. 2004 Equity Plan (the "Plan"). The purpose of the Plan is to provide additional incentive to those
officers, employees, directors, advisors and consultants of the Company and its Subsidiaries (each, as defined below) and affiliates whose contributions are essential to the growth and success of the
Company's business, in order to strengthen the long-term commitment of such persons to the Company and its Subsidiaries and affiliates, motivate such persons to faithfully and diligently
perform their responsibilities and attract and retain competent and dedicated persons whose efforts will result in the long-term growth and profitability of the Company and its
Subsidiaries and affiliates and enhance shareholder value. To accomplish such purposes, the Plan provides that the Company may grant Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock and Restricted Stock Units (each, as defined below). The Plan is intended to permit awards that satisfy the requirements of section 162(m) of the Code (as
defined below) and shall be interpreted in a manner consistent with the requirements thereof. 

Section 2. Definitions.  

        For purposes of the Plan, in addition to terms defined elsewhere in the Plan, the following terms shall be defined as set forth below: 

        (a)   "Administrator" means the Board, or if and to the extent the Board does not administer the Plan, the Committee, in
accordance with Section 3 hereof. 

        (b)   "Award" means an award of Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted
Stock or Restricted Stock Units under the Plan. 

        (c)   "Award Agreement" means, with respect to any Award, the written agreement between the Company and the Participant setting
forth the terms and conditions of the Award. 

        (d)   "Blum" means Blum Capital Partners, L.P., any other related fund managed by Blum Capital Partners, or an affiliate
thereof, and their respective affiliates, together with any affiliated Person to whom any of the foregoing shall have directly or indirectly transferred any Shares. 

        (e)   "Board" means the Board of Directors of the Company. 

        (f)    "Cause" means, unless a Participant is a party to a written employment agreement with the Company, Subsidiary or
affiliate which contains a definition of "cause," "termination for cause," or any other similar term or phrase, in which case "Cause" shall have the meaning set forth in such agreement, or unless
otherwise provided in an Award Agreement, conduct involving one or more of the following: (i) the substantial and continuing failure of the Participant to render services to the Company or any
Subsidiary or affiliate in accordance with the Participant's obligations and position with the Company, Subsidiary or affiliate, provided that the Company or any Subsidiary or affiliate provides the
Participant with adequate notice of such failure and, if such failure is capable of cure, the Participant fails to cure such failure within 30 days of the notice; (ii) dishonesty, gross
negligence, or breach of fiduciary duty; (iii) the Participant'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 Participant, on the one hand, and the Company or any Subsidiary or affiliate on the other hand or a material breach of
any material company policy. 

        (g)   "Change in Capitalization" means any increase, reduction, or change or exchange of Shares for a different number or kind
of shares or other securities or property by reason of a reclassification, recapitalization, merger, amalgamation, consolidation, reorganization, issuance of 

 

warrants
or rights, stock dividend, stock split or reverse stock split, combination or exchange of shares, repurchase of shares, change in corporate structure or otherwise; or any other corporate
action, such as declaration of a special dividend, that affects the capitalization of the Company; provided, however, that the conversion of the Company's preferred stock in connection with the
Company's initial underwritten public offering of Shares will not be deemed to constitute a Change in Capitalization. 

        (h)   "Change in Control" means, unless otherwise provided in an Award Agreement, the first to occur of any one of the events
set forth in the following paragraphs; provided, however, that any public offering of Shares of the Company shall not constitute a Change in Control: 

          (i)  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 (other than any of the Investors) or Group (other than any Group including any of the Investors), 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 ("Voting Stock") and such Person or Group has the power and authority to vote such Shares; or 

        (iii)  the
consummation of a merger or consolidation of the Company with another entity in which immediately following the consummation of the transaction, the Investors
cease to own collectively at least 20% of the Voting Stock in the surviving corporation. 

        (i)    "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto. 

        (j)    "Committee" means the Compensation Committee of the Board of Directors or any other committee or subcommittee that the
Board may appoint to administer the Plan. If at any time or to any extent the Board shall not administer the Plan, then the functions of the Administrator specified in the Plan shall be exercised by
the Committee. Unless otherwise determined by the Board, the composition of the Committee shall at all times consist solely of persons who are (i) "nonemployee directors" as defined in
Rule 16b-3 issued under the Exchange Act, and (ii) "outside directors" as defined in section 162(m) of the Code, and shall be constituted to satisfy any applicable
stock exchange rules or requirements. 

        (k)   "Common Shares" means the shares of common stock, par value $0.001 per share, of the Company. 

        (l)    "Company" means Kinetic Concepts, Inc., a Texas corporation (or any successor corporation). 

        (m)  "Disability" means, unless otherwise provided in an Award Agreement (i) any physical or mental condition that
would qualify a Participant for a disability benefit under any long-term disability plan maintained by the Company or by the Subsidiary or affiliate by which he is employed;
(ii) when used in connection with the exercise of an Incentive Stock Option following termination of employment, disability within the meaning of section 22(e)(3) of the Code; or
(iii) such other condition as may be determined in the sole discretion of the Administrator to constitute Disability. 

        (n)   "Eligible Recipient" means an employee, officer, director, advisor or consultant of the Company or of any Subsidiary or
affiliate. 

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        (o)   "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. 

        (p)   "Exercise Price" means the per Share price at which a holder of an Option may purchase the Shares issuable upon exercise
of the Option. 

        (q)   "Fair Market Value" of a Share as of a particular date shall mean (1) the closing sale price reported for such
Share on the national securities exchange or national market system on which such Share is principally traded on such date (or, if there were no trades on such date, on the most recently preceding day
on which there was a sale thereon), or (2) if the Shares are not then listed on a national securities exchange or national market system, or the value of such shares is not otherwise
determinable, such value as determined by the Board in good faith in its sole discretion. 

        (r)   "Freestanding SAR" means an SAR that is granted independently of any Options, as described Section 10 hereof. 

        (s)   "Fremont" means Fremont Partners L.P., any other related fund managed by Fremont Partners, or an affiliate thereof, and
their respective affiliates, together with any affiliated Person to whom any of the foregoing shall have directly or indirectly transferred any Shares. 

        (t)    "Group" shall have the meaning set forth in Section 2(h) hereof. 

        (u)   "Immediate Family" means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law, including adoptive relationships of the Participant; trusts for the benefit of such immediate family members; or
partnerships in which such immediate family members are the only partners. 

        (v)   "Incentive Stock Option" means an Option that is an "incentive stock option" within the meaning of section 422 of
the Code, or any successor provision, and that is designated by the Administrator as an Incentive Stock Option. 

        (w)  "Investors" means Fremont, Blum and Leininger. 

        (x)   "Leininger" means James R. Leininger, M.D., any related partnership, trust or fund managed or otherwise controlled by
James R. Leininger, M.D., or an affiliate thereof, and their respective affiliates, together with any affiliated Person to whom any of the foregoing shall have directly or indirectly transferred any
Shares. 

        (y)   "Nonqualified Stock Option" means any Option that is not an Incentive Stock Option, including any Option that provides
(as of the time such Option is granted) that it will not be treated as an Incentive Stock Option. 

        (z)   "Option" means a right to purchase Shares, granted to a Participant pursuant to the Plan. As used herein generally, the
term "Option" includes an Incentive Stock Option, a Nonqualified Stock Option, or either or both of them, as the context requires. 

        (aa) "Participant" means any Eligible Recipient selected by the Administrator, pursuant to the Administrator's authority in
Section 3 hereof, to receive the grant of an Award. A Participant who receives the grant of an Option is sometimes referred to herein as "Optionee." 

        (bb) "Performance Goal" shall mean one or more of the following business criteria applied to a Participant and/or a business
unit or the Company and/or a Subsidiary: (i) earnings before taxes and interest expense; (ii) earnings before taxes, interest expense, depreciation and amortization of assets;
(iii) working capital; (iv) earnings growth, revenues, expenses, share price, market share, return on assets, return on capital, equity or investment, regulatory compliance, satisfactory 

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internal
or external audits, improvement of financial ratings, or achievement of balance sheet, income statement or cash flow objectives; (v) cash flows or income derived from operating
activities; and/or (vi) such other goal or goals as may established by the Committee. 

        (cc) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company. 

        (dd) "Restricted Period" shall have the meaning set forth in Section 8(d) hereof. 

        (ee) "Restricted Stock Unit" means the right to receive a Share or the Fair Market Value of a Share in cash granted pursuant
to Section 9 hereof. 

        (ff)  "Restricted Stock" means Shares subject to certain restrictions granted pursuant to Section 8 hereof. 

        (gg) "Shares" means Common Shares and the common equity of any successor security. 

        (hh) "Stock Appreciation Right" or "SAR" means an Award, granted alone or in
connection with a related Option, designated as an SAR, pursuant to Section 10 hereof. 

        (ii)   "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the
Company, if each of the corporations (other than the last corporation) in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the
other corporations in the chain. 

        (jj)   "Tandem SAR" means an SAR that is granted in connection with a related Option pursuant to Section 10 hereof, the
exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be canceled). 

        (kk) "Voting Stock" shall have the meaning set forth in Section 2(h) hereof. 

Section 3. Administration.  

        (a)   The
Plan shall be administered by the Board or, at the Board's sole discretion, by the Committee, which shall serve at the pleasure of the Board. Pursuant to the terms
of the Plan, the Administrator shall have the power and authority, without limitation: 

          (i)  to
select those Eligible Recipients who shall be Participants; 

         (ii)  to
determine whether and to what extent Options or Stock Appreciation Rights or awards of Restricted Stock or Restricted Stock Units are to be granted hereunder to
Participants; 

        (iii)  to
determine the number of Shares to be covered by each Award granted hereunder; 

        (iv)  to
determine the terms and conditions, not inconsistent with the terms of the Plan, of each Award granted hereunder; 

         (v)  to
determine the terms and conditions, not inconsistent with the terms of the Plan, which shall govern all written instruments evidencing Awards granted hereunder; 

        (vi)  to
adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; and 

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       (vii)  to
interpret the terms and provisions of the Plan and any Award issued under the Plan (and any Award Agreement relating thereto), and to otherwise supervise the
administration of the Plan. 

        (b)   All
decisions made by the Administrator pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including the Company and the
Participants. No member of the Board or the Committee, nor any officer or employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made
in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law,
be fully indemnified and protected by the Company in respect of any such action, determination or interpretation. 

        (c)   The
Administrator in its sole discretion may condition entitlement to an Award in whole or in part on the attainment of one or more Performance Goals. With respect to
Awards intended to satisfy the requirements of section 162(m) of the Code, the Committee shall establish any such Performance Goal not later than 90 days after the commencement of the
period of service to which the Award relates (or if less, 25% of such period of service), and once granted, the Administrator shall not have discretion to increase the amount payable under such Award,
provided, however, that whether or not an Award is intended to constitute qualified performance based compensation within the meaning of section 162(m) of the Code, the Administrator shall have
the authority to make appropriate adjustments in Performance Goals under an Award to reflect the impact of extraordinary items not reflected in such Performance Goals. For purposes of the Plan,
extraordinary items shall be defined as (1) any profit or loss attributable to acquisitions or dispositions of stock or assets, (2) any changes in accounting standards that may be
required or permitted by the Financial Accounting Standards Board or adopted by the Company after the goal is established, (3) all items of gain, loss or expense for the year related to
restructuring charges for the Company, (4) all items of gain, loss or expense for the year determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the
disposal of a segment of a business, (5) all items of gain, loss or expense for the year related to discontinued operations that do not qualify as a segment of a business as defined in APB
Opinion No. 30, and (6) such other items as may be prescribed by section 162(m) of the Code and the Treasury Regulations thereunder as may be in effect from time to time, and any
amendments, revisions or successor provisions and any changes thereto. 

        (d)   Subject
to section 162(m) of the Code and except as required by Rule 16b-3 under the Exchange Act with respect to grants of Awards to
individuals who are subject to section 16 of the Exchange Act, or as otherwise required for compliance with Rule 16b-3 under the Exchange Act or other applicable law, the
Administrator may delegate all or any part of its authority under the Plan to an employee, employees or committee of employees of the Company or any Subsidiary. 

        (e)   If
at any time (whether before or after termination of employment or service) the Administrator determines that a Participant has engaged in conduct that would
constitute Cause, then the Administrator may provide for the immediate forfeiture of any Award granted hereunder held by the Participant (including any securities, cash or other property issued upon
exercise or other settlement of such Award), whether or not then vested. Any determination by the Administrator under this subsection (e) shall be final, conclusive and binding on all persons. 

Section 4. Shares Reserved for Issuance Under the Plan.  

        (a)   There
shall be reserved and available for issuance under the Plan 7,000,000 Common Shares, of which 20% may be issued as Restricted Stock, Restricted Stock Units or a
combination thereof pursuant to the grant of Awards under the Plan. The grant of any Restricted Stock Units 

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or
SARs that may be settled only in cash shall not reduce the number of Common Shares with respect to which Awards may be granted pursuant to the Plan. 

        (b)   To
the extent that (i) an Option expires or is otherwise cancelled or terminated without being exercised as to the underlying Shares, (ii) any Shares
subject to any award of Stock Appreciation Rights, Restricted Stock or Restricted Stock Units are forfeited, (iii) payment for an Option upon exercise is made with Shares held for more than six
months or (iv) Shares are withheld from payment of an Award in satisfaction of any minimum federal, state or local tax withholding requirements, such Shares shall again be available for
issuance in connection with future Awards granted under the Plan. 

        (c)   The
aggregate number of Shares with respect to which Awards (including Awards payable in cash but denominated in Shares, i.e., cash-settled Restricted Stock
Units or SARs) may be granted to any individual Participant during any calendar year shall not exceed 2,500,000. 

Section 5. Equitable Adjustments.  

        In the event of any Change in Capitalization, an equitable substitution or proportionate adjustment shall be made in (i) the aggregate number and/or kind
of common shares or other property reserved for issuance under the Plan, (ii) the kind, number and/or option price of shares or other property subject to outstanding Options and Stock
Appreciation Rights granted under the Plan, (iii) the kind, number and/or purchase price of shares or other property subject to outstanding awards of Restricted Stock, and Restricted Stock
Units granted under the Plan, and (iv) the aggregate annual Award limit described in Section 4(c) hereof, in each case as may be determined by the Administrator, in its sole discretion. Such
other noncash equitable substitutions or adjustments shall be made as may be determined by the Administrator, in its sole discretion. 

Section 6. Eligibility.  

        The Participants under the Plan shall be selected from time to time by the Administrator, in its sole discretion, from among Eligible Recipients. The
Administrator shall have the authority to grant to any Eligible Recipient Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock or Restricted Stock Units. 

Section 7. Options.  

        (a)    General.    Options may be granted alone or in addition to other Awards granted under the Plan. Any Option
granted under the Plan shall be evidenced by an Award Agreement. The provisions of each Option need not be the same with respect to each Participant. Participants who are granted Options shall enter
into an Award Agreement with the Company, in such form as the Administrator shall determine, which Award Agreement shall set forth, among other things, the Exercise Price of the Option, the term of
the Option and provisions regarding exercisability of the Option granted thereunder. The Options granted under the Plan may be of two types: (i) Incentive Stock Options and
(ii) Nonqualified Stock Options. To the extent that any Option does not qualify as an Incentive Stock Option, it shall constitute a separate Nonqualified Stock Option. More than one Option may
be granted to the same Participant and be outstanding concurrently hereunder. Options granted under the Plan shall be subject to the terms and conditions set forth in paragraphs (b)-(i) of this
Section 7 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable. 

        (b)    Exercise Price.    The per share Exercise Price of Shares purchasable under an Option shall be determined by
the Administrator in its sole discretion at the time of grant but shall not be less than 100% of the Fair Market Value per Share (but in the case of Incentive Stock Options, shall not be less than
110% of the Fair Market Value per Share on such date if, on such date, the 

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Eligible
Recipient owns, or is deemed to own under the Code, stock possessing more than 10% (a "Ten Percent Owner") of the total combined voting power of all classes of shares of the Company or its
Subsidiaries). 

        (c)    Option Term.    The term of each Option shall be fixed by the Administrator, but no Option shall be exercisable
more than ten years after the date such Option is granted. If the Eligible Participant is a Ten Percent Owner, an Incentive Stock Option may not be exercisable after the expiration of five years from
the date such Incentive Stock Option is granted. 

        (d)    Exercisability and Vesting.    Options shall be exercisable and vested at such time or times and subject to
such terms and conditions, including the attainment of preestablished Performance Goals or other corporate or individual performance goals, as shall be determined by the Administrator in its sole
discretion. The Administrator may also provide that any Option shall be exercisable only in installments. Unless otherwise provided in an Award Agreement, Options shall vest and become exercisable at
the rate of 25% of the Shares subject to the Option on the first anniversary of the date of grant, and as to an additional 25% of the Shares subject to the Option on each of the three succeeding
anniversaries of the date of grant, but solely to the extent that the Optionee has been continuously employed by or providing services to the Company or any Subsidiary or affiliate through each such
date. 

        (e)    Method of Exercise.    Options may be exercised in whole or in part by giving written notice of exercise to the
Company specifying the number of Shares to be purchased, accompanied by payment in full of the aggregate Exercise Price of the Shares so purchased in cash or its equivalent, as determined by the
Administrator. As determined by the Administrator, in its sole discretion, payment in whole or in part may also be made (i) to the extent permitted by applicable law, by means of any cashless
exercise procedure through the use of a brokerage arrangement that is approved by the Administrator, (ii) in the form of unrestricted Shares already owned by the Optionee for at least six
months on the date of surrender in each case to the extent the Shares have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option
shall be exercised, provided that, in the case of an Incentive Stock Option, the right to make payment in the form of already owned Shares or withheld
shares may be authorized only at the time of grant, or (iii) any combination of the foregoing. 

        (f)    Rights as Shareholder.    An Optionee shall have no rights to dividends or any other rights of a shareholder
with respect to the Shares subject to the Option until the Optionee has given written notice of exercise, has paid in full for such Shares, and has satisfied the requirements of Section 15
hereof. 

        (g)    Nontransferability of Options.    The Optionee shall not be permitted to sell, transfer, pledge or assign any
Option other than by will or the laws of descent and distribution and all Options shall be exercisable during the Participant's lifetime only by the Participant, in each case, except as set forth in
the following two sentences. During an Optionee's lifetime, the Administrator may, in its sole discretion, permit the transfer, assignment or other encumbrance of an outstanding Option if such Option
is a Nonqualified Stock Option or an Incentive Stock Option that the Administrator and the Participant intend to change to a Nonqualified Stock Option. Subject to the approval of the Administrator and
to any conditions that the Administrator may prescribe, an Optionee may, upon providing written notice to the Company, elect to transfer any or all Options described in the preceding sentence
(i) to members of his or her Immediate Family, provided that no such transfer by any Participant may be made in exchange for consideration,
(ii) by instrument to an inter vivos or testamentary trust in which the Options are to be passed to beneficiaries upon the death of the Participant, or (iii) pursuant to a qualified
domestic relations order within the meaning of Section 414(p) of the Code or any similar instrument, to the extent permitted by applicable law. 

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        (h)    Termination of Employment or Service.    Except as otherwise provided in an Award Agreement, if a Participant's
employment or service with the Company or any Subsidiary or affiliate terminates for any reason other than for Cause, all outstanding Options granted to such Participant to the extent vested and
exercisable as of such date of termination, shall expire 30 days (180 days upon a termination of employment or service due to death or Disability) following the date of such termination,
and all options that are not vested and exercisable as of such date of termination shall expire as of such date. Notwithstanding the foregoing, (i) if a Participant's employment or service with
the Company or any Subsidiary or affiliate terminates for Cause, then all outstanding Options granted to such Participant,
whether or not vested or exercisable, shall expire as of such date, and (ii) no Option shall be exercisable after the expiration of its term. 

        (i)    Limitation on Incentive Stock Options.    To the extent that the aggregate Fair Market Value of Shares with
respect to which Incentive Stock Options are exercisable for the first time by an Optionee during any calendar year under the Plan and any other stock option plan of the Company or any Subsidiary
shall exceed $100,000, such Options shall be treated as Nonqualified Stock Options. Such Fair Market Value shall be determined as of the date on which each such Incentive Stock Option is granted. 

Section 8. Restricted Stock.  

        (a)    General.    Awards of Restricted Stock may be issued either alone or in addition to other Awards granted under
the Plan and shall be evidenced by an Award Agreement. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, Awards of Restricted Stock shall be made; the
number of Shares to be awarded; the price, if any, to be paid by the Participant for the acquisition of Restricted Stock; and the Restricted Period (as defined in Section 8(d)) applicable to
awards of Restricted Stock. The provisions of the awards of Restricted Stock need not be the same with respect to each Participant. 

        (b)    Purchase Price.    The price per Share, if any, that a Recipient must pay for Shares purchasable under an award
of Restricted Stock shall be determined by the Administrator in its sole discretion at the time of grant. 

        (c)    Awards and Certificates.    The prospective recipient of an Award of Restricted Stock shall not have any rights
with respect to any such Award, unless and until such recipient has executed an Award Agreement evidencing the Award and delivered a fully executed copy thereof to the Company, within such period as
the Administrator may specify after the award date. Each Participant who is granted an award of Restricted Stock shall be issued a share certificate in respect of such shares of Restricted Stock,
which certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to any such Award,  provided that
the Company may require that the share certificates evidencing Restricted Stock granted hereunder be held in the custody of the Company
until the restrictions thereon shall have lapsed, and that, as a condition of any award of Restricted Stock, the Participant shall have delivered a stock power, endorsed in blank, relating to the
Shares covered by such Award. 

        (d)    Nontransferability.    The Administrator, in its sole discretion, shall determine in the terms of the Award
Agreement the period during which the Award shall be subject to restrictions on transferability (the "Restricted Period"). During the Restricted Period, the Participant shall not be permitted to sell,
transfer, pledge, hypothecate or assign Shares of Restricted Stock awarded under the Plan except by will or the laws of descent and distribution. The Administrator may also impose such other
restrictions and conditions, including the attainment of preestablished Performance Goals or other corporate or individual performance goals, on Restricted Stock as it determines in its sole
discretion. The Restricted Period shall be not less than three years, provided that the 

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Restricted
Period may be shorter (but not less than one year) if vesting of the Restricted Stock is conditioned upon the attainment of preestablished Performance Goals or other corporate or individual
performance goals. However, in no event shall the Restricted Period end with respect to a Restricted Stock Award prior to the satisfaction by the Participant of any liability arising under
Section 15 hereof. Any attempt to dispose of any Restricted Stock in contravention of any such restrictions shall be null and void and without effect. 

        (e)    Rights as a Shareholder.    Except as provided in Section 8(c) and (d) and unless otherwise
provided in an Award Agreement, the Participant shall possess all incidents of ownership with respect to Shares of Restricted Stock during the Restricted Period, including the right to receive or
reinvest dividends with respect to such Shares (except that the Administrator may provide in its sole discretion that any dividends paid in property other than cash shall be subject to the same
restrictions as those that apply to the underlying Restricted Stock) and to vote such Shares. Certificates for unrestricted Shares shall be delivered to the Participant promptly after, and only after,
the Restricted Period shall expire without forfeiture in respect of such awards of Restricted Stock except as the Administrator, in its sole discretion, shall otherwise determine. 

        (f)    Termination of Employment or Service.    Except as otherwise provided in an Award Agreement, if a Participant's
employment or service with the Company or any Subsidiary or affiliate terminates for any reason during the Restricted Period, the Participant's rights to the unvested Restricted Stock shall be
forfeited and the Participant shall have no further rights thereto. 

Section 9. Restricted Stock Units  

        (a)    General.    Awards of Restricted Stock Units may be issued either alone or in addition to other Awards granted
under the Plan and shall be evidenced by an Award Agreement. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, Awards of Restricted Stock Units shall
be made; the number of units to be awarded and the vesting period (as described in Section 9(b)) applicable to awards of Restricted Stock Units. The provisions of the awards of Restricted Stock
Units need not be the same with respect to each Participant. 

        (b)    Vesting.    The Administrator, in its sole discretion, shall determine in the terms of the Award Agreement the
vesting schedule and other restrictions and conditions to which the Restricted Stock Unit Award will be subject, including the attainment of preestablished Performance Goals or other corporate or
individual performance goals. Provided that all conditions to the vesting of a Restricted Stock Unit are satisfied, and except as provided in Section 9(d), upon the satisfaction of all vesting
conditions with respect to a Restricted Stock Unit, such Restricted Stock Unit shall vest. Notwithstanding the foregoing provisions of this Section 9, the Restricted Stock Unit shall vest not
earlier than three years from the date of grant, provided that the Restricted Stock Unit may vest earlier (but not less than one year from the date of
grant) if vesting of the Restricted Stock Unit is conditioned upon the attainment of preestablished Performance Goals or other corporate or individual performance goals. The provisions of the Awards
of Restricted Stock Units need not be the same with respect to each Participant. 

        (c)    Benefit Upon Vesting.    Upon the vesting of Restricted Stock Units, the Participant shall be entitled to
receive, within 30 days of the date on which such Restricted Stock Unit vests, an amount in cash, Shares or a combination of the foregoing (as determined by the Administrator in its sole
discretion) equal, per unit, to the sum of (1) the Fair Market Value of a Share on the date on which such Restricted Stock Unit vests and (2) to the extent provided in an Award
Agreement, the aggregate amount of cash dividends paid with respect to a Share during the period 

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commencing
on the date on which the Restricted Stock Unit was granted and terminating on the date on which such Share vests. 

        (d)    Termination of Employment or Service.    Except as otherwise provided in an Award Agreement, if a Participant's
employment or service with the Company or any Subsidiary or affiliate terminates for any reason before the Restricted Stock Units have vested, the Participant's rights to the unvested Restricted Stock
Units shall be cancelled and the Participant shall have no further rights thereto. 

Section 10. Stock Appreciation Rights.  

        (a)    General.    Awards of Stock Appreciation Rights may be issued either alone or in addition to other Awards
granted under the Plan and shall be evidenced by an Award Agreement. The Administrator may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SAR. The Administrator in its sole
discretion shall determine the Eligible Recipients to whom, and the time or times at which, Awards of SARs shall be made, the number of SARs granted to each Participant (subject to Section 4
hereof) and, consistent with the provisions of the Plan, the terms and conditions pertaining to such SARs, including any conditions relating to the attainment of preestablished Performance Goals or
other corporate or individual performance goals as may be determined by the
Administrator in its sole discretion. The provisions of the awards of SARs need not be the same with respect to each Participant. 

        (b)    Grant Price.    The grant price of a Freestanding SAR shall be not less than the Fair Market Value of a Share
on the date of grant of the SAR. The grant price of Tandem SARs shall equal the Exercise Price of the related Option. 

        (c)    Exercise of Tandem SARs.    Tandem SARs may be exercised for all or part of the number of Shares subject to the
related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the number of Shares for which its related
Option is then exercisable. Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an Incentive Stock Option: (i) the Tandem
SAR shall expire no later than the expiration of the underlying Incentive Stock Option; (ii) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent
(100%) of the difference between the Exercise Price of the underlying Incentive Stock Option and the Fair Market Value of the Shares subject to the underlying Incentive Stock Option at the time the
Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the Incentive Stock Option exceeds the Exercise Price of the
Incentive Stock Option. 

        (d)    Exercise of Freestanding SARs.    Freestanding SARs shall be exercisable at such time or times and subject to
such terms and conditions, including the attainment of preestablished Performance Goals or other corporate or individual performance goals, as shall be determined by the Administrator in its sole
discretion. The Administrator may also provide that any Freestanding SAR shall be exercisable only in installments. 

        (e)    SAR Agreement.    Each SAR grant shall be evidenced by an Award Agreement in such form as the Administrator
shall determine, which Award Agreement shall set forth, among other things, the grant price of the SAR, the term of the SAR, and provisions regarding exercisability of the SARs granted thereunder. 

        (f)    Term of SARs.    The term of each SAR shall be fixed by the Administrator; provided, however, that such term
shall not exceed ten (10) years. 

10

 

        (g)    Payment of SAR Amount.    Upon exercise of an SAR, a Participant shall be entitled to receive payment from the
Company in an amount determined by multiplying: 

          (i)  the
difference between the Fair Market Value of a Share on the date of exercise over the grant price; by 

         (ii)  the
number of Shares with respect to which the SAR is exercised. 

At
the sole discretion of the Administrator, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. The Administrator's determination regarding
the form of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR. 

        (h)    Termination of Employment or Service.    Except as otherwise provided in an Award Agreement, if a Participant's
employment or service with the Company or any Subsidiary or affiliate terminates for any reason other than for Cause, all outstanding Freestanding SARs granted to such Participant shall expire
30 days (180 days upon a termination of employment or service due to death or Disability) following the date of such termination (whether or not then vested or exercisable) and all SARs
that are not vested and exercisable as of such date of termination shall expire as of such date. Terms of Tandem SARs shall be governed by the terms of the related Option. Notwithstanding the
foregoing, (i) if a Participant's employment or service with the Company or any Subsidiary or affiliate terminates for Cause, then all outstanding SARs granted to such Participant, whether or
not vested or exercisable, shall expire as of such date, and (ii) no SAR shall be exercisable after the expiration of its term. 

Section 11. Effect of Change in Control.  

        Unless otherwise provided in an Award Agreement, upon the occurrence of a Change in Control, all outstanding Shares of Restricted Stock and Restricted Stock Units
granted to a Participant that have not theretofore vested shall immediately vest and all restrictions on such shares and units shall immediately lapse, and each Option and Stock Appreciation Right
granted to a Participant and outstanding at such time shall become fully and immediately vested and exercisable, unless such Awards are either assumed or an equitable substitution is made therefor. In
addition to the foregoing, if, within 24 months following a Change in Control, the Participant's employment or service with the Company, any Subsidiary or affiliate thereof, or any successor to
any of the foregoing is terminated other than for Cause, then all outstanding Shares of Restricted Stock, and Restricted Stock Units granted to the Participant that have not theretofore vested shall
immediately vest and all restrictions on such shares and units shall immediately lapse, and each Option and Stock Appreciation Right granted to the Participant and outstanding at such time shall
become fully and immediately exercisable. 

Section 12. Amendment and Termination.  

        (a)   The
Board may amend, alter or discontinue the Plan, but (i) no amendment, alteration, or discontinuation shall be made that would impair the rights of a
Participant under any Award theretofore granted without such Participant's consent, and (ii) any amendment shall be subject to approval of shareholders if it (A) materially increases the
benefits accruing to Participants under the Plan, (B) materially increases the number of Shares that may be issued under the Plan, or (C) materially modifies the requirements for
participation in the Plan. Unless the Board determines otherwise, the Board shall obtain approval of shareholders of the Company for any amendment that would require such approval in order to satisfy
the requirements of section 162(m) of the Code, section 422 of the Code, stock exchange rules or other applicable law. 

11

 

        (b)   The
Administrator may amend the terms of any Award theretofore granted (and the Award Agreement with respect thereto), prospectively or retroactively, but subject to
Section 4 of Plan, no such amendment shall impair the rights of any Participant without his or her consent. 

        (c)   Notwithstanding
the foregoing provisions of this Section 12, any decrease in the Exercise Price of any outstanding Option (whether effected by amendment to the
Plan or an Award Agreement) shall be subject to the approval of the shareholders of the Company. 

Section 13. Unfunded Status of Plan.  

        The Plan is intended to constitute an "unfunded" plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company,
nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. 

Section 14. Withholding Taxes.  

        (a)   Whenever
cash is to be paid pursuant to an Award, the Company (or Subsidiary or affiliate, as the case may be) shall have the right to deduct therefrom an amount
sufficient to satisfy any federal, state and local tax withholding requirements related thereto. Whenever Shares are to be delivered pursuant to an Award, the Company (or Subsidiary or affiliate, as
the case may be) shall have the right to require the Participant to remit to the Company (or Subsidiary or affiliate, as the case may be) in cash an amount sufficient to satisfy any federal, state and
local tax withholding requirements related thereto. With the approval of the Administrator, a Participant may satisfy the foregoing requirement by electing to have the Company withhold from delivery
Shares or by delivering Shares, in each case, having a value equal to the aggregate required minimum tax withholding to be collected by the Company or any
Subsidiary or affiliate thereof. Such Shares shall be valued at their Fair Market Value on the date on which the amount of tax to be withheld is
determined. Fractional share amounts shall be settled in cash. Such an election may be made with respect to all or any portion of the shares to be
delivered pursuant to an Award. 

        (b)   If
the Participant makes a disposition, within the meaning of section 424(c) of the Code and regulations promulgated thereunder, of any Share or Shares issued to
such Participant pursuant to such Participant's exercise of an Incentive Stock Option, and such disposition occurs within the two-year period commencing on the day after the date of grant
or within the one-year period commencing on the day after the date of exercise, such Participant shall, within ten (10) days of such disposition, notify the Company (or Subsidiary
or affiliate, as the case may be) thereof and thereafter immediately deliver to the Company (or Subsidiary or affiliate, as the case may be) any amount of federal, state or local income taxes and
other amounts which the Company (or Subsidiary or affiliate, as the case may be) informs the Participant the Company (or Subsidiary or affiliate, as the case may be) is required to withhold. 

Section 15. General Provisions.  

        (a)   Shares
shall not be issued pursuant to the exercise of any Award granted hereunder unless the exercise of such Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. The Company shall be under no obligation to effect
the registration pursuant to the Securities Act of 1933, as amended, of any interests in the Plan or any Shares to be issued hereunder or to effect similar compliance under any state laws. 

        (b)   All
certificates for Shares delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Administrator may deem advisable under
the rules, regulations, 

12

 

and
other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares may then be listed, and any applicable federal or state securities law, and the Administrator
may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. The Administrator may require, as a condition of the issuance and delivery of
certificates evidencing Shares pursuant to the terms hereof, that the recipient of such Shares make such agreements and representations as the Administrator, in its sole discretion, deems necessary or
desirable. 

        (c)   Nothing
contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to shareholder approval, if such approval is
required; and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of the Plan shall not confer upon any Eligible Recipient any right to continued
employment or service with the Company or any Subsidiary or affiliate, as the case may be, nor shall it interfere in any way with the right of the Company or any Subsidiary or affiliate to terminate
the employment or service of an Eligible Recipient at any time. 

        (d)   No
fractional Shares shall be issued or delivered pursuant to the Plan. The Administrator shall determine whether cash, other Awards, or other property shall be issued
or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. 

        (e)   All
Awards and related amounts determined pursuant to the Plan shall be denominated in terms of U.S. currency. 

        (f)    If
any provision of the Plan is held to be invalid or unenforceable, the other provisions of the Plan shall not be affected but shall be applied as if the invalid or
unenforceable provision had not been included in the Plan. 

        (g)   The
Plan and all Awards shall be governed by the laws of the State of Texas without regard to its principles of conflict of laws. 

        (h)   Awards
may be granted under the Plan from time to time in substitution for awards held by employees, directors or service providers of other corporations who are about
to become employees of the Company or a Subsidiary or affiliate as the result of a merger or consolidation of the employing corporation with the Company or Subsidiary or affiliate, or the acquisition
by the Company or a Subsidiary or affiliate of the assets of the employing corporation, or the acquisition by the Company or a Subsidiary or affiliate of the shares of the employing corporation, as
the result of which it becomes a Subsidiary or affiliate under the Plan. The terms and conditions of the Awards so granted may vary from the terms and conditions set forth in this Plan at the time of
such grant as the Administrator may deem appropriate to conform, in whole or in part, to the provisions of the awards in substitution for which they are made. 

Section 16. Shareholder Approval; Effective Date of Plan.  

        The Plan shall be effective as of the later of (a) the date of its approval by the Company's shareholders and (b) the first date upon which any
security of the Company is listed (or approved for listing) upon notice of issuance on any securities exchange, or designated (or approved for designation) upon notice of issuance as a national market
security on an interdealer quotation system if such securities exchange
or interdealer quotation system has been certified in accordance with the provisions of any applicable State securities law. 

Section 17. Term of Plan.  

        No Award shall be granted pursuant to the Plan on or after the tenth anniversary of the date the Plan is approved by the Company's shareholders, but Awards
theretofore granted may extend beyond that date. 

13

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Exhibit 10.33  

 
 

KINETIC CONCEPTS, INC.
  2004 EMPLOYEE STOCK PURCHASE PLAN    
    

        1.    Purpose.    The Kinetic Concepts, Inc. 2004 Employee Stock Purchase Plan (the "Plan") is being
established for the benefit of employees of the Company and its Designated Parents/Subsidiaries (as defined below). The Plan is intended to provide such employees with a convenient opportunity to
purchase common stock of the Company (as defined below) through payroll deductions, to enhance such employees' sense of participation in the success of the Company, to provide an incentive for
continued employment and to promote long-term, broad based employee ownership of the Company's common stock. It is the intention of the Company that the Plan qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Code, and the provisions of the Plan shall be construed in a manner consistent with the requirements of such section of the Code (as
defined below). 

        2.    Definitions.    

        a.     "Administrator"
shall mean the Board, or to the extent the Board does not administer the Plan, the Committee. 

        b.     "Board"
shall mean the Board of Directors of the Company. 

        c.     "Blum"
means Blum Capital Partners, L.P., any other related fund managed by Blum Capital Partners, or an affiliate thereof, and their respective affiliates, together with
any affiliated Person to whom any of the foregoing shall have directly or indirectly transferred any Shares. 

        d.     "Change
in Capitalization" means any increase, reduction, or change or exchange of Shares for a different number or kind of shares or other securities or property by
reason of a reclassification, recapitalization, merger, amalgamation, consolidation, reorganization, issuance of warrants or rights, stock dividend, stock split or reverse stock split, combination or
exchange of shares, repurchase of shares, change in corporate structure or otherwise; or any other corporate action, such as declaration of a special dividend, that affects the capitalization of the
Company; provided, however, that the conversion of the Company's preferred stock in connection with the Company's initial underwritten public offering of Shares will not be deemed to constitute a
Change in Capitalization. 

        e.     "Change
in Control" means, unless otherwise provided in an Award Agreement, the first to occur of any one of the events set forth in the following paragraphs; provided,
however, that any public offering of Shares of the Company shall not constitute a Change in Control: 

          (i)  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 (other than any of the Investors) or Group (other than any Group including any of the Investors), 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 ("Voting Stock") and such Person or Group has the power and authority to vote such Shares; 

        (iii)  the
consummation of a merger or consolidation of the Company with another entity in which immediately following the consummation of the transaction, the Investors
cease to own collectively at least 20% of the Voting Stock in the surviving corporation. 

        f.      "Code"
shall mean the Internal Revenue Code of 1986, as amended from time to time. 

 

        g.     "Committee"
shall mean the compensation committee or any other committee of members of the Board appointed by the Board to administer the Plan and to perform the
functions set forth herein. To
the extent necessary or desirable, such committee shall be composed entirely of individuals who meet the qualifications referred to in Rule 16b-3 under the Exchange Act. 

        h.     "Company"
shall mean Kinetic Concepts, Inc., a corporation organized under the laws of the State of Texas, or any successor corporation. 

        i.      "Compensation"
shall mean the base salary, wages, commissions, overtime pay, shift premiums and bonuses paid by an Employer to an Employee as reported by the Employer to
the United States government for federal income tax purposes, including an Employee's portion of compensation deferral contributions pursuant to Section 401(k) of the Code, any amount
excludable pursuant to Section 125 of the Code and/or any non-qualified compensation deferral. 

        j.      "Designated
Parent/Subsidiary" shall mean any Parent or Subsidiary of the Company that has been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan, which may include corporations that become a Parent or Subsidiary of the Company after the adoption of the Plan. 

        k.     "Employee"
shall mean any employee of the Company or a Designated Parent/Subsidiary, excluding: 

          (i)  employees
who have been employed less than three (3) months; 

         (ii)  employees
whose customary employment is for less than twenty (20) hours per week; and 

        (iii)  employees
whose customary employment is for less than five(5) months in a calendar year. 

        l.      "Employer"
shall mean, as to any particular Employee, the corporation which employs such Employee. 

        m.    "Exchange
Act" shall mean the Securities Exchange Act of 1934, as amended. 

        n.     "Exercise
Date" shall mean the last business day of each Purchase Period. 

        o.     "Fair
Market Value" of a Share as of a particular date shall mean (1) the closing sale price reported for such share on the national securities exchange or
national market system on which such share is principally traded on such date (or, if there were no trades on such date, on the most recently preceding day on which there was a sale), or (2) if
the Shares are not then listed on a national securities exchange or national market system, or the value of such shares is not otherwise determinable, such value as determined by the Administrator in
good faith in its sole discretion. 

        p.     "Fremont"
means Fremont Partners L.P., any other related fund managed by Fremont Partners, or an affiliate thereof, and their respective affiliates, together with any
affiliated Person to whom any of the foregoing shall have directly or indirectly transferred any Shares. 

        q.     "Group"
shall have the meaning set forth in Section 2e. hereof. 

        r.     "Investors"
means Fremont, Blum and Leininger. 

        s.     Leininger
means James R. Leininger, M.D., any related partnership, trust or fund managed or otherwise controlled by James R. Leininger, M.D., or an affiliate thereof, and
their respective affiliates, together with any affiliated Person to whom any of the foregoing shall have directly or indirectly transferred any Shares. 

2

 

        t.      "Listing
Date" means the first date upon which any security of the Company is listed (or approved for listing) upon notice of issuance on any securities exchange, or
designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system if such securities exchange or interdealer quotation system has been
certified in accordance with the provisions of any applicable State securities law. 

        u.     "Offering
Date" shall mean the first business day of each Offering Period of the Plan. The Offering Date of an Offering Period is the grant date for the options offered
in such Offering Period. 

        v.     "Offering
Period" shall mean a six (6) month period with respect to which the right to purchase Shares may be granted under the Plan, as determined pursuant to
Section 5, or such other period as determined by the Administrator pursuant to Section 5. 

        w.    "Parent"
shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of granting an option, each of
the corporations other than the Company owns shares possessing 50% or more of the total combined voting power of all classes of shares in one of the other corporations in such chain. 

        x.     "Person"
shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall
not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates,
(iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company. 

        y.     "Plan"
shall mean the Kinetic Concepts, Inc. 2004 Employee Stock Purchase Plan, as amended from time to time. 

        z.     "Purchase
Period" shall mean a six (6) month period in which payroll deductions may be made for the purchase of Shares under the Plan, as determined pursuant to
Section 5, or such other period as determined by the Administrator pursuant to Section 5. 

        aa.   "Shares"
shall mean shares of the common stock, par value $0.001 per share, of the Company. 

        bb.   "Subsidiary"
shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of granting an option,
each of the corporations other than the last corporation in the unbroken chain owns shares possessing fifty percent (50%) or more of the total combined voting power of all classes of shares in one of
the other corporations in such chain. 

        cc.   "Voting
Stock" shall have the meaning set forth in Section 2e. hereof. 

        3.    Eligibility.    Subject to the limitations set forth in Section 4 hereof, any Employee is eligible to
participate in the Plan and may elect to participate by satisfying the requirements set forth in Section 6a. 

        4.    Limitation on Shares to be Purchased.    

        a.     Notwithstanding
any provisions of the Plan to the contrary, no Employee shall be granted an option under the Plan if, immediately after the grant, such Employee (or any
other person whose Shares would be attributed to such Employee pursuant to Section 424(d) of the Code) would own Shares and/or hold outstanding options to purchase Shares possessing five
percent (5%) or more of the total combined voting power or value of all classes of Shares of the Company or of any Subsidiary or Parent of the Company. 

3

 

        b.     Notwithstanding
any provisions of the Plan to the contrary, no Employee shall be entitled to purchase Shares under the Plan at a rate which, when aggregated with his or
her rights to purchase Shares under all employee stock purchase plans (as described in Section 423 of the Code) of the Company and any Subsidiary or Parent of the Company, exceeds
twenty-five thousand dollars ($25,000) in Fair Market Value of such Shares (determined at the time such option is granted) for any calendar year in which such option would be outstanding
at any time. Any amounts received from an Employee which cannot be used to purchase Shares as a result of this limitation will be returned as soon as practicable to the Employee without interest. 

        c.     Notwithstanding
any provisions of the Plan to the contrary, no Employee shall be entitled to purchase more than the Maximum Share Amount (as defined below) on any single
Exercise Date. Not less than thirty (30) days prior to the commencement of any Purchase Period, the Administrator may, in its sole discretion, set a maximum number of Shares which may be
purchased by any employee at any single Exercise Date (hereinafter the "Maximum Share Amount"). If a new Maximum Share Amount is set, then all participants must be notified of such Maximum Share
Amount not less than fifteen (15) days prior to the commencement of the next Purchase Period. Once the Maximum Share Amount is set, it shall continue to apply with respect to all succeeding
Exercise Dates and Purchase Periods unless revised by the Administrator as set forth above. 

        5.    Offering Periods.    Except as provided below, the Plan shall be implemented by two Offering Periods commencing
each fiscal year and the Offering Periods shall consist of the six (6) month periods commencing on the first day of each of the first and third fiscal quarters of the fiscal year. While the
Plan is in effect, except as provided below, each Offering Period shall be composed of one (1) Purchase Period that is identical to the Offering Period. Notwithstanding the foregoing, the
Administrator shall have the sole discretion to determine the commencement date of the first Offering Period and Purchase Period following the Effective Date (as defined in Section 20) of the
Plan. The Plan shall continue until terminated in accordance with Section 21 hereof. Notwithstanding the foregoing, subject to Section 21 hereof, the Administrator shall have the power
to change the commencement date, duration and/or the frequency of Offering Periods and/or Purchase Periods with respect to future offerings and shall use its best efforts to notify Employees of any
such change at least fifteen (15) days prior to the scheduled beginning of the first Offering Period to be affected; provided, however, that in no event shall any Offering Period or Purchase
Period be longer than six (6) months. 

        6.    Participation; Grant of Option on Enrollment; Purchase Price.    

        a.     Participation
in the Plan is wholly voluntary. Each eligible Employee may elect to become a participant in the Plan with respect to a particular Offering Period, by
filing a subscription agreement with his or her Employer authorizing payroll deductions in accordance with Section 7 hereof and filing it with the Company or the Employer in accordance with the
form's instructions at least ten (10) business days prior to the applicable Offering Date, unless a later time for filing the subscription agreement is set by the Administrator for all eligible
Employees with respect to a given Offering Period. Once an eligible Employee becomes a participant in an Offering Period, he or she will automatically participate in the next Offering Period pursuant
to the previously filed authorization, unless the employee withdraws from the Plan or terminates further participation in an Offering Period as set forth in Section 10. Such participant is not
required to file any additional subscription agreement in order to continue participation in the Plan. 

        b.     Enrollment
by an eligible Employee in the Plan with respect to an Offering Period will constitute the grant (as of the Offering Date) by the Company to such Employee an
option to purchase Shares on the Exercise Date up to that number of Shares determined by dividing the amount accumulated in such Employee's payroll deduction account during such Purchase Period by
eighty five percent (85%) of the Fair Market Value of a Share on (i) the Offering Date or (ii) the 

4

 

Exercise
date, whichever is lesser; provided, however, that the number of Shares subject to any option granted pursuant to this Plan shall not exceed the limitations provided under Section 4. 

        c.     The
purchase price per Share subject to an offering shall be 85% of the Fair Market Value of a Share on (i) the Offering Date or (ii) the Exercise Date,
whichever is lower. 

        7.    Payroll Deductions.    

        a.     Subject
to Section 6a hereof, a participant in the Plan may, in accordance with rules and procedures adopted by the Administrator, authorize a payroll deduction of
any whole percentage from 1 percent to 10 percent of such participant's Compensation each pay period (the permissible range within such percentages to be determined by the Administrator
from time to time), not to exceed $25,000 per year. A participant may at any time increase or decrease such payroll deduction (including a cessation of payroll
deductions), by completing and filing with the Employer a new subscription agreement authorizing a change in payroll deduction rate. The Administrator
may, in its discretion, limit the number of rate changes by a participant during an Offering Period. A change in rate shall be effective as of the next payroll period following the date of filing of
the new subscription agreement. All payroll deductions made by a participant shall be credited to such participant's account under the Plan. No interest shall accrue on the payroll deductions. 

        b.     A
participant may withdraw from the Plan as provided in Section 10, which will terminate his or her payroll deductions for the Purchase Period in which such
withdrawal occurs. 

        8.    Exercise of Option.    

        a.     Unless
a participant withdraws from the Plan as provided in Section 10 hereof, or unless the Administrator otherwise provides, such participant's election to
purchase Shares shall be exercised automatically on the Exercise Date, and the maximum number of whole Shares subject to such option will be purchased for such participant at the applicable purchase
price with the accumulated payroll deductions in the participant's account as of the Exercise Date. No fractional Shares may be purchased hereunder. 

        b.     Any
payroll deductions accumulated in a participant's account following the purchase of Shares on any Exercise Date that are not sufficient to purchase a full Share shall
be retained in the participant's account for the subsequent Purchase Period, subject to earlier withdrawal by the participant as provided in Section 10 hereof. Any additional amounts remaining
in a participant's account following the purchase of Shares on any Exercise Date that are equal to, or in excess of, the amount required to purchase at least one full Share shall be returned to the
Participant as soon as practicable following the Exercise Date. During a participant's lifetime, a participant's option to purchase Shares hereunder will be exercisable only by the participant. 

        c.     The
Shares purchased upon exercise of an option hereunder shall be credited to the participant's account under the Plan as of the Exercise Date and shall be deemed to be
transferred to the participant on such date. Except as otherwise provided herein, the participant shall have all rights of a shareholder with respect to such Shares upon their being credited to the
participant's account. 

        9.    Delivery of Shares.    

        a.     As
promptly as practicable after the Exercise Date, the Company shall arrange the delivery to each participant of a certificate representing the Shares purchased upon
exercise of his or her option; provided, however, that the Administrator may deliver certificates to a broker or brokers that hold such certificate in a street name for the benefit of each such
participant. 

5

 

        b.     Shares
to be delivered to a participant under the Plan will be registered in the name of the participant or, at the election of the participant, in the name of the
participant and another person as joint tenants with rights of survivorship or community property. 

        10.    Withdrawal; Termination of Employment.    

        a.     A
participant may withdraw from an Offering Period under the plan by giving written notice to the Company at least fifteen (15) days prior to the next occurring
Exercise Date. 

        b.     Upon
withdrawal from the Plan, the accumulated payroll deductions credited to such participant's account shall be paid, without interest, to such participant as soon as
practicable after receipt of such participant's notice of withdrawal and such participant's interest in the Plan shall terminate. In the event a participant voluntarily elects to withdraw from the
Plan, he or she may not resume participation in the Plan during the same Purchase Period, but may participate in any Purchase Period under the Plan which commences on a date subsequent to such
withdrawal by filing a new authorization for payroll deductions in the same manner as set forth above for initial participation in the Plan. 

        c.     Termination
of a participant's employment for any reason, including retirement, death or failure of a participant to remain an eligible Employee, immediately terminates
his or her participation in the Plan. In such event, the payroll deductions credited to such participant's account that have not been used to purchase Shares shall be returned as soon as practicable
to such participant or, in the case of such participant's death, to the person or persons entitled thereto under Section 14 hereof, without interest. For purposes of this Section 10, an
Employee will not be deemed to have terminated employment or failed to remain in continuous employ of the Company or a Designated Parent/Subsidiary in the case of sick leave, military leave, or any
other leave of absence approved in writing by the Administrator; provided, however, that the leave is for a period of not more than ninety (90) days or reemployment upon the expiration of such
leave is guaranteed by contract or statute. 

        11.    Interest.    No interest shall accrue on or be payable with respect to the payroll deductions of a participant
in the Plan. 

        12.    Shares.    Subject to adjustment as provided in Section 19 hereof, the maximum number of Shares which
shall be reserved for sale under the Plan shall be two million five hundred thousand (2,500,000) Shares. Such Shares shall be either authorized and unissued Shares or Shares which have been reacquired
by the Company. If the total number of Shares to be purchased on the first day of a Purchase Period by all participants exceeds the number of Shares then available under the Plan, the Administrator
shall make a pro rata allocation of the Shares remaining available for option grant in as uniform a manner as is practicable and as it shall determine to be equitable. In such event, the Administrator
shall give written notice to each participant of such reduction of the number of option Shares affected thereby and shall similarly reduce the rate of payroll deductions, if necessary. 

        13.    Administration.    The Plan shall be administered by the Administrator. The Administrator shall have full power
and authority, subject to the provisions of the Plan and Section 423 of the Code and any other provisions of applicable law, including foreign law, to promulgate such rules and regulations as
it deems necessary for the proper administration of the Plan, to interpret the provisions and supervise the administration of the Plan, and to take all action in connection therewith or in relation
thereto as it deems necessary or advisable. Subject to the provisions of the Plan and limitations of Section 423 of the Code and all other applicable law, all decisions, determinations and
interpretations of the Administrator shall be final and binding on all participants. Except as otherwise provided by the Administrator, each Employer shall be charged with all expenses incurred in
connection with administration of the Plan with respect to the Employer's Employees. 

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        14.    Designation of Beneficiary.    

        a.     A
participant may file with the Company, on forms supplied by the Company, a written designation of a beneficiary who is to receive any Shares and cash remaining in such
participant's account under the Plan in the event of the participant's death. 

        b.     Such
designation of beneficiary may be changed by the participant at any time by written notice to the Company, on forms supplied by the Company. In the event of the
death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, the Company shall deliver such Shares and/or cash to
the executor or administrator of the estate of the participant or, if no such executor or administrator has been appointed (to the knowledge of the Company), the Company shall deliver such Shares
and/or cash in accordance with applicable laws of descent and distribution. 

        15.    Transferability.    Neither payroll deductions credited to a participant's account nor any rights with regard
to the exercise of an option or to receive Shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way by the participant (other than by will, the laws of descent
and distribution or as provided in Section 14 hereof). Any such attempt at assignment, transfer, pledge or other disposition shall be without effect. 

        16.    No Right to Continued Employment.    Nothing in the Plan or in any right granted under the Plan shall confer
upon any participant any right to continue in the employ of the Company or any Designated Parent/Subsidiary for any period of specific duration or interfere with or otherwise affect or restrict in any
way the rights of the Company or any Designated Parent/Subsidiary or of the participant to terminate his or her employment at any time and for any reason, with or without cause. The adoption and
maintenance of the Plan shall not constitute a condition of the employment of any Employee. 

        17.    Use of Funds.    All payroll deductions held by the Company under the Plan may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such funds. 

        18.    Reports.    Individual accounts will be maintained for each participant in the Plan. Statements of account will
be given to participants as soon as practicable following each Offering Period, which statements will set forth the amounts of payroll deductions, the per Share purchase price, the number of Shares
purchased, the aggregate Shares in the participant's account and the remaining cash balance, if any. 

        19.    Effect of Change in Capitalization; Change in Control.    

        a.     In
the event of a Change in Capitalization, the Administrator, in its sole discretion, shall conclusively determine the appropriate equitable adjustments, if any, to be
made under the Plan, including without limitation adjustments to the number of Shares which have been authorized for issuance under the Plan but have not yet been placed under option, as well as the
price per Share covered by each option under the Plan which has not yet been exercised. 

        b.     In
the event of a Change in Control of the Company, unless otherwise provided by the Administrator, the Offering Periods shall terminate on such date as determined by the
Administrator and accumulated payroll deductions on such date shall be used to purchase the applicable number of Shares. 

        20.    Effective Date; Term of Plan.    

        a.     The
Plan shall be effective as of the date determined by the Company to be the effective date of the Plan (the "Effective Date"), subject to the approval of the Plan by
the shareholders of the Company within 12 months before or after the date the Plan is adopted by the Board. No 

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Offering
Period shall commence under the Plan prior to the date that shareholder approval is obtained. 

        b.     The
Plan shall continue from the Effective Date until the earlier to occur of (i) the termination of the Plan by the Board pursuant to Section 21,
(ii) the issuance of all Shares reserved for issuance under the Plan, or (iii) ten (10) years from the date the Plan was originally adopted by the Board. 

        21.    Amendment, Suspension and Termination of Plan.    

        a.     The
Administrator may at any time amend, suspend or terminate the Plan. Except as provided in Section 19 hereof, no such suspension or termination may adversely
affect options previously granted to a participant without such participant's consent and no amendment may make any change to any option previously granted that would adversely affect the rights of
any participant without the consent of such participant. No amendment shall be effective unless it receives the requisite approval of the shareholders of the Company if such shareholder approval of
such amendment is required to comply with Rule 16b-3 under the Exchange Act or Section 423 of the Code or to comply with any other applicable law, regulation or stock
exchange rule. Upon termination of the Plan, unless the Administrator shall determine otherwise, any assets remaining in the participants' accounts under the Plan shall be delivered to the respective
participant (or the participant's legal representative) as soon as practicable. 

        b.     The
Administrator shall review the reports described in Section 26, and commencing following receipt of the report for the first Offering Period under the Plan and
each report thereafter, the Administrator shall make a determination as to whether to continue the Plan, suspend the Plan or terminate the Plan pursuant to this Section 21. In the event that
the Administrator does not make a determination to commence the next Offering Period, then the Plan shall be automatically suspended and shall remain suspended until the Administrator recommences the
Offering Periods, terminates the Plan or the Plan expires. Notwithstanding the foregoing, an Offering Period may be so suspended only if (i) within a reasonable amount of time prior to such
suspension, the Administrator has received a report for the preceding Offering Period, and (ii) the participants have been provided adequate notice. 

        22.    Notices.    All notices or other communications by a participant to the Company under or in connection with the
Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. 

        23.    Regulations and Other Approvals; Governing Law.    

        a.     This
Plan and the rights of all persons claiming hereunder shall be construed and determined in accordance with the laws of the State of Texas without giving effect to
the choice of law principles thereof, except to the extent that such law is preempted by federal law. 

        b.     The
obligation of the Company to sell or deliver Shares with respect to options granted under the Plan shall be subject to all applicable laws, rules and regulations,
including all applicable federal and state securities laws and all applicable foreign laws, and the obtaining of all such approvals by governmental agencies or other authorities as may be deemed
necessary or appropriate by the Administrator. 

        c.     To
the extent applicable hereto, the Plan is intended to comply with Rule 16b-3 under the Exchange Act, and the Administrator shall interpret and
administer the provisions of the Plan in a manner consistent therewith. Any provisions inconsistent with such Rule shall be inoperative and shall not affect the validity of the Plan. 

8

 

        d.     The
Company and the Administrator shall make all determinations under the Plan based on U.S. currency, except as otherwise may be required pursuant to the laws of a
foreign jurisdiction. 

        24.    Withholding of Taxes.    If the participant makes a disposition, within the meaning of Section 424(c) of
the Code and regulations promulgated thereunder, of any Share or Shares issued to such participant pursuant to such participant's exercise of an option, and such disposition occurs within the later of
the two-year period commencing on the day after the Offering Date or the one-year period commencing on the day after the Exercise Date, such participant shall, within ten
(10) days of such disposition, notify the Company thereof and thereafter immediately deliver to the Company any amount of federal, state, local or other income taxes and other amounts which the
Company informs the participant the Company is required to withhold. 

        25.    Equal Rights and Privileges.    All eligible Employees shall have equal rights and privileges with respect to
the Plan so that the Plan qualifies as an "employee stock purchase plan" within the meaning of Section 423 or any successor provision of the Code and the related regulations. Any provision of
the Plan which is inconsistent with Section 423 or any successor provision of the Code shall, without further act or amendment by the Company or the Administrator, be reformed to comply with
the requirements of Section 423. This Section 25 shall take precedence over all other provisions in the Plan. 

        26.    Periodic Reports.    As soon as practicable following the end of each Purchase Period, the Company shall
provide to the Administrator a report summarizing the number of Shares purchased during such Purchase Period by each Employee participating in the Plan, the per Share purchase price for such period,
and the total number of Shares purchased. To the extent permitted by applicable law, and available to the Company, the Company shall also provide to the Administrator the number of Shares that have
been retained by Employees participating in the Plan. 

9

QuickLinks

KINETIC CONCEPTS, INC. 2004 EMPLOYEE STOCK PURCHASE PLAN

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