S-4

Use these links to rapidly review the document
TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

KINETIC CONCEPTS, INC.
(Exact Name of Registrant as Specified in its Charter)

Texas (State or other Jurisdiction of Incorporation or Organization)	2590 (Primary Standard Industrial Classification Code Number)	74-1891727 (I.R.S. Employer Identification Number)
8023 Vantage Drive San Antonio, Texas 78230 (210) 524-9000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Dennis E. Noll
Senior Vice President, General Counsel & Secretary
8023 Vantage Drive
San Antonio, Texas 78230
(210) 524-9000
(Name and address, including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

Copies to:
Kenton J. King Thomas J. Ivey Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue Palo Alto, California 94301 (650) 470-4500	William J. McDonough Cox & Smith Incorporated 112 East Pecan Street San Antonio, Texas 78205 (210) 554-5268

SEE TABLE OF ADDITIONAL REGISTRANTS

Approximate date of commencement of proposed exchange of the securities: As soon as practicable after this registration statement becomes effective.

        If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o

        If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. o                         

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price Per Unit	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee
Series B 73/8% Senior Subordinated Notes due 2013	$205,000,000	100%	$205,000,000	$16,585
Guarantees of Series B 73/8% Senior Subordinated Notes due 2013	(2)	(2)	(2)	(2)

(1)

Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(f) promulgated under the Securities Act of 1933, as amended.

(2)

Each of KCI Holding Company, Inc., KCI Real Holdings, L.L.C., KCI International, Inc., KCI Licensing, Inc., KCI Properties Limited, KCI Real Property Limited, KCI USA, Inc., KCI USA Real Holdings, L.L.C. and Medclaim, Inc. will guarantee the obligations of Kinetic Concepts, Inc. under the Series B 7³/8% Senior Subordinated Notes due 2013. Pursuant to Rule 457(n), no additional registration fee is being paid in respect of such guarantees.

The registrants hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until the registrants shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities Exchange Commission, acting pursuant to said Section 8(a), may determine.

TABLE OF ADDITIONAL REGISTRANTS

Name of Additional Registrant*	State of Incorporation or Formation	Primary Standard Industrial Classification Code Number	I.R.S. Employer Identification Number
KCI Holding Company, Inc.	Delaware	2590	74-2804102
KCI Real Holdings, L.L.C.	Delaware	2590	N/A
KCI International, Inc.	Delaware	2590	51-0307888
KCI Licensing, Inc.	Delaware	2590	74-2928553
KCI Properties Limited	Texas	2590	74-2621178
KCI Real Property Limited	Texas	2590	74-2644430
KCI USA, Inc.	Delaware	2590	74-2152396
KCI USA Real Holdings, L.L.C.	Delaware	2590	N/A
Medclaim, Inc.	North Carolina	2590	56-2200462

*

The address and telephone number of the principal executive offices of each of the registrants listed below are the same as those of Kinetic Concepts, Inc.

The information in this prospectus is not complete and may be changed. We may not issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to exchange these securities and it is not soliciting an offer to buy these securities in any state where the offer, exchange or sale is not permitted.

Subject to completion, dated                        , 2003

PROSPECTUS

KINETIC CONCEPTS, INC.

Offer to exchange all outstanding Series A 7³/8% Senior Subordinated Notes due 2013 (which we refer to as the old notes) for Series B 7³/8% Senior Subordinated Notes due 2013 (which we refer to as the new notes) which have been registered under the Securities Act of 1933, as amended.

The exchange offer will expire at 5:00 p.m., New York City time, on                  , 2003, the 21st business day following the date of this prospectus, unless we extend the exchange offer in our sole and absolute discretion.

        The principal terms of the exchange offer are as follows:

•

We will exchange the new notes for all outstanding old notes that are validly tendered and not withdrawn pursuant to the exchange offer.



•

You may withdraw tendered old notes at any time prior to the expiration of the exchange offer.



•

The terms of the new notes are substantially identical to those of the outstanding old notes, except that the transfer restrictions and registration rights relating to the old notes do not apply to the new notes.



•

The exchange of old notes for new notes will not be a taxable transaction for U.S. federal income tax purposes, but you should see the discussion under the heading "Material United States Federal Income Tax Considerations" for more information.



•

We will not receive any proceeds from the exchange offer.



•

We issued the old notes in a transaction not requiring registration under the Securities Act, and as a result, transfer of the old notes is restricted. We are making the exchange offer to satisfy your registration rights, as a holder of the old notes.



•

There is no established trading market for the new notes or the old notes.

        Our obligations under the old notes are, and our obligations under the new notes will be, fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis, by KCI Holding Company, Inc., KCI Real Holdings, L.L.C., KCI International, Inc., KCI Licensing, Inc., KCI Properties Limited, KCI Real Property Limited, KCI USA, Inc., KCI USA Real Holdings, L.L.C. and Medclaim, Inc.

See the section entitled "Risk Factors" beginning on page 16 for a discussion of risks you should consider prior to tendering your outstanding old notes for exchange.

        Each broker-dealer that receives new notes for its own account in the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of these new notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where the old notes were acquired as a result of market-making activities or other trading activities.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is                        , 2003.

TABLE OF CONTENTS

        References in this prospectus to the "Company," "we," "our" or "us" refer to Kinetic Concepts, Inc. and our subsidiaries.

        When we use the term "notes" in this prospectus, the term includes the old notes and the new notes.

        You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus.

i

FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements. When used in this prospectus, the words "estimate," "project," "anticipate," "expect," "intend," "believe" and similar expressions are intended to identify forward-looking statements. All of the forward-looking statements contained in this prospectus are based on estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve risks and uncertainties beyond our control. In addition, management's assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this prospectus are not guarantees of future performance and we cannot assure any reader that such statements will be realized. In all likelihood, actual results will differ from those contemplated by such forward-looking statements. Any such differences could result from a variety of factors, including the following:

•

foreign and domestic economic and business conditions;



•

demographic changes;



•

government regulations and changes in, or our failure to comply with, government regulations;



•

changes in the health care reimbursement policies of Medicare Part B or other governmental or private payers;



•

competition;



•

the loss of any significant customers;



•

our significant indebtedness;



•

our ability to effectively protect our intellectual property and not infringe on the intellectual property of others;



•

loss of any significant suppliers, especially sole-source suppliers;



•

failure of new products and services to achieve market acceptance;



•

liability resulting from litigation; and



•

other factors discussed elsewhere in this document and in our filings with the Securities and Exchange Commission, or SEC.

ii

SUMMARY

This summary highlights selected information contained elsewhere in this prospectus. Because this is only a summary, it may not contain all of the information you should consider when making your decision to tender your old notes in the exchange offer. To understand all of the terms of the exchange offer and for a more complete understanding of our business, you should carefully read this entire prospectus, particularly the section entitled "Risk Factors," and the documents incorporated by reference in this prospectus. In this prospectus, except as set forth under the "Description of the New Notes" and unless the context requires otherwise, the words "we," "our," and "us" refer to Kinetic Concepts, Inc. and its consolidated subsidiaries. For purposes of this prospectus, "KCI" refers to Kinetic Concepts, Inc.

KINETIC CONCEPTS, INC.

        Kinetic Concepts, Inc. is a global medical device company with leadership positions in (1) advanced wound care and (2) therapeutic surfaces which treat and prevent complications resulting from patient immobility. We design, manufacture, market and service a wide range of proprietary products which can significantly improve clinical outcomes while reducing the overall cost of patient care by accelerating the healing process or preventing complications. We have an infrastructure designed to meet the specific needs of medical professionals and patients across all health care settings, including acute care hospitals, extended care facilities and patients' homes both in the United States and abroad.

        Our advanced wound care systems are transforming the treatment of difficult-to-treat wounds. These systems incorporate our proprietary Vacuum Assisted Closure®, or V.A.C.®, technology, which has been clinically demonstrated to promote wound healing and reduce the cost of treating patients with difficult-to-treat wounds. V.A.C. systems help treat a broad spectrum of acute and chronic wounds including failed surgical closures, trauma wounds, partial thickness burns, serious pressure ulcers and diabetic ulcers and help improve outcomes of skin grafting procedures. V.A.C. systems work by applying negative pressure to wounds through proprietary foam dressings. V.A.C. therapy removes excess fluids that may interfere with wound healing, promotes growth of granulation tissue, draws the wound edges closer together, stimulates blood flow and reduces bacterial levels. V.A.C. therapy has been demonstrated to promote the healing of wounds that, in some cases, have been open for years. For the twelve-month period ended June 30, 2003, our V.A.C. products and related services generated $391.3 million in revenue, as compared to $244.5 million for the twelve-month period ended June 30, 2002.

        Our therapeutic surfaces, including specialty hospital beds, mattress replacement systems and overlays, are designed to address complications associated with immobility and obesity, such as pressure sores and pneumonia. These complications, if left untreated, can be life threatening. We offer a broad line of therapeutic surfaces designed to deliver pressure relief, pulmonary care and bariatric care. Our beds and mattress overlays help reduce the amount of pressure on a patient's skin by using air, foam, silicon beads or viscous fluid as support. We also manufacture beds which rotate to prevent and treat medical problems suffered by immobile patients, such as pneumonia and blood clots. Our line of bariatric care products, which are designed to accommodate obese individuals weighing up to 1,000 pounds, permits patients to be treated effectively and reduces the risk of injury to health care personnel related to handling these patients. For the twelve-month period ended June 30, 2003, therapeutic surfaces generated $272.5 million of revenue, as compared to $263.8 million for the twelve-month period ended June 30, 2002.

        Our customers generally prefer to rent our V.A.C. systems and therapeutic surfaces and purchase the related disposable products, such as V.A.C. dressings. Our network of service centers enables us to deliver products and services to our customers when needed. This allows our customers to obtain the right product for each patient without having to purchase and store large numbers of irregularly used

1

items, thus avoiding substantial capital investments and costs associated with complex asset management and internal logistics. Our rental model and service center network also benefit us by improving capital efficiency and facilitating our ability to introduce new products.

        We have extensive contractual relationships and reimbursement coverage for the V.A.C. in the United States. In acute and extended care, we have contracts with nearly all major hospital, and most major extended care, group purchasing organizations. Hospitals and extended care facilities pay us directly for our services. In the home care market, we provide V.A.C. products and services directly to patients and bill third-party payers, including Medicare and private insurance. V.A.C. systems are covered by Medicare Part B.

        We have close relationships with key decision makers regarding the use of our products as a result of the clinical support and consultation we provide, and our education and training programs. Our worldwide sales organization consists of approximately 1,050 individuals, including approximately 350 domestic employees with medical or clinical backgrounds. In addition, we employ approximately 85 field-based specialists who train and consult with our customers regarding the often demanding and complex paperwork required by Medicare and private insurance companies.

        We have also dedicated significant time and resources to develop capabilities and expertise in third-party reimbursement, intellectual property protection, and new product development and commercialization. In addition, we have developed systems to support and manage the deployment of our domestic and international sales and service efforts. We believe these capabilities position us to continue to expand our product and service offerings and to strengthen our position with our customers.

Competitive Strengths

        We believe we have the following competitive strengths:

•

Leading global market positions.



•

Superior clinical efficacy.



•

Product innovation and commercialization.



•

Broad V.A.C. patent portfolio.



•

Broad reach and customer relationships.



•

Extensive service center network.



•

Reimbursement expertise.



•

Strong management team.

2

Business Strategy

        We intend to continue to grow our business and to improve our market position by pursuing the following strategies:

•	Capture the current V.A.C. opportunity.
•	Establish V.A.C. therapy as the standard of care.
	—Increase penetration in home care markets.
	—Further penetrate the acute care market.
•	Maintain and expand our leadership position in therapeutic surfaces.
•	Expand presence in international markets.
•	Generate high returns on invested capital.

        KCI was founded in 1976 by James R. Leininger, M.D., and is incorporated in Texas. Fremont Partners, L.P. and Blum Capital Partners, L.P. recapitalized KCI in 1997 and, together with Dr. Leininger, continue to hold the majority of our outstanding equity. Our principal executive offices are located at 8023 Vantage Drive, San Antonio, Texas 78230, and our telephone number is (210) 524-9000. Our website is located at www.kci1.com. The information contained on our website is not a part of this prospectus.

THE RECAPITALIZATION

        The Old Notes.    On August 11, 2003, we issued and sold an aggregate of $205.0 million principal amount of Series A 7³/8% Senior Subordinated Notes due 2013 (the old notes to which this exchange offer relates), to qualified institutional buyers under Rule 144A and outside the United States in compliance with Regulation S. Our obligations under the old notes were fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis by most of our direct and indirect domestic subsidiaries. In connection with the initial purchasers' purchase of the old notes, we agreed to consummate the exchange offer within 240 days after the consummation of the sale of the old notes.

        New Senior Credit Facility.    Concurrently with the issuance of the old notes, we entered into a new senior credit facility, consisting of a $480.0 million term loan facility and a $100.0 million revolving credit facility, for which Morgan Stanley Senior Funding, Inc. and Credit Suisse First Boston, acting through its Cayman Islands Branch, acted as joint lead arrangers, and Morgan Stanley Senior Funding, Inc. acted as administrative agent. Initially, we borrowed $480.0 million under the new term loan facility. Borrowings under the new senior credit facility are secured by a first priority security interest in substantially all of our existing and hereafter acquired assets, including substantially all of the capital stock or membership interests of all of our subsidiaries that are guarantors under this new credit facility and 65% of the capital stock or membership interests of certain of our foreign subsidiaries. (See "Description of the New Senior Credit Facility.")

        Redemption of our 9⁵/8% Senior Subordinated Notes.    As of June 30, 2003, we had outstanding $200.0 million in 9⁵/8% Senior Subordinated Notes due 2007. On August 11, 2003, we notified holders of these notes that, pursuant to their terms, we would redeem all such outstanding notes for a purchase price of 104.813% of their principal amount plus accrued but unpaid interest to the date of redemption. The redemption was completed on August 14, 2003. In addition, we paid approximately $1.4 million in consent fees related to amending the indenture governing the notes to allow for their early redemption.

3

        Offering of Convertible Preferred Stock.    Concurrently with the issuance and sale of the old notes, we issued and sold $263.8 million of our Series A Convertible Preferred Stock. The preferred stock is entitled to quarterly dividends equal to the greater of 9% per annum (compounded quarterly) of the stated value or the amount of any common stock dividend the holder would have received on an as-converted basis, excluding the share repurchase described below. Dividends accrue and will accrete for the first three years and thereafter may be paid in cash or accrete at our option. The preferred stock is also entitled to its dividends through December 31, 2005, even if mandatorily converted beforehand. Holders of the preferred stock will have the right to force us to redeem their preferred stock starting in 2015, subject to our right to postpone redemption in certain situations. The preferred stock is convertible into common stock at any time at the option of the holder at a conversion price equal to $17.00 per share of common stock. The preferred stock will be mandatorily convertible into common stock upon an initial public offering if the price offered to the public is equal to or greater than $22.00 per share of common stock, and may be converted by us upon an initial public offering at a lower price if we elect to issue additional shares of our common stock to holders of our preferred stock. The preferred stock is also mandatorily convertible into common stock if the average closing price of our common stock for 20 consecutive trading days equals or exceeds $23.50 per share, and can be converted by us if the average closing price of our common stock for 20 consecutive trading days is less than $23.50 if we elect to issue additional shares of our common stock to holders of our preferred stock. The preferred stock is governed by a statement of designations which contains negative covenants including a limitation on additional indebtedness that we may incur and a limitation on our ability to repurchase junior securities. Except as otherwise required by law, the holders of the preferred stock are entitled to vote together with our common shareholders and are entitled to vote on an as-converted basis. KCI, Fremont Partners, L.P., Blum Capital Partners, L.P. and Dr. Leininger, and their affiliates, have entered into an Investors' Rights Agreement with the holders of the preferred stock, which agreement provides for "piggyback" registration rights, restrictions on transfer of the shares of the preferred stock, rights of first offer, "tag-along" rights and "bring-along" rights. Fremont Partners, L.P., Blum Capital Partners, L.P. and James R. Leininger, M.D., and their affiliates, purchased $190.0 million of the preferred stock in the aggregate.

        Share Repurchase.    On August 11, 2003, we commenced a tender offer to repurchase for cash up to $589.8 million of our common stock and vested stock options at a price of $17.00 per share. We refer to this transaction throughout this prospectus as the "share repurchase." On September 9, 2003, we completed the share repurchase of $589.0 million of our common stock and vested stock options. We intend to repurchase additional shares in an amount equal to the sum of (1) the net after-tax proceeds of the $75.0 million Hillenbrand antitrust settlement payment that we expect to receive in January 2004, (2) the tax benefits to the Company related to the recapitalization in an amount not to exceed $40.0 million and (3) the cash benefit received from the exercise of stock options as part of the share repurchase, if any.

        The issuance and sale of the old notes and the convertible preferred stock, the refinancing of our old senior credit facility with our new senior credit facility, the redemption of our 9⁵/8% Senior Subordinated Notes due 2007 and the share repurchase are referred to throughout this prospectus collectively as the "recapitalization."

4

        The following sets forth the sources and uses of funds in connection with the recapitalization:

		Amount
		(in millions)
Source of Funds
Gross proceeds from the sale of the old notes		$	205.0
Borrowings under the new senior credit facility			480.0
Gross proceeds from the sale of convertible preferred stock			263.8
Proceeds from Hillenbrand settlement (net of taxes)			46.9
Tax benefits realized from transaction fees and expenses			31.9
Cash on hand			53.8
	Total		1,081.4
Use of Funds
Redemption of 95/8% Senior Subordinated Notes Due 2007(1)		$	211.1
Repayment of debt under the old senior credit facility			208.2
Share repurchase			634.0
Transaction fees and expenses for the recapitalization			28.1
	Total		1,081.4

(1)

Includes early redemption premium of 4.813% of the aggregate principal amount pursuant to the terms of the 9⁵/8% Senior Subordinated Notes due 2007, in addition to the payment of $1.4 million in consent fees related to amending the indenture governing such notes to allow for their early redemption.

5

SUMMARY DESCRIPTION OF THE EXCHANGE OFFER

Old Notes	Series A 73/8% Senior Subordinated Notes due 2013, which we issued and sold on August 11, 2003.
New Notes	Series B 73/8% Senior Subordinated Notes due 2013, the issuance of which has been registered under the Securities Act. The form and the terms of the new notes are identical in all material respects to those of the old notes, except that the new notes:
	•	will have been registered under the Securities Act;
	•	will not bear restrictive legends restricting their transfer under the Securities Act;
	•	will not be entitled to registration rights that apply to the old notes; and
	•	will not contain provisions relating to liquidated damages in connection with the old notes under circumstances related to the timing of the exchange offer.
Exchange Offer	We are offering to issue up to $205,000,000 aggregate principal amount of the new notes in exchange for a like aggregate principal amount of the old notes to satisfy our obligations under the registration rights agreement that we entered into when the old notes were issued in transactions in reliance upon the exemption from registration provided by Rule 144A and Regulation S under the Securities Act.
Expiration Date; Tenders	The exchange offer will expire at 5:00 p.m., New York City time, on                  , 2003, the 21st business day following the date of this prospectus, unless extended in our sole and absolute discretion. By tendering your old notes, you represent to us that:
	•	you are not our "affiliate," as defined in Rule 405 under the Securities Act;
	•	any new notes you receive in the exchange offer are being acquired by you in the ordinary course of your business;
	•	at the time of the commencement of the exchange offer, neither you nor anyone receiving new notes from you has any arrangement or understanding with any person to participate in the distribution, as defined in the Securities Act, of the new notes in violation of the Securities Act;
	•	if you are a broker-dealer, you will receive the new notes for your own account in exchange for old notes that were acquired by you as a result of your market-making or other trading activities and that you will deliver a prospectus in connection with any resale of the new notes you receive. For further information regarding resales of the new notes by participating broker-dealers, see "Plan of Distribution;" and

6

	•	if you are not a broker-dealer, you are not engaged in, and do not intend to engage in, the distribution of the new notes, as defined in the Securities Act.
Withdrawal; Non-Acceptance	You may withdraw any old notes tendered in the exchange offer at any time prior to 5:00 p.m., New York City time, on                  , 2003. To be effective, a written notice of withdrawal must be received by the exchange agent at the address set forth on page 33. The notice must specify:
	•	the name of the person having tendered the old notes to be withdrawn;
	•	the old notes to be withdrawn, including the principal amount of such old notes; and
	•	where certificates for old notes have been transmitted, the name in which such old notes are registered, if different from that of the withdrawing holder.
	If we decide for any reason not to accept any old notes tendered for exchange, the old notes will be returned to the registered holder at our expense promptly after the expiration or termination of the exchange offer. In the case of the old notes tendered by book-entry transfer into the exchange agent's account at The Depository Trust Company, which we sometimes refer to in this prospectus as DTC, any withdrawn or unaccepted old notes will be credited to the tendering holders' account at DTC. For further information regarding the withdrawal of the tendered old notes, see "The Exchange Offer—Withdrawal Rights."
Conditions to the Exchange Offer	The exchange offer is subject to customary conditions, which we may waive. See "The Exchange Offer—Conditions to the Exchange Offer" for more information regarding the conditions to the exchange offer.
Procedures for Tendering Old Notes	Unless you comply with the procedure described below under the caption "The Exchange Offer—Guaranteed Delivery Procedures," you must do one of the following on or prior to the expiration or termination of the exchange offer to participate in the exchange offer:
	•	tender your old notes by sending the certificates for your old notes, in proper form for transfer, a properly completed and duly executed letter of transmittal, with any required signature guarantees, and all other documents required by the letter of transmittal, to U.S. Bank, N.A., as exchange agent, at the address set forth on page 33; or

7

	•	tender your old notes by using the book-entry transfer procedures described below and transmitting a properly completed and duly executed letter of transmittal, with any required signature guarantees, or an agent's message instead of the letter of transmittal, to the exchange agent. In order for a book-entry transfer to constitute a valid tender of your old notes in the exchange offer, U.S. Bank, N.A., as exchange agent, must receive a confirmation of book-entry transfer of your old notes into the exchange agent's account at DTC prior to the expiration or termination of the exchange offer. For more information regarding the use of book-entry transfer procedures, including a description of the required agent's message, see "The Exchange Offer—Book-Entry Transfers."
Guaranteed Delivery Procedures	If you are a registered holder of old notes and wish to tender your old notes in the exchange offer, but
	•	the old notes are not immediately available;
	•	time will not permit your old notes or other required documents to reach the exchange agent before the expiration or termination of the exchange offer; or
	•	the procedure for book-entry transfer cannot be completed prior to the expiration or termination of the exchange offer;
	then you may tender old notes by following the procedures described below under the caption "The Exchange Offer—Guaranteed Delivery Procedures."
Special Procedures for Beneficial Owners	If you are a beneficial owner whose old notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your old notes in the exchange offer, you should promptly contact the person in whose name the old notes are registered and instruct that person to tender them on your behalf. If you wish to tender in the exchange offer on your own behalf, prior to completing and executing the letter of transmittal and delivering your old notes, you must either make appropriate arrangements to register ownership of the old notes in your name, or obtain a properly completed bond power from the person in whose name the old notes are registered.
Material United States Federal Income Tax Considerations	The exchange of the old notes for new notes in the exchange offer will not be a taxable transaction for United States federal income tax purposes. See "Material United States Federal Income Tax Considerations" for more information regarding the United States federal income tax consequences to you of the exchange offer.
Use of Proceeds	We will not receive any proceeds from the exchange offer.
Exchange Agent	U.S. Bank, N.A. is the exchange agent for the exchange offer. You can find the address and telephone number of the exchange agent below under the caption, "The Exchange Offer—Exchange Agent."

8

Resales	Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, we believe that the new notes you receive in the exchange offer may be offered for resale, resold or otherwise transferred by you without compliance with the registration and prospectus delivery requirements of the Securities Act. However, you will not be able to freely transfer the new notes if:
	•	you are our "affiliate," as defined in Rule 405 of the Securities Act;
	•	you are not acquiring the new notes in the exchange offer in the ordinary course of business;
	•	you have an arrangement or understanding with any person to participate in the distribution, as defined in the Securities Act, of the new notes you will receive in the exchange offer;
	•	you are holding old notes that have or are reasonably likely to have the status of an unsold allotment in the initial offering; or
	•	you are a broker-dealer that received new notes for its own account in the exchange offer in exchange for old notes that were acquired as a result of market-making or other trading activities.
	If you fall within one of the exceptions listed above, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction involving the new notes. See "The Exchange Offer—Procedures for Tendering Old Notes" for more information.
Broker-Dealers	Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. The letter of transmittal states that by so acknowledging and delivering a prospectus, a broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes which were received by the broker-dealer as a result of market making or other trading activities. See "Plan of Distribution" for more information.
Registration Rights Agreement	When we issued the old notes on August 11, 2003, we entered into a registration rights agreement with the initial purchasers of the old notes. Under the terms of the registration rights agreement, we agreed to:
	•	commence this exchange offer no later than 15 days after the registration statement of which this prospectus is a part has been declared effective by the Commission; and

9

•	use our best efforts to have the exchange offer consummated no later than 240 days after the closing date for the issuance and sale of the old notes, which was August 11, 2003;
If we fail to meet our registration obligations, we are obligated under the registration rights agreement to pay, as liquidated damages, additional interest on the old notes at a rate of 0.5% per annum, with an additional 0.25% per annum for each subsequent 90-day period, up to a maximum of 1.0% per annum until the exchange offer is consummated or a shelf registration statement registering the old notes, as discussed below under "Consequences of Not Exchanging Your Old Notes," is declared effective by the SEC.
A copy of the registration rights agreement is included as an exhibit to the registration statement of which this prospectus is a part. See "Description of the New Notes—Registration Rights."

CONSEQUENCES OF NOT EXCHANGING YOUR OLD NOTES

        If you do not exchange your old notes in the exchange offer, you will continue to be subject to the restrictions on transfer described in the legend on the certificate for your old notes. In general, you may offer or sell your old notes only if they are:

•

registered under the Securities Act and applicable state securities laws;



•

offered or sold under an exemption from registration under the Securities Act and applicable state securities laws; or



•

offered or sold in a transaction not subject to the Securities Act and applicable state securities laws.

        We do not intend to register the old notes under the Securities Act. Under some circumstances set forth in the registration rights agreement, however, holders of the old notes, including holders who are not permitted to participate in the exchange offer or who may not freely sell new notes received in the exchange offer, may require us to file, and cause to become effective, a shelf registration statement covering resales of the old notes by these holders. For more information regarding the consequences of not tendering your old notes and our obligations to file a shelf registration statement, see "The Exchange Offer—Consequences of Exchanging or Failing to Exchange Old Notes" and "Description of the New Notes—Registration Rights."

10

SUMMARY DESCRIPTION OF THE NEW NOTES

        The new notes will represent the same debt as the old notes and will be issued subject to the same indenture, which is governed by New York law. The terms of the new notes and those of the outstanding old notes are substantially identical, except that the new notes:

•

will have been registered under the Securities Act;



•

will not bear restrictive legends restricting their transfer under the Securities Act;



•

will not be entitled to registration rights that apply to the old notes; and



•

will not contain provisions relating to liquidated damages in connection with the old notes under circumstances related to the timing of the exchange offer.

        The summary below describes the principal terms of the new notes. For a more complete description of the terms of the new notes, see "Description of the New Notes" in this prospectus.

Issuer	Kinetic Concepts, Inc.
Securities Offered	Up to $205,000,000 aggregate principal amount of Series B 73/8% Senior Subordinated Notes due 2013.
Maturity	May 15, 2013.
Interest	7.375% per annum, payable semi-annually in arrears on May 15 and November 15 commencing November 15, 2003.
Optional Redemption	We may redeem the new notes, at our option, in whole or in part, at any time or from time to time, on and after May 15, 2008, at the redemption prices listed in "Description of the New Notes—Optional Redemption." Prior to May 15, 2008, we will also have the option to redeem the new notes, in whole or in part, from time to time, at a price equal to the greater of 101% of the principal amount of the new notes or a "make-whole" redemption price as described in the "Description of the New Notes—Optional Redemption," plus accrued and unpaid interest.
	In addition, at any time, or from time to time, on or prior to May 15, 2006, we may, at our option and subject to some conditions, use the net proceeds from one or more equity offerings to redeem up to 35% of the original aggregate principal amount of new notes at a redemption price of 107.375% of their principal amount, plus accrued interest, if after each such redemption, at least 65% of the aggregate principal amount of new notes originally issued remains outstanding.
Ranking	The new notes will be our senior subordinated unsecured obligations. The new notes will rank junior to all of our existing and future senior indebtedness, will rank pari passu with any future senior subordinated indebtedness and will rank senior to any of our future indebtedness that is expressly subordinated to the new notes.
	As of June 30, 2003, on a pro forma basis, after giving effect to the recapitalization, we would have had outstanding $687.5 million of total debt, including $480.6 million of debt which would have been senior to the new notes.

11

Guarantees	Most of our existing and future domestic restricted subsidiaries will fully and unconditionally guarantee, jointly and severally on a senior subordinated basis, our obligation to pay principal, premium, if any, and interest on the new notes. The guarantees will rank junior to all existing and future senior indebtedness of these subsidiaries, will rank pari passu with all future senior subordinated indebtedness of these subsidiaries and will rank senior to all future indebtedness of these subsidiaries that is expressly subordinated to the guarantees. A substantial portion of our business is conducted through our foreign operating subsidiaries, which will not guarantee the notes. See note 18 to the consolidated financial statements included elsewhere in this prospectus.
Change of Control	Upon a change of control, we will be required to make an offer to purchase the new notes at a price equal to 101% of their principal amount plus accrued interest to the date of repurchase. We may not have sufficient funds available at the time of any change of control to make any required debt repayment.
Certain Covenants	The terms of the new notes will limit our ability and the ability of our subsidiaries to:
	•	incur additional indebtedness;
	•	create liens;
	•	pay dividends, repurchase capital stock, and make distributions in respect of capital stock;
	•	make investments or certain other restricted payments;
	•	sell assets;
	•	issue guarantees;
	•	enter into transactions with affiliates; and
	•	effect a consolidation or merger.
	These covenants are subject to a number of important qualifications and exceptions. See "Description of the New Notes—Covenants."

RISK FACTORS

        Before making a decision to tender your old notes in the exchange offer, you should carefully consider the specific factors we discuss under "Risk Factors," as well as other information included in this prospectus.

12

SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA

        The following tables summarize our consolidated financial data for the periods presented. You should read the following financial information together with the information under "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the notes to those consolidated financial statements appearing elsewhere in this prospectus. The summary consolidated balance sheet data for fiscal 2002 and the summary consolidated statement of operations data for fiscal 2000, 2001 and 2002 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated financial data for fiscal 1998 and 1999 are derived from our audited consolidated financial statements not included in this prospectus. The unaudited consolidated balance sheet data as of June 30, 2002 and 2003 and the unaudited consolidated statement of earnings data for the six months ended June 30, 2002 and June 30, 2003 have been prepared on a basis consistent with our audited financial statements and include all adjustments, consisting only of normal recurring adjustments, we consider necessary for the fair presentation of the information. Operating results for the six months ended June 30, 2003 are not necessarily indicative of results that may be expected for the entire year ending December 31, 2003. The "As Adjusted" balance sheet data gives effect to the recapitalization as if it had occurred on June 30, 2003. The financial data for the last twelve months ended June 30, 2003 has been derived from the Company's audited consolidated financial statements for the year ended December 31, 2002 and the unaudited historical financial statements for the six months ended June 30, 2002 and 2003. The unaudited segment operating data for the five years ended December 31, 2002, the six months ended June 30, 2002 and 2003, and the last twelve months ended June 30, 2003 are derived from the company's accounting records.

		Years Ended December 31,															Six Months Ended June 30						Last Twelve Months Ended June 30,
		1998			1999			2000(1)			2001			2002			2002			2003			2003
		(in thousands, except ratio data)
Consolidated Statement of Earnings Data:
Revenue:
	Rental and service	$	258,482		$	245,983		$	274,331		$	361,634		$	453,060		$	209,010		$	270,296		$	514,346
	Sales and other		71,463			74,249			77,701			94,313			125,902			55,239			78,753			149,416
	Total revenue		329,945			320,232			352,032			455,947			578,962			264,249			349,049			663,762
Rental expenses			166,629			167,397			176,392			220,485			276,125			128,415			166,459			314,169
Cost of goods sold			26,219			29,811			29,645			32,952			51,824			21,369			28,358			58,813
	Gross profit		137,097			123,024			145,995			202,510			251,013			114,465			154,232			290,780
Selling, general and administrative expenses			69,537			75,208			80,294			114,828			141,594			63,763			85,395			163,226
Unusual item-litigation settlement(2)			—			—			—			—			(173,250	)		—			—			(173,250	)
Operating earnings			67,560			47,816			65,701			87,682			282,669			50,702			68,837			300,804
Interest income			616			348			897			280			496			109			747			1,134
Interest expense			(48,594	)		(46,502	)		(48,635	)		(45,116	)		(40,943	)		(20,692	)		(16,228	)		(36,479	)
Foreign currency gain (loss)			20			(1,356	)		(2,358	)		(1,638	)		3,935			2,448			4,156			5,643
	Earnings before income taxes and     minority interest		19,602			306			15,605			41,208			246,157			32,567			57,512			271,102
	Income taxes		7,851			620			6,476			17,307			96,001			12,538			21,567			105,030
	Earnings (loss) before minority     interest		11,751			(314	)		9,129			23,901			150,156			20,029			35,945			166,072
Minority interest in subsidiary loss			25			—			—			—			—			—			—			—
	Net earnings (loss)	$	11,776		$	(314	)	$	9,129		$	23,901		$	150,156		$	20,029		$	35,945		$	166,072
Other Financial Data:
EBITDA(3)			97,694			79,027			96,706			121,223			321,782			69,764			94,573			346,591
Depreciation and amortization(4)			29,473			32,219			32,466			34,899			34,682			16,505			20,833			39,010
Net capital expenditures(5)			28,406			22,046			30,281			43,953			53,143			27,601			35,047			60,589
Cash from operating activities			43,885			36,767			40,151			29,895			76,254			23,927			198,705			251,032
Ratio Data:
Ratio of Earnings to Fixed Charges(6)			1.3			0.9			1.2			1.7			2.4	(7)		2.3			3.7			3.1	(7)

13

	As of June 30, 2003
	Actual			As Adjusted
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	102,973		$	44,815
Working capital(8)		165,174			122,335
Total assets		516,015			473,370
Total debt(9)		410,760			687,534
Convertible Preferred Stock		—			252,241
Total shareholders' deficit		(38,942	)		(606,821	)

				Years Ended December 31,										Six Months Ended June 30				Last Twelve Months Ended June 30,
				1998		1999		2000(1)		2001		2002		2002		2003		2003
				(in thousands)
Segment Operating Data:
USA
	V.A.C.
		Rental		$	21,747	$	28,552	$	55,343	$	134,428	$	214,979	$	94,209	$	139,843	$	260,613
		Sales			8,864		8,605		14,637		31,814		53,245		21,702		36,947		68,490
		Total V.A.C.			30,611		37,157		69,980		166,242		268,224		115,911		176,790		329,103
	Therapeutic surfaces/other
		Rental			186,617		160,538		153,852		156,704		150,793		75,618		74,235		149,410
		Sales			34,678		37,561		32,750		31,177		27,770		13,848		13,815		27,737
			Total therapeutic surfaces/other		221,295		198,099		186,602		187,881		178,563		89,466		88,050		177,147
		Total USA rental			208,364		189,090		209,195		291,132		365,772		169,827		214,078		410,023
		Total USA sales			43,542		46,166		47,387		62,991		81,015		35,550		50,762		96,227
			Subtotal—USA		251,906		235,256		256,582		354,123		446,787		205,377		264,840		506,250
International
	V.A.C.
		Rental			3,015		4,323		7,510		11,577		21,946		8,207		17,660		31,399
		Sales			3,918		5,396		8,256		12,182		23,244		9,611		17,187		30,820
			Total V.A.C.		6,933		9,719		15,766		23,759		45,190		17,818		34,847		62,219
	Therapeutic surfaces/other
		Rental			47,103		52,611		57,625		58,924		65,343		30,976		38,558		72,925
		Sales			24,003		22,646		22,059		19,141		21,642		10,078		10,804		22,368
			Total therapeutic surfaces/other		71,106		75,257		79,684		78,065		86,985		41,054		49,362		95,293
	Total International rental				50,118		56,934		65,135		70,501		87,289		39,183		56,218		104,324
	Total International sales				27,921		28,042		30,315		31,323		44,886		19,689		27,991		53,188
		Subtotal—International			78,039		84,976		95,450		101,824		132,175		58,872		84,209		157,512
Total revenue				$	329,945	$	320,232	$	352,032	$	455,947	$	578,962	$	264,249	$	349,049	$	663,762

(1)

In December 2000, we began reporting international results on a current-month basis. As a result of this change, the 2000 fiscal year included a 13th monthly period for the international segment which increased reported revenue and operating earnings by approximately $8.0 million and $1.1 million, respectively.

(2)

Includes accrual in connection with an installment payment of $175.0 million ($173.3 million net of expenses of $1.7 million) from Hillenbrand as part of an antitrust settlement. See note 16 to consolidated financial statements included elsewhere in this prospectus for discussion of the antitrust settlement.

(3)

We calculate EBITDA as net earnings plus depreciation and amortization (less amortization of loan issuance costs), income taxes and interest expense. We find EBITDA to be a useful measure of our ability to service our debt and our ability to generate cash for other purposes. EBITDA is a non-GAAP financial measure and should not be considered in isolation from, and is not intended to represent an alternative measure of, operating or net earnings or cash flow from operating activities, or any other measure of performance determined in accordance with GAAP. Other companies may calculate EBITDA differently, and our EBITDA calculation is not necessarily comparable with similarly titled figures for other companies. Therefore, in evaluating EBITDA data, you should consider, among other factors, the non-GAAP nature of

14

EBITDA data, actual cash flows and net earnings, the actual availability of funds for debt service, capital expenditures and working capital.

We have provided below a reconciliation of EBITDA to net earnings, which we believe is the most directly comparable GAAP measure:

	Years Ended December 31,											Six Months Ended June 30				Last Twelve Months Ended June 30,
	1998		1999			2000(1)		2001		2002		2002		2003		2003
	(in thousands)
Net earnings	$	11,776	$	(314	)	$	9,129	$	23,901	$	150,156	$	20,029	$	35,945	$	166,072
Interest expense		48,594		46,502			48,635		45,116		40,943		20,692		16,228		36,479
Depreciation and amortization(4)		29,473		32,219			32,466		34,899		34,682		16,505		20,833		39,010
Income taxes		7,851		620			6,476		17,307		96,001		12,538		21,567		105,030
EBITDA	$	97,694	$	79,027		$	96,706	$	121,223	$	321,782	$	69,764	$	94,573	$	346,591

EBITDA for 2002 includes the installment payment of $175.0 million ($173.3 million net of expenses of $1.7 million) from Hillenbrand as part of an antitrust settlement that we accrued in January, 2003. EBITDA for all periods also includes the effects of payments aggregating $1.5 million per year that we have made since 1998 pursuant to a management services agreement with Fremont Partners, James R. Leininger, M.D. and Blum Capital. On August 11, 2003, the management services agreement was amended to, among other things, terminate the management fee and continue to provide for indemnification and reimbursement of expenses. We made final management fee payments of $300,000 and $450,000 in July and August 2003, respectively.

(4)

Excludes amortization of loan issuance costs of approximately $2.3 million for each of 1998 through 2002 and for the last twelve months ended June 30, 2003, and approximately $1.2 million for each of the six month periods ended June 30, 2002 and 2003, all of which are included in interest expense.

(5)

We calculate net capital expenditures as total expenditures for property, plant and equipment along with expenditures for inventory purchased to be converted into equipment for rental reduced by cash proceeds from dispositions of property, plant and equipment.

(6)

We calculate the ratio of earnings to fixed charges as net earnings plus income taxes and interest expense divided by interest expense plus estimated interest expense on our operating leases.

(7)

This calculation excludes the Hillenbrand antitrust settlement discussed in footnote (2) above.

(8)

Working capital represents total current assets less total current liabilities.

(9)

Total debt includes current and long-term debt, capital lease obligations and our liability associated with interest rate swaps.

15

RISK FACTORS

Our business faces significant risks. You should carefully consider the risks described below together with all other information contained in and incorporated by reference into this prospectus before making a decision to participate in the exchange offer.

Risks Related to the Exchange Offer and the New Notes

Holders who fail to exchange their old notes will continue to be subject to restrictions on transfer.

        If you do not exchange your old notes in the exchange offer, you will continue to be subject to the restrictions on transfer of your old notes described in the legend on the certificates for your old notes. The restrictions on transfer of your old notes arise because we issued the old notes under exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, you may only offer or sell the old notes if they are registered under the Securities Act and applicable state securities laws, or are offered and sold under an exemption from these requirements. We do not plan to register the old notes under the Securities Act. Furthermore, we have not conditioned the exchange offer on receipt of any minimum or maximum principal amount of old notes. As old notes are tendered and accepted in the exchange offer, the principal amount of remaining outstanding notes will decrease. This decrease will reduce the liquidity of the trading market for the old notes. We cannot assure you of the liquidity, or even the continuation, of the trading market for the outstanding old notes following the exchange offer. For further information regarding the consequences of tendering your old notes in the exchange offer, see the discussions below under the captions "The Exchange Offer—Consequences of Exchanging or Failing to Exchange Old Notes" and "Material United States Federal Tax Considerations."

You must comply with the exchange offer procedures in order to receive new, freely tradable notes.

        Delivery of new notes in exchange for old notes tendered and accepted for exchange pursuant to the exchange offer will be made only if you do one of the following prior to the expiration or termination of the exchange offer:

•

tender your old notes by sending the certificates for your old notes, in proper form for transfer, a properly completed and duly executed letter of transmittal, with any required signature guarantees, and all other documents required by the letter of transmittal, to U.S. Bank, N.A., as exchange agent, at the address set forth on page 33; or



•

tender your old notes by using the book-entry transfer procedures described below and transmitting a properly completed and duly executed letter of transmittal, with any required signature guarantees, or an agent's message instead of the letter of transmittal, to the exchange agent. In order for a book-entry transfer to constitute a valid tender of your old notes in the exchange offer, U.S. Bank, N.A., as exchange agent, must receive a confirmation of book-entry transfer of your old notes into the exchange agent's account at DTC prior to the expiration or termination of the exchange offer. For more information regarding the use of book-entry transfer procedures, including a description of the required agent's message, see "The Exchange Offer—Book-Entry Transfers."

        Therefore, holders of old notes who would like to tender old notes in exchange for new notes should be sure to allow enough time for the old notes to be delivered on time. We are not required to notify you of defects or irregularities in tenders of old notes for exchange. Old notes that are not tendered or that are tendered but we do not accept for exchange will, following consummation of the exchange offer, continue to be subject to the existing transfer restrictions under the Securities Act and, upon consummation of the exchange offer, certain registration and other rights under the registration

16

rights agreement will terminate. (See "The Exchange Offer—Procedures for Tendering Old Notes" and "The Exchange Offer—Consequences of Exchanging or Failing to Exchange Old Notes.")

Some holders who exchange their old notes may be deemed to be underwriters and these holders will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction.

        If you exchange your old notes in the exchange offer for the purpose of participating in a distribution of the new notes, you may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction.

Risks Related to Our Capital Structure

Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under the new notes.

        We have a significant amount of debt. As of June 30, 2003, we would have had, on a pro forma basis after giving effect to the recapitalization, $687.5 million of outstanding indebtedness (long-term debt, capital lease obligations and our liability associated with interest rate swaps), $480.6 million of which would have been senior to the new notes, and a shareholders' deficit of $606.8 million. This level of indebtedness could have important consequences for you, including the following:

•

it may be difficult for us to satisfy our obligations under our new senior credit facility and the new notes;



•

we may have to use a significant amount of our cash flow for scheduled debt service rather than for operations;



•

we may be less able to obtain other debt financing in the future;



•

we could be less able to take advantage of significant business opportunities, including acquisitions or divestitures;



•

our vulnerability to general adverse economic and industry conditions could be increased; and



•

we could be at a competitive disadvantage to competitors with less debt.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

        We expect to obtain the money to make payments on our debt, including the new notes, and to fund working capital, capital expenditures and other general corporate requirements in part from our operations and the operations of our subsidiaries. Due to the large amount of principal and interest payments due under our debt, we may not generate enough cash from our operations to meet these obligations or to fund other liquidity needs. Our ability to generate cash in the future is, to some extent, subject to risks and uncertainties that are beyond our control. If we are unable to meet our debt obligations, we may need to refinance all or a portion of our indebtedness, sell assets or raise funds in the capital markets. Our ability to refinance will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

17

Restrictive covenants in the new senior credit facility and the indenture may restrict our ability to pursue our business strategies.

        The indenture and the new senior credit facility limit our ability, among other things, to:

•

incur additional indebtedness or contingent obligations;



•

pay dividends or make distributions to our shareholders;



•

repurchase or redeem our stock;



•

make investments;



•

grant liens;



•

make capital expenditures;



•

enter into transactions with our shareholders and affiliates;



•

sell assets; and



•

acquire the assets of, or merge or consolidate with, other companies.

        In addition, the new senior credit facility requires us to maintain certain financial ratios, including an interest coverage ratio and a leverage ratio. Specifically, we are obligated not to permit:

•

for any period of four consecutive quarters ending at the end of any fiscal quarter beginning with the fiscal quarter ending December 31, 2003, the ratio of EBITDA to consolidated cash interest expense to be less than certain specified ratios ranging from 4.30 to 1.00 for the fiscal quarter ending December 31, 2003 to 5.50 to 1.00 for the fiscal quarter ending December 31, 2006 and each fiscal quarter following that quarter;



•

as of the last day of any fiscal quarter beginning with the fiscal quarter ending December 31, 2003, the leverage ratio as defined in the new senior credit facility to be greater than certain specified leverage ratios ranging from 4.30 to 1.00, for the fiscal quarter ending December 31, 2003 to 2.50 to 1.00 for the fiscal quarter ending December 31, 2006 and each fiscal quarter following that quarter; or



•

for any period of four consecutive fiscal quarters ending at the end of any fiscal quarter beginning with the fiscal quarter ending December 31, 2003, EBITDA to be less than certain amounts ranging from $156.4 million for the fiscal quarter ending December 31, 2003 to $240.0 million for the fiscal quarter ending December 31, 2006 and each fiscal quarter following that quarter.

        We may not be able to maintain these ratios. Covenants in the new senior credit facility may also impair our ability to finance future operations or capital needs, or to enter into acquisitions or joint ventures or engage in other favorable business activities.

        If we default under the new senior credit facility, we could be prohibited from making any payments on the new notes. In addition, the lenders under the new senior credit facility could require immediate repayment of the entire principal. If those lenders require immediate repayment, we may not be able to repay them and also repay the new notes in full. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments under the new senior credit facility, or if we are unable to maintain the financial ratios under the new senior credit facility, we will be in default under the credit agreement, which could, in turn, cause a default under the new notes, the related indenture and any other debt obligations that we may incur from time to time.

18

Despite our substantial debt, we may incur additional indebtedness, including senior debt, which would increase the risks described above.

        We may be able to incur additional debt, including senior debt, in the future. The indenture for the new notes and our new senior credit facility do not completely prohibit us from incurring additional debt. As of June 30, 2003, on a pro forma basis after giving effect to the recapitalization, we would have had $89.1 million (net of outstanding letters of credit of $10.9 million) of total availability for potential borrowing under our new revolving credit facility, subject to our compliance with the financial and other covenants included in our new revolving credit facility. Any future borrowings we make under our new revolving credit facility will be senior to the new notes and the subsidiary guarantees. In addition, the indenture allows us to incur debt that may be senior to the notes. If new debt is added to KCI's and its subsidiaries' current debt levels, the risks related to KCI and the subsidiary guarantors' abilities to service that debt and its impact on our respective operations that we and they now face could increase.

Your right to receive payment on the new notes from KCI or its subsidiaries will be junior to some of KCI's and their obligations.

        The new notes and the guarantees will rank junior to all of KCI's and its subsidiary guarantors' existing and future senior indebtedness, including all indebtedness under our new senior credit facility. As a result of the subordination of the new notes, if KCI or its subsidiary guarantors become insolvent or enter into a bankruptcy or similar proceeding, then the holders of our senior indebtedness must be paid in full before you are paid. Also, we cannot make any cash payments to you if we have failed to make payments to holders of designated senior indebtedness.

The new notes will not be secured by any of our assets, and our assets will secure the new senior credit facility and possibly other debt.

        In addition to being subordinated to all of our existing and future indebtedness, other than the existing senior subordinated notes, certain trade payables and any future indebtedness that expressly provides that it ranks equal with, or subordinated in right of payment to, the new notes, the new notes will not be secured by any of our assets. Our obligations under the new senior credit facility will be secured by liens on substantially all of our assets, and the guarantees of certain of our subsidiaries under the new senior credit facility will be secured by liens on substantially all of such subsidiaries' assets. If we become insolvent or are liquidated, or if payment under the new senior credit facility or of other secured obligations are accelerated, the lenders under the new senior credit facility or the obligees with respect to the other secured obligations will be entitled to exercise the remedies available to a secured lender under applicable law and the applicable agreements and instruments. Accordingly, such lenders will have a prior claim with respect to such assets and there may not be sufficient assets remaining to pay amounts due on the new notes then outstanding.

Certain subsidiaries are not included as subsidiary guarantors.

        Upon the consummation of the recapitalization, the guarantors of the new notes will include only our domestic subsidiaries. The aggregate revenue and operating income of our subsidiaries that are not guarantors were $157.0 million and $27.1 million, respectively, for the twelve-month period ended June 30, 2003. As of June 30, 2003, those subsidiaries held 29.2% of our total assets.

        Because a substantial portion of our operations are conducted by foreign subsidiaries, our cash flow and our ability to service debt, including KCI's and its subsidiary guarantors' ability to pay the interest on and principal of the new notes when due are dependent to a significant extent on interest payments, cash dividends and distributions and other transfers of cash from our foreign subsidiaries. In addition, any payment of interest, dividends, distributions, loans or advances by our foreign subsidiaries

19

to KCI and its subsidiary guarantors, as applicable, could be subject to taxation or other restrictions on dividends or repatriation of earnings under applicable local law, monetary transfer restrictions and foreign currency exchange regulations in the jurisdiction in which our foreign subsidiaries operate. Moreover, payments to KCI and its subsidiary guarantors by the foreign subsidiaries will be contingent upon these subsidiaries' earnings.

        Our foreign subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the new notes, or to make any funds available therefor, whether by dividends, loans, distributions or other payments. Any right that KCI or the subsidiary guarantors have to receive any assets of any of the foreign subsidiaries upon the liquidation or reorganization of those subsidiaries, and the consequent rights of holders of new notes to realize proceeds from the sale of any of those subsidiaries' assets, will be effectively subordinated to the claims of that subsidiary's creditors, including trade creditors and holders of debt of that subsidiary.

If a change of control occurs, we may not have sufficient funds to repurchase your new notes.

        Upon specified change of control events, you may require us to repurchase all or a portion of your new notes. If a change of control occurs, we may not be able to pay the repurchase price for all of the new notes submitted for repurchase. In addition, the terms of our new senior credit facility generally prohibit us from purchasing any of the new notes until we have repaid all debt outstanding under such new senior credit facility. Future credit agreements or other agreements relating to debt may contain similar provisions. We may not be able to secure the consent of our lenders under the applicable senior credit facility to repurchase the new notes or refinance the borrowings that prohibit us from repurchasing the new notes. If we do not obtain a consent or repay the borrowings, we could be unable to repurchase the new notes. (See "Description of the New Notes—Change of Control.")

The covenants in the indenture for the new notes may not prevent us from engaging in certain mergers or other transactions that may adversely affect you.

        The provisions of the indenture for the new notes (including the change of control provision) will not necessarily afford you protection in the event of a highly leveraged transaction, including a reorganization, recapitalization, restructuring, merger, takeover or other similar transaction involving us, that may adversely affect you. Such a transaction may not involve a change of the magnitude required under the definition of change of control in the indenture for the notes to trigger such provisions. Except as described under "Description of the New Notes—Change of Control," the indenture for the new notes will not contain provisions that permit the holders of the new notes to require us to repurchase the notes in the event of a reorganization, recapitalization, restructuring, merger, takeover or other similar transaction.

Issuance of the new notes and our subsidiaries' guarantees may be subject to fraudulent transfer laws.

        If KCI or any of its subsidiary guarantors becomes a debtor in a case under the United States Bankruptcy Code or otherwise encounters financial difficulty, under federal or state fraudulent transfer law, a court might avoid, or cancel, KCI's obligations with respect to the new notes or a guarantor's obligations with respect to its guarantee, if it finds that:

•

KCI or the subsidiary incurred the debt with the intent to hinder, delay or defraud creditors; or



•

KCI or the subsidiary received less than fair consideration or reasonably equivalent value for incurring the debt; and



•

when KCI or the subsidiary incurred the debt, or, in some jurisdictions, when payments became due on the debt, KCI or the subsidiary either:



(a)

was, or was rendered, insolvent;

20

(b)

was left with unreasonably small capital with which to conduct our or its business; or



(c)

believed, or reasonably should have believed, that KCI or the subsidiary would incur debts beyond KCI's or its ability to pay.

        A court would likely find that neither KCI nor any subsidiary guarantors received fair consideration or reasonably equivalent value for incurring our respective obligations under the new notes and their guarantees, except to the extent we or the subsidiary benefited directly or indirectly from the issuance of the new notes.

        Whether an entity was, or was rendered, "insolvent" when it entered into or paid amounts due under its guarantee will vary depending on the law of the jurisdiction being applied. Generally, an entity would be considered insolvent if the sum of its debts is greater than all of its property at a fair valuation or if the present fair saleable value of its assets is less than the amount that will be required to pay its probable liability on its existing debts as they become absolute and matured. In this context, "debts" include contingent and unliquidated debts.

        If a court avoided the notes or a subsidiary's guarantee, the court could redirect any repayments thereunder. In addition, a court could subordinate the new notes or the guarantees to our obligations to other existing and future creditors.

        To reduce the risk that a court will avoid the guarantees, each guarantee will include a "savings clause" limiting the subsidiary's guarantee obligation to the maximum amount that the subsidiary may incur and pay without the guarantee being subject to avoidance as a fraudulent transfer. We cannot assure you that this savings clause will be effective, or, if it is, that the guarantees, in the aggregate, will suffice to pay all amounts due under the new notes.

No public trading market for the new notes exists.

        There is currently no public market for the new notes. An active public market will likely never develop for the new notes because the new notes are not investment grade and we will not apply to list the new notes on any exchange or the Nasdaq National Market. As a result, you may be required to bear the financial risk of your investment in the new notes indefinitely. Any new notes traded after they are initially issued may trade at a discount from their initial offering price. The trading price of the new notes depends on prevailing interest rates, the market for similar securities and other factors, including economic conditions and our financial condition, performance and prospects. Historically, the market for noninvestment grade debt has been subject to disruptions that have caused substantial fluctuations in the prices of the securities.

        Although we do not intend to apply for listing or quotation of the new notes, we expect that the new notes will be designated for trading in the PORTAL Market. The placement agents are not obligated to do so and may cease such market-making at any time without notice. In addition, this market-making activity will be subject to the limitations imposed by the Securities Act and the Exchange Act, and may be limited during the effectiveness of a registration statement relating to the new notes. (See "Description of the New Notes" and "Plan of Distribution.")

Risks Related To Our Business

We face significant competition.

        The competition for our V.A.C. systems in wound healing and tissue repair consists in large part of wound-healing modalities which do not operate in a manner similar to V.A.C. systems, including traditional wound care dressings, advanced wound care dressings, skin substitutes, products containing growth factors and medical devices used for wound care. Recently, BlueSky Medical Corporation introduced a medical device which has been marketed to compete with the V.A.C. system. We have

21

filed suit against BlueSky and related parties seeking to enjoin their continued marketing and sales of the device, which we believe infringes our patent rights (see "Business—Legal Proceedings"). If any product similar to the V.A.C. system is introduced into the market by a legitimate competitor and protections afforded us under intellectual property laws do not operate to prevent the sale of the product, we could lose market share or experience downward pricing pressure from decreased demand.

        Our primary competitor in the therapeutic surface business is Hill-Rom Company, whose financial and other resources substantially exceed those zavailable to us. In Europe, we also face competition from Huntleigh Healthcare and Pegasus Limited.

        Competitive conditions could intensify in our markets. Competitors may:

•

develop or commercialize new technologies which are more effective than our products;



•

introduce new competing products with greater safety or efficacy or at lower prices;



•

secure exclusive arrangements with health care providers and GPOs;



•

devote greater resources to marketing and promotional campaigns;



•

secure regulatory clearances or approvals that surpass those of our products; or



•

obtain services, products and materials from suppliers on more favorable terms.

We may incur substantial costs in protecting our intellectual property, and if we are unable to effectively protect it, our competitive position would be harmed.

        We place considerable importance on obtaining and maintaining patent protection for our products. We have numerous patents on our existing products and processes and we file applications as appropriate for patents covering new technologies as they are developed. However, we cannot be sure that the patents we own, or in which we have rights, will be sufficiently broad to protect our technology position against competitors. Issued patents owned by, or licensed to, us may be challenged, invalidated or circumvented, or the rights granted under the patent may not provide us with competitive advantages. We would incur substantial costs and diversion of management resources if existing disputes are not resolved amicably, or if we have to assert our patent rights against others. Any unfavorable outcome in intellectual property disputes or litigation could have a material adverse effect on our business. In addition, we may not be able to detect infringement by third parties, and could lose our competitive position if we fail to do so quickly.

        Further, our efforts to protect our intellectual property rights may be less effective in some countries where intellectual property rights are not as well protected as in the United States. Many U.S. companies have encountered substantial problems in protecting their proprietary rights against infringement in foreign countries. If we fail to adequately protect our intellectual property rights in these countries, it could be easier for our competitors to sell competing products.

        We also rely on a combination of copyright, trade secret and other laws, and contractual restrictions on disclosure, copying and transferring title, including confidentiality agreements with vendors, strategic partners, co-developers, employees, consultants and other third parties, to protect our proprietary rights. We cannot give assurance that such protections will prove adequate and that contractual agreements will not be breached, that we will have adequate remedies for any such breaches, or that our trade secrets will not otherwise become known to or independently developed by others. We have trademarks, both registered and unregistered, that are maintained and enforced to provide customer recognition for our products in the marketplace. We cannot provide assurance that our trademarks will not be used by unauthorized third parties, or that we will be able to stop such unauthorized use if it occurs. We also have agreements with third parties that provide for licensing of patented or proprietary technologies. These agreements include royalty-bearing licenses. If we were to lose the rights to license these technologies or our costs to license these technologies were to materially increase, our business would suffer.

22

We may be sued by third parties for alleged infringement of their proprietary rights.

        The markets in which we compete are characterized by a substantial amount of litigation over patent and other intellectual property rights. Our competitors, like companies in other high technology businesses, continually review other companies' products for possible conflicts with their own intellectual property rights. Determining whether a product infringes a third party's intellectual property rights involves complex legal and factual issues, and the outcome of this type of litigation is often uncertain. Third parties may claim that we are infringing their intellectual property rights, and we may be found to infringe those intellectual property rights.

        From time to time, we have received notices from third parties alleging infringement of patent or other intellectual property rights relating to their products, and we have ongoing lawsuits in which third parties have accused us of infringing and misappropriating their intellectual property. Any contest regarding patents or other intellectual property could be costly and time-consuming, and could divert our management and key personnel from our business operations. We may not prevail in any such contest. If we are unsuccessful, we may be subject to significant damages or injunctions against development and sale of our products, or may be required to enter into costly royalty or license agreements. We cannot be certain that any licenses required would be made available or that the terms of any proposed license would be acceptable.

Our intellectual property rights may be less effective in some foreign countries.

        Many U.S. companies have encountered problems in protecting their proprietary rights against infringement in foreign countries. If we fail to adequately protect our intellectual property rights in these countries, our competitors could more easily sell competing products.

If we are unable to develop new generations of products and enhancements to existing products, we may be unable to attract or retain customers.

        Our success is dependent upon the successful development, introduction and commercialization of new generations of products and enhancements to existing products. Our products are technologically complex and must keep pace with rapid and significant technological change, must comply with rapidly evolving industry standards and must compete effectively with new product introductions of our competitors. Accordingly, many of our products require significant planning, design, development and testing at the technological, product and manufacturing process levels. These activities require significant capital commitments and investments on our part, which we may be unable to recover.

        Our ability to successfully develop and introduce new products and product enhancements, and the associated costs, are also affected by our ability to:

•

properly identify customer needs;



•

solve the technical problems associated with product innovations designed to meet customer needs;



•

prove feasibility of new products;



•

limit the time required from proof of feasibility to commercialization;



•

predict and manage the timing, cost and results of regulatory approvals;



•

accurately predict and control costs associated with inventory overruns caused by phase-in of new products and phase-out of old products;



•

price our products competitively;



•

manufacture and deliver our products in sufficient volumes on time;



•

accurately predict and control costs associated with manufacturing, installation, warranty and maintenance of the products;



•

manage customer demands for retrofits of both new and old products; and

23

•

anticipate and compete successfully with competitors' efforts and intellectual property.

        As a result, we cannot be sure that we will be able to successfully develop, manufacture and commercialize new products or product enhancements. Without the successful introduction of new products and product enhancements, we may be unable to attract and retain customers and our revenue and operating results will suffer. In addition, even if customers accept new products or product enhancements, the revenue from such products may not be sufficient to offset the significant costs associated with making such products available to customers.

We depend on revenue from sales and rentals of V.A.C. products.

        For the twelve-month period ended June 30, 2003, we derived 59.0% of our revenue from V.A.C. sales and rentals. We expect that sales and rentals of V.A.C. products will continue to be the predominant source of our revenue for the foreseeable future. If revenue from our V.A.C. sales and rentals does not grow as we anticipate, our results of operations and financial condition could suffer.

We rely on the opportunity to provide education and training to health care professionals.

        In order to achieve market acceptance for our products, we are often required to educate health care professionals about the use of a new medical device, overcome objections to some of the effects of the device or its related treatment regimen and convince health care payers that the benefits of the device and its related treatment regimen outweigh its costs. For example, the complexity and dynamic nature of our V.A.C. products require education of health care professionals regarding the benefits and the required departures from customary practices. If health care professionals do not participate in education or training that we offer, our sales and marketing efforts will suffer. The timing of our competitors' introduction of products and the market acceptance of their products may also make this educational process more difficult.

Health care reform could decrease demand for our products.

        There are widespread legislative efforts to control health care costs in the United States and abroad, which we expect will continue in the future. In the past, these have included freezes in annual payment updates, cuts in payment reimbursement amounts and efforts to competitively bid durable medical equipment. We cannot assess the likelihood of similar legislative efforts in the future or the impact the enactment of any resulting legislation could have on our business.

Changes to third-party reimbursement policies could reduce the reimbursement we receive for our products.

        Our products are rented and sold to hospitals and skilled nursing facilities that receive reimbursement for the products and services they provide from various public and private third party payers, including Medicare, Medicaid and private insurance programs. We also act as a DME supplier and, as such, we furnish our products directly to customers and bill third-party payers such as Medicare, Medicaid and private insurance. As a result, the demand for our products in any specific care setting is dependent, in part, on the reimbursement policies (including coverage and payment policies) of the various payers in that setting. Some state and private payers make adjustments to their reimbursement policies to reflect federal changes as well as to make their own changes. If coverage and payment policies for our products are revised or otherwise withdrawn under existing Medicare or Medicaid policies, demand for our products could decrease. In addition, in the event any public or private third-party payers challenge our billing, documentation or other practices as inconsistent with their reimbursement policies, we could experience significant delays, reductions or denials in obtaining reimbursements. In light of increased controls on health care spending, especially on Medicare and Medicaid spending, there can be no assurance on the outcome of future coverage or payment decisions for any of our products by governmental or private payers.

        The Medicare Part B coverage policy covering V.A.C. systems is complex and requires extensive documentation. In addition, the reimbursement process for the non-governmental payer segment

24

requires extensive contract development and administration with several hundred payers, with widely varying requirements for documentation and administrative procedures, which can result in extended payment cycles. This has made billing home care payers more complex and time consuming than billing other payers. In 2003, the Centers for Medicare and Medicaid Services issued new regulations on inherent reasonableness of such charges and while these regulations do not impact us currently, future coverage or payment decisions could impact our V.A.C. systems or any of our other products. If providers, suppliers and other users of our products and services are unable to obtain sufficient reimbursement for the provision of our products, demand for our products will decrease.

We depend on our ability to timely collect reimbursement payments.

        As of June 30, 2003, we had $159.7 million of receivables outstanding, net of reserves of $32.3 million for doubtful accounts, and for the twelve month period ended June 30, 2003, our receivables were outstanding for an average of 79 days. If our collection policies and procedures are not effective, we may not be able to timely collect our reimbursement payments.

We may be subject to claims audits which would harm our business and financial results.

        As a health care supplier, we are subject to extensive government regulation, including laws regulating reimbursement under various government programs. The billing, documentation and other practices of health care suppliers are subject to government scrutiny, including claims audits. To ensure compliance with Medicare regulations, contractors, such as the Durable Medical Equipment Regional Carriers, or DMERCs, which serve as the government's agents for the processing of claims for products sold for home use, periodically conduct audits and request medical records and other documents to support claims submitted by us for payment of services rendered to our customers. Because we are a DME supplier, those audits involving home use involve audits of patient claims records. Such audits can result in delays in obtaining reimbursement and denials of claims for payment submitted by us.

        For example, we recently received the results of a routine review conducted by the DMERC for Region A. The review included a sample of 30 claims billed to Medicare for negative pressure wound therapy pumps and supplies between October 1, 2000, and December 31, 2001, from each of our top three billing locations in Region A. In their first review, the DMERC identified certain medical record documentation deficiencies. This resulted in an alleged overpayment of approximately $620,000. In rebuttal of those decisions, we submitted supplemental documentation to the Region A DMERC. After review of the additional information, the DMERC reduced the total amount of total overpayment to approximately $110,000. We are also reviewing the rebuttal decisions to determine which, if any, of the denied claims should be appealed for review by an administrative law judge.

        Also, in December 2002, we submitted a written request to the medical directors of the four DMERCs in which we requested clarification of a number of issues with respect to the DMERCs' "Negative Pressure Wound Therapy Policy." That policy establishes Medicare Part B reimbursement criteria for our V.A.C. products. In June 2003, we received a response from the medical directors and, in some instances, their interpretation of the policy differed from our interpretation. In September 2003, we learned that one of the DMERCs published in its regional newsletter an interpretation of the policy consistent with its June response. Also in September 2003, we began to experience an increase in Medicare Part B denials for V.A.C. placements. Although difficult to quantify, we estimate that the reimbursement coverage issues under the DMERCs' policy relate to less than 10% of our Medicare V.A.C. revenue, or approximately 1% of our overall revenue. We are currently analyzing clinical data for a follow-up response to the medical directors to support our interpretation of the policy. We intend to continue working with the medical directors in an effort to clarify the policy while at the same time maintaining coverage for all Medicare Part B beneficiaries for whom V.A.C. treatment is medically necessary. In the event that the medical directors do not agree to revise their interpretations on these issues, the rate of V.A.C. revenue growth could be impacted.

25

        In addition, the government could demand significant refunds or recoupments of amounts paid by the government for claims which are determined by the government to be inadequately supported by the required documentation.

We depend upon a limited group of suppliers and, in some cases, sole-source suppliers.

        We obtain some of the components included in our products from a limited group of suppliers, and, in one case, a sole-source supplier. We have entered into a sole-source agreement with Avail Medical Products, Inc., or Avail, for V.A.C. disposables, effective October 2002 for our U.S.-related orders and mid-2003 for our international-related orders. This supply agreement has a three-year term with an automatic extension for an additional twelve months if neither party gives notice of termination. If we lose any supplier (including any sole-source supplier), we would be required to obtain one or more replacement suppliers and may be required to conduct a significant level of product development to incorporate new parts into our products. The need to change suppliers or to alternate between suppliers might cause material delays in delivery or significantly increase costs.

A high percentage of our sales are international, and economic, political and other risks associated with international sales and operations could adversely affect our sales or make them less predictable.

        For the twelve-month period ending June 30, 2003, approximately 24% of our revenue, and approximately 16% of our operating earnings (excluding the Hillenbrand settlement), were derived from our international segment. We intend to continue to expand our presence in international markets. Accordingly, our future results could be harmed by a variety of factors, including:

•

the difficulties in enforcing agreements and collecting receivables under many foreign countries' legal systems;



•

the longer payment cycles associated with many foreign customers;



•

the possibility that foreign countries may impose additional withholding taxes or otherwise tax our foreign income, impose tariffs or adopt other restrictions on foreign trade;



•

fluctuations in exchange rates, which may affect product demand and adversely affect the profitability, in U.S. dollars, of products and services provided by us in foreign markets where payment for our products and services is made in the local currency;



•

our ability to obtain U.S. export licenses and other required export or import licenses or approvals;



•

changes in the political, regulatory, safety or economic conditions in a country or region; and



•

the protection of intellectual property in foreign countries may be more difficult to enforce.

We may not be able to maintain or expand our business if we are not able to retain, hire and integrate sufficient qualified personnel.

        Our future success depends on the continued service of members of our key executive, technical, sales, marketing and engineering staff. Our business has been growing rapidly and therefore depends on our ability to attract, expand, integrate, train and retain our management team, qualified engineering personnel and technical personnel. The loss of services of key employees could adversely affect our business. Competition for such personnel can be intense. We compete for key personnel with other medical equipment and technology companies, as well as universities and research institutions. Because the competition for qualified personnel is intense, costs related to compensation could increase if supply decreases or demand increases. If we are unable to hire, train or retain qualified personnel, we will not be able to maintain and expand our business.

If we are unable to manage rapid changes, our business may be harmed.

        We are currently experiencing significant growth in revenue, employees and number of product offerings. This growth has placed a significant strain on our management and our financial, operational,

26

marketing and sales systems. Any failure by us to properly manage our growth could impair our ability to attract and service customers and could cause us to incur higher operating costs and experience delays in the execution of our business plan. We have also experienced reductions in revenue in the past that required us to rapidly reduce costs.

We face significant costs in order to comply with laws and regulations governing the health care industry, and failure to comply with applicable regulations could limit our ability to promote and distribute our products and could subject us to civil or criminal penalties.

        Substantially all of our products are subject to regulation by the U.S. Food and Drug Administration, or FDA, and its foreign counterparts. Complying with FDA requirements and other applicable regulations imposes significant costs and expenses on our operations. If we fail to comply with applicable regulations, we could be subject to enforcement sanctions, our promotional practices may be restricted, and our marketed products could be subject to recall or otherwise impacted. In addition, new regulations, such as the U.S. Health Insurance Portability and Accountability Act of 1996, or HIPAA, that regulate the way we do business will result in increased compliance costs.

        In October 2002, an FDA inspector noted several noncompliance conditions after an inspection of our principal manufacturing facility. Although we believe we have adequately responded to the inspector's observations, the FDA may initiate an enforcement action based upon the observations.

        We are also subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, privacy and security of individually identifiable health information, standardization of electronic data transactions and code sets, environmental protection, fire hazard control and disposal of hazardous or potentially hazardous substances. Changes in existing requirements or adoption of new requirements could cause us to incur significant compliance costs.

        We are also subject to various federal and state laws pertaining to health care fraud and abuse, including prohibitions on the submission of false claims and the payment or acceptance of kickbacks or other remuneration in return for the purchase or lease of our products. The United States Department of Justice and the Office of the Inspector General of the United States Department of Health and Human Services has launched an enforcement initiative which specifically targets the long term care, home health and DME industries. Sanctions for violating these laws include criminal penalties and civil sanctions, including fines and penalties, and possible exclusion from the Medicare, Medicaid and other federal health care programs. Although we believe our business arrangements comply with federal and state fraud and abuse laws, our practices may be challenged under these laws in the future.

Product liability claims could expose us to adverse judgments or could affect the demand for our products.

        The manufacturing and marketing of medical products necessarily entails an inherent risk of product liability claims. If a product liability claim is successfully asserted against us and we become liable for amounts in excess of our insurance coverage, we could be responsible for potentially large litigation damage awards and costs and expenses in litigating such a claim.

Our voting stock is controlled by three principal shareholders, whose interests may conflict with those of the holders of the new notes.

        Dr. Leininger, who is our founder and a member of our board of directors, beneficially owns 30.8% of our outstanding shares voting stock, which consists of common stock and preferred stock entitled to the same voting rights as our common stock. In addition, Fremont Partners, L.P. beneficially owns 36.5% of our outstanding shares of voting stock and Blum Capital Partners, L.P. beneficially owns 24.1% of our outstanding shares of voting stock. As a result of this ownership, Dr. Leininger, Fremont Partners, L.P. and Blum Capital Partners, L.P. are able to direct our affairs and to approve any matter requiring the approval of our shareholders. Such matters include the election of directors, the adoption of amendments to our articles of incorporation and approval of mergers or sales of substantially all our assets. The interests of our principal shareholders may conflict with the interests of the holders of the new notes. (See "Principal Shareholders.")

27

THE EXCHANGE OFFER

Terms of the Exchange Offer; Period for Tendering Old Notes

        Subject to terms and conditions detailed in this prospectus, we will accept for exchange old notes that are properly tendered on or prior to the expiration date and not withdrawn as permitted below. The term "expiration date" means 5:00 p.m., New York City time,            , 2003, the 21st business day following the date of this prospectus. We may, however, in our sole discretion, extend the period of time that the exchange offer is open. The term "expiration date" means the latest time and date to which the exchange offer is extended.

        As of the date of this prospectus, $205,000,000 aggregate principal amount of old notes are outstanding. We are sending this prospectus, together with the letter of transmittal, to all holders of old notes that we are aware of on the date hereof.

        We expressly reserve the right, at any time, to extend the period of time that the exchange offer is open, and delay acceptance for exchange of any old notes, by giving oral or written notice of an extension to the holders of the old notes as described below. During any extension, all old notes previously tendered will remain subject to the exchange offer and may be accepted for exchange by us. Any old notes not accepted for exchange for any reason will be returned without expense to the tendering holder as promptly as practicable after the expiration or termination of the exchange offer.

        Old notes tendered in the exchange offer must be in denominations of principal amount of $1,000 and any integral multiple thereof.

        We expressly reserve the right to amend or terminate the exchange offer, and not to exchange any old notes, upon the occurrence of any of the conditions of the exchange offer specified under "—Conditions to the Exchange Offer." We will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the old notes as promptly as practicable. In the case of any extension, we will issue a notice by means of a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date.

Procedures for Tendering Old Notes

        Your tender to us of old notes as set forth below and our acceptance of the old notes will constitute a binding agreement between us and you upon the terms and subject to the conditions detailed in this prospectus and in the accompanying letter of transmittal. Except as set forth below, to tender old notes for exchange in the exchange offer, you must transmit a properly completed and duly executed letter of transmittal, including all other documents required by the letter of transmittal or, in the case of a book-entry transfer, an agent's message in place of the letter of transmittal, to U.S. Bank, N.A., as exchange agent, at the address set forth below under "—Exchange Agent" on or prior to the expiration date. In addition, either:

•

certificates for old notes must be received by the exchange agent with the letter of transmittal;



•

a timely confirmation of a book-entry transfer, which we refer to in this prospectus as a book-entry confirmation, of old notes, if this procedure is available, into the exchange agent's account at DTC pursuant to the procedure for book-entry transfer described beginning on page 31 must be received by the exchange agent prior to the expiration date, with an agent's message in lieu of the letter of transmittal; or



•

the holder must comply with the guaranteed delivery procedures described below.

        The term "agent's message" means a message, transmitted by DTC to and received by the exchange agent and forming a part of a book-entry confirmation, which states that DTC has received

28

an express acknowledgment from the tendering participant stating that such participant has received and agrees to be bound by the letter of transmittal and that we may enforce such letter of transmittal against such participant.

        The method of delivery of old notes, letters of transmittal and all other required documents is at your election and risk. If such delivery is by mail, it is recommended that you use registered mail, properly insured, with return receipt requested. In all cases, you should allow sufficient time to assure timely delivery. No letter of transmittal or old notes should be sent to us.

        Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the old notes surrendered for exchange are tendered:

•

by a holder of the old notes who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal; or



•

for the account of an eligible institution (as defined below).

        In the event that signatures on a letter of transmittal or a notice of withdrawal are required to be guaranteed, such guarantees must be by a firm which is a member of the Securities Transfer Agent Medallion Program, the Stock Exchanges Medallion Program or the New York Stock Exchange Medallion Program (we refer to each such entity as an "eligible institution" in this prospectus). If old notes are registered in the name of a person other than the signer of the letter of transmittal, the old notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as we or the exchange agent determine in our sole discretion, duly executed by the registered holders with the signature thereon guaranteed by an eligible institution.

        We or the exchange agent in our sole discretion will make a final and binding determination on all questions as to the validity, form, eligibility, including time of receipt, and acceptance of old notes tendered for exchange. We reserve the absolute right to reject any and all tenders of any particular old note not properly tendered or to not accept any particular old note which acceptance might, in our judgment or our counsel's, be unlawful. We also reserve the absolute right to waive any defects or irregularities or conditions of the exchange offer as to any particular old note either before or after the expiration date, including the right to waive the ineligibility of any holder who seeks to tender old notes in the exchange offer. Our or the exchange agent's interpretation of the terms and conditions of the exchange offer as to any particular old note either before or after the expiration date, including the letter of transmittal and the instructions thereto, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old notes for exchange must be cured within a reasonable period of time, as we determine. We are not, nor is the exchange agent or any other person, under any duty to notify you of any defect or irregularity with respect to your tender of old notes for exchange, and no one will be liable for failing to provide such notification.

        If the letter of transmittal is signed by a person or persons other than the registered holder or holders of old notes, such old notes must be endorsed or accompanied by powers of attorney signed exactly as the name(s) of the registered holder(s) that appear on the old notes.

        If the letter of transmittal or any old notes or powers of attorneys are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing. Unless waived by us or the exchange agent, proper evidence satisfactory to us of their authority to so act must be submitted with the letter of transmittal.

        By tendering old notes, you represent to us that, among other things:

•

the new notes acquired pursuant to the exchange offer are being obtained in the ordinary course of business of the person receiving such new notes whether or not such person is the holder; and

29

•

neither the holder nor such other person has any arrangement or understanding with any person, to participate in the distribution of the new notes.

        In the case of a holder that is not a broker-dealer, that holder, by tendering, will also represent to us that the holder is not engaged in or does not intend to engage in a distribution of the new notes.

        If you are our "affiliate," as defined under Rule 405 under the Securities Act, and engage in or intend to engage in or have an arrangement or understanding with any person to participate in a distribution of such new notes to be acquired pursuant to the exchange offer, you or any such other person:

•

could not rely on the applicable interpretations of the staff of the SEC; and



•

must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction.

        Each broker-dealer that receives new notes for its own account in exchange for old notes, where the old notes were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. (See "Plan of Distribution.") The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

Acceptance of Old Notes for Exchange; Delivery of New Notes

        Upon satisfaction or waiver of all of the conditions to the exchange offer, we will accept, promptly after the expiration date, all old notes properly tendered and will issue the new notes promptly after acceptance of the old notes. (See "—Conditions to the Exchange Offer.") For purposes of the exchange offer, we will be deemed to have accepted properly tendered old notes for exchange if and when we give oral, confirmed in writing, or written notice to the exchange agent.

        The holder of each old note accepted for exchange will receive a new note in the amount equal to the surrendered old note. Accordingly, registered holders of new notes on the record date for the first interest payment date following the consummation of the exchange offer will received interest accruing from the most recent date that interest has been paid on the old notes. Holders of new notes will not receive any payment in respect of accrued interest on old notes otherwise payable on any interest payment date, the record date for which occurs on or after the consummation of the exchange offer.

        In all cases, issuance of new notes for old notes that are accepted for exchange will only be made after timely receipt by the exchange agent of:

•

certificates for such old notes or a timely book-entry confirmation of such old notes into the exchange agent's account at DTC;



•

a properly completed and duly executed letter of transmittal or an agent's message in lieu thereof; and



•

all other required documents.

        If any tendered old notes are not accepted for any reason set forth in the terms and conditions of the exchange offer or if old notes are submitted for a greater principal amount than the holder desires to exchange, the unaccepted or non-exchanged old notes will be returned without expense to the tendering holder or, in the case of old notes tendered by book-entry transfer into the exchange agent's account at DTC pursuant to the book-entry procedures described below, the non-exchanged old notes will be credited to an account maintained with DTC, as promptly as practicable after the expiration or termination of the exchange offer.

30

Book-Entry Transfers

        For purposes of the exchange offer, the exchange agent will request that an account be established with respect to the old notes at DTC within two business days after the date of this prospectus, unless the exchange agent already has established an account with DTC suitable for the exchange offer. Any financial institution that is a participant in DTC may make book-entry delivery of old notes by causing DTC to transfer such old notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. Although delivery of old notes may be effected through book-entry transfer at DTC, the letter of transmittal or facsimile thereof or an agent's message in lieu thereof, with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the exchange agent at the address set forth under "—Exchange Agent" no later than 5:00 p.m., New York City time, on the expiration date or the guaranteed delivery procedures described below must be complied with.

Guaranteed Delivery Procedures

        If you desire to tender your old notes and your old notes are not immediately available, or time will not permit your old notes or other required documents to reach the exchange agent before the expiration date, a tender may be effected if:

•

the tender is made through an eligible institution;



•

prior to the expiration date, the exchange agent receives from such eligible institution a notice of guaranteed delivery, substantially in the form we provide, by telegram, telex, facsimile transmission, mail or hand delivery, setting forth your name and address, the amount of old notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery, the certificates for all physically tendered old notes, in proper form for transfer, or a book-entry confirmation, as the case may be, together with a properly completed and duly executed appropriate letter of transmittal or facsimile thereof or agent's message in lieu thereof, with any required signature guarantees and any other documents required by the letter of transmittal will be deposited by such eligible institution with the exchange agent; and



•

the certificates for all physically tendered old notes, in proper form for transfer, or a book-entry confirmation, as the case may be, together with a properly completed and duly executed appropriate letter of transmittal or facsimile thereof or agent's message in lieu thereof, with any required signature guarantees and all other documents required by the letter of transmittal, are received by the exchange agent within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery.

Withdrawal Rights

        You may withdraw your tender of old notes at any time prior to the expiration date. To be effective, a written notice of withdrawal must be received by the exchange agent at one of the addresses set forth under "—Exchange Agent." This notice must specify:

•

the name of the person having tendered the old notes to be withdrawn;



•

the old notes to be withdrawn, including the principal amount of each of such old notes; and



•

where certificates for old notes have been transmitted, the name in which such old notes are registered, if different from that of the withdrawing holder.

        If certificates for old notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of the certificates, the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures

31

guaranteed by an eligible institution, unless such holder is an eligible institution. If old notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn old notes and otherwise comply with the procedures of DTC.

        We or the exchange agent will make a final and binding determination on all questions as to the validity, form and eligibility, including time of receipt, of such notices. Any old notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any old notes tendered for exchange but not exchanged for any reason will be returned to the holder without cost to the holder, or, in the case of old notes tendered by book-entry transfer into the exchange agent's account at DTC pursuant to the book-entry transfer procedures described above, the old notes will be credited to an account maintained with DTC for the old notes as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn old notes may be re-tendered by following one of the procedures described under "—Procedures for Tendering Old Notes" above at any time on or prior to the expiration date.

Conditions to the Exchange Offer

        Notwithstanding any other provision of the exchange offer, we are not required to accept for exchange, or to issue new notes in exchange for, any old notes and may terminate or amend the exchange offer, if any of the following events occur prior to acceptance of such old notes:

(a)

the exchange offer violates any applicable law or applicable interpretation of the staff of the SEC; or



(b)

there is threatened, instituted or pending any action or proceeding before, or any injunction, order or decree has been issued by, any court or governmental agency or other governmental regulatory or administrative agency or commission,



(1)

seeking to restrain or prohibit the making or consummation of the exchange offer or any other transaction contemplated by the exchange offer, or assessing or seeking any damages as a result thereof, or



(2)

resulting in a material delay in our ability to accept for exchange or exchange some or all of the old notes pursuant to the exchange offer;

or any statute, rule, regulation, order or injunction has been sought, proposed, introduced, enacted, promulgated or deemed applicable to the exchange offer or any of the transactions contemplated by the exchange offer by any government or governmental authority, domestic or foreign, or any action has been taken, proposed or threatened, by any government, governmental authority, agency or court, domestic or foreign, that in our sole judgment might, directly or indirectly, result in any of the consequences referred to in clauses (1) or (2) above or, in our reasonable judgment, might result in the holders of new notes having obligations with respect to resales and transfers of new notes which are greater than those described in this prospectus, or would otherwise make it inadvisable to proceed with the exchange offer; or

(c)

there has occurred:



(1)

any general suspension of or general limitation on prices for, or trading in, securities on any national securities exchange or in the over-the-counter market,



(2)

any limitation by a governmental agency or authority which may adversely affect our ability to complete the transactions contemplated by the exchange offer,

32

(3)

a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or any limitation by any governmental agency or authority which adversely affects the extension of credit, or



(4)

a commencement of a war, armed hostilities or other similar international calamity directly or indirectly involving the United States, or, in the case of any of the foregoing, existing at the time of the commencement of the exchange offer, a material acceleration or worsening thereof; or



(d)

any change (or any development involving a prospective change) has occurred or is threatened in our business, properties, assets, liabilities, financial condition, operations, results of operations or prospects and our subsidiaries taken as a whole that, in our reasonable judgment, is or may be adverse to us, or we have become aware of facts that, in our reasonable judgment, have or may have adverse significance with respect to the value of the old notes or the new notes;



(i)

which in our reasonable judgment in any case, and regardless of the circumstances (including any action by us) giving rise to any such condition, makes it inadvisable to proceed with the exchange offer and/or with such acceptance for exchange or with such exchange.

        The foregoing conditions are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any condition or may be waived by us in whole or in part at any time in our reasonable discretion. Our failure at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right and each such right will be deemed an ongoing right which may be asserted at any time.

        In addition, we will not accept for exchange any old notes tendered, and we will not issue new notes in exchange for any such old notes, if at such time any stop order by the SEC is threatened or in effect with respect to the registration statement, of which this prospectus constitutes a part, or the qualification of the indenture under the Trust Indenture Act.

Exchange Agent

        U.S. Bank, N.A. has been appointed as the exchange agent for the exchange offer. All executed letters of transmittal and all other required documents should be directed to the exchange agent at the address set forth below. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for notices of guaranteed delivery should be directed to the exchange agent addressed as follows:

U.S. Bank, N.A., Exchange Agent
By Hand, Overnight Delivery or by Mail:
60 Livingston Avenue
St. Paul, Minnesota 55107
Attention: Corporate Trust Department
By Facsimile Transmission
(for Eligible Institutions only):
(651) 495-8097
Confirm by Telephone:
(651) 495-3913

Delivery of the letter of transmittal to an address other than as set forth above or transmission of such letter of transmittal via facsimile other than as set forth above does not constitute a valid delivery of the letter of transmittal.

33

Fees and Expenses

        The principal solicitation is being made by mail by U.S. Bank, N.A., as exchange agent. We will pay the exchange agent customary fees for its services, reimburse the exchange agent for its reasonable out-of-pocket expenses incurred in connection with the provision of these services and pay other registration expenses, including fees and expenses of the trustee under the indenture relating to the new notes, filing fees, blue sky fees and printing and distribution expenses. We will not make any payment to brokers, dealers or others soliciting acceptances of the exchange offer.

        Additional solicitation may be made by telephone, facsimile or in person by our and our affiliates' officers and regular employees and by persons so engaged by the exchange agent.

Accounting Treatment

        We will record the new notes at the same carrying value as the old notes, as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes. The expenses of the exchange offer will be amortized over the term of the new notes.

Transfer Taxes

        You will not be obligated to pay any transfer taxes in connection with the tender of old notes in the exchange offer unless you instruct us to register new notes in the name of, or request that old notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder. In those cases, you will be responsible for the payment of any potentially applicable transfer tax. (See "Material United States Federal Income Tax Considerations.")

Consequences of Exchanging or Failing to Exchange Old Notes

        If you do not exchange your old notes for new notes in the exchange offer, your old notes will continue to be subject to the provisions of the indenture regarding transfer and exchange of the old notes and the restrictions on transfer of the old notes described in the legend on your certificates. These transfer restrictions are required because the old notes were issued under an exemption from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the old notes may not be offered or sold unless registered under the Securities Act, except under an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not plan to register the sale of the old notes under the Securities Act, except under the limited circumstances described in "Description of the New Notes—Registration Rights".

        Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, we believe that the new notes you receive in the exchange offer may be offered for resale, resold or otherwise transferred without compliance with the registration and prospectus delivery provisions of the Securities Act. However, you will not be able to freely transfer the new notes if:

•

you are our "affiliate," as defined in Rule 405 under the Securities Act;



•

you are not acquiring the new notes in the exchange offer in the ordinary course of your business;



•

you have an arrangement or understanding with any person to participate in the distribution, as defined in the Securities Act, of the new notes you will receive in the exchange offer;



•

you are holding old notes that have, or are reasonably likely to have, the status of an unsold allotment in the initial offering; or

34

•

you are a broker-dealer that received new notes for its own account in the exchange offer in exchange for old notes that were acquired as a result of market-making or other trading activities.

        We do not intend to request the SEC to consider, and the SEC has not considered, the exchange offer in the context of a similar no-action letter. As a result, we cannot guarantee that the staff of the SEC would make a similar determination with respect to the exchange offer as in the circumstances described in the no action letters discussed above. Each holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of new notes and has no arrangement or understanding to participate in a distribution of new notes. If you are our affiliate, are engaged in or intend to engage in a distribution of the new notes or have any arrangement or understanding with respect to the distribution of the new notes you will receive in the exchange offer, you may not rely on the applicable interpretations of the staff of the SEC and you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction involving the new notes. If you are a participating broker-dealer, you must acknowledge that you will deliver a prospectus in connection with any resale of the new notes. In addition, to comply with state securities laws, you may not offer or sell the new notes in any state unless they have been registered or qualified for sale in that state or an exemption from registration or qualification is available and is complied with. The offer and sale of the new notes to "qualified institutional buyers" (as defined in Rule 144A of the Securities Act) is generally exempt from registration or qualification under state securities laws. We do not plan to register or qualify the sale of the new notes in any state where an exemption from registration or qualification is required and not available.

35

USE OF PROCEEDS

        We will not receive any proceeds from this exchange offer. Any old notes that are properly tendered and exchanged pursuant to the exchange offer will be retired and cancelled.

RATIO OF EARNINGS TO FIXED CHARGES

        The following table sets forth the ratio of earnings to fixed charges for the periods indicated. We have calculated the ratio of earnings to fixed charges in the following table as net earnings plus income taxes and interest expense divided by interest expense plus estimated interest expense on our operating leases.

	Years Ended December 31,							Six Months Ended June 30,		Last Twelve Months Ended June 30,
	1998	1999	2000		2001	2002		2002	2003	2003
Ratio of earnings to fixed charges	1.3	0.9	1.2	(1)	1.7	2.4	(2)	2.3	3.7	3.1	(2)

(1)

In December 2000, we began reporting international results on a current-month basis. As a result of this change, the 2000 fiscal year included a 13^th monthly period for the international segment which increased reported revenue and operating earnings by approximately $8.0 million and $1.1 million, respectively.

(2)

This calculation excludes pretax income of $173.3 million ($175.0 million, less expenses of $1.7 million) from Hillenbrand as part of an antitrust settlement. See note 16 to consolidated financial statements included elsewhere in this prospectus for discussion of the antitrust settlement.

36

CAPITALIZATION

        The following table sets forth our consolidated cash and cash equivalents and capitalization of KCI as of June 30, 2003, on an actual basis and on an as adjusted basis to give effect to the recapitalization as if the recapitalization had occurred on June 30, 2003. You should read the data set forth in the table below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of the New Senior Credit Facility" and our consolidated financial statements of KCI and related notes appearing elsewhere in this prospectus.

			As of June 30, 2003
			Actual			As Adjusted
			(in thousands)
Cash and cash equivalents			$	102,973		$	44,815	(1)
	Total debt:
	Existing credit facility		$	208,226		$	—
	93/8% Senior Subordinated Notes due 2007			200,000			—
	New senior credit facility(2)			—			480,000
	Notes			—			205,000
	Other debt and capitalized lease obligations			2,534			2,534
		Total debt		410,760			687,534
Convertible preferred stock				—			252,241
Shareholders' equity:
	Common stock, par value $0.001, 150,000,000 shares authorized and 71,122,556 issued and outstanding as of June 30, 2003, 37,809,205 issued and outstanding as adjusted			71			38
	Retained deficit			(39,425	)		(607,271	)
	Accumulated other comprehensive income			412			412
	Total shareholders' deficit			(38,942	)		(606,821	)
	Total capitalization		$	371,818		$	332,954

(1)

Calculation of cash on hand to be used to fund part of recapitalization:

Cash and cash equivalents at June 30, 2003, actual	$	102,973
Cash and cash equivalents at June 30, 2003, as adjusted		44,815
Net change in cash		58,158
Principal paid between June 30, 2003 and closing of this offering		—
Net interest payments included herein but not part of transaction		4,313
Expected cash to be used to fund part of recapitalization	$	53,845

(2)

At June 30, 2003, on a pro forma basis assuming the recapitalization had occurred on such date: (a) the total borrowing capacity under the new revolving credit facility was $100.0 million, subject to compliance with applicable covenants; (b) no amount was outstanding under the new revolving credit facility; and (c) borrowing availability under the new revolving credit facility was $89.1 million, after netting $10.9 million in outstanding letters of credit.

37

SELECTED CONSOLIDATED FINANCIAL DATA

        The following tables summarize our consolidated financial data for the periods presented. You should read the following financial information together with the information under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the notes to those consolidated financial statements appearing elsewhere in this prospectus. The selected consolidated balance sheet data for fiscal 2002 and the selected consolidated statement of earnings data for fiscal 2000, 2001 and 2002 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated financial data for fiscal 1998 and 1999 are derived from our audited consolidated financial statements not included in this prospectus. The unaudited consolidated balance sheet data as of June 30, 2002 and 2003 and the unaudited consolidated statement of earnings data for the six months ended June 30, 2002 and June 30, 2003 have been prepared on a basis consistent with our audited financial statements and include all adjustments, consisting only of normal recurring adjustments, we consider necessary for the fair presentation of the information. Operating results for the six months ended June 30, 2003 are not necessarily indicative of results that may be expected for the entire year ending December 31, 2003. The last twelve month period ended June 30, 2003 has been derived from our audited consolidated financial statements for the year ended December 31, 2002 and the unaudited historical financial statements for the six month period ended June 30, 2002 and 2003.

			Years Ended December 31,															Six Months Ended June 30,						Last Twelve Months Ended June 30,
			1998			1999			2000(1)			2001			2002			2002			2003			2003
			(in thousands)
Consolidated Statement of Earnings Data:
Revenue:
	Rental and service		$	258,482		$	245,983		$	274,331		$	361,634		$	453,060		$	209,010		$	270,296		$	514,346
	Sales and other			71,463			74,249			77,701			94,313			125,902			55,239			78,753			149,416
		Total revenue		329,945			320,232			352,032			455,947			578,962			264,249			349,049			663,762
Rental expenses				166,629			167,397			176,392			220,485			276,125			128,415			166,459			314,169
Cost of goods sold				26,219			29,811			29,645			32,952			51,824			21,369			28,358			58,813
		Gross profit		137,097			123,024			145,995			202,510			251,013			114,465			154,232			290,780
Selling, general and administrative expenses				69,537			75,208			80,294			114,828			141,594			63,763			85,395			163,226
Unusual item-litigation settlement(2)				—			—			—			—			(173,250	)		—			—			(173,250	)
		Operating earnings		67,560			47,816			65,701			87,682			282,669			50,702			68,837			300,804
Interest income				616			348			897			280			496			109			747			1,134
Interest expense				(48,594	)		(46,502	)		(48,635	)		(45,116	)		(40,943	)		(20,692	)		(16,228	)		(36,479	)
Foreign currency gain (loss)				20			(1,356	)		(2,358	)		(1,638	)		3,935			2,448			4,156			5,643
		Earnings before income taxes and
		minority interest		19,602			306			15,605			41,208			246,157			32,567			57,512			271,102
Income taxes				7,851			620			6,476			17,307			96,001			12,538			21,567			105,030
		Earnings (loss) before minority interest		11,751			(314	)		9,129			23,901			150,156			20,029			35,945			166,072
Minority interest in subsidiary loss				25			—			—			—			—			—			—			—
		Net earnings (loss)	$	11,776		$	(314	)	$	9,129		$	23,901		$	150,156		$	20,029		$	35,945		$	166,072
Other Financial Data:
EBITDA(3)				97,694			79,027			96,706			121,223			321,782			69,764			94,573			346,591
Depreciation and amortization				29,473			32,219			32,466			34,899			34,682			16,505			20,833			39,010
Net capital expenditures(4)				28,406			22,046			30,281			43,953			53,143			27,601			35,047			60,589
Cash from operating activities				43,885			36,767			40,151			29,895			76,254			23,927			198,705			251,032

38

	As of December 31,															As of June 30,
	1998			1999			2000			2001			2002			2002			2003
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	4,366		$	7,362		$	2,139		$	199		$	54,485		$	9,368		$	102,973
Working capital(5)		76,593			62,482			40,411			100,335			243,862			114,478			165,174
Total assets		306,117			283,261			288,091			343,193			618,059			387,021			516,015
Total debt(6)		515,651			502,780			489,119			509,540			523,443			525,518			410,760
Total shareholders' deficit		(261,588	)		(264,735	)		(257,953	)		(236,325	)		(80,436	)		(212,601	)		(38,942	)

(1)

In December 2000, we began reporting international results on a current-month basis. As a result of this change, the 2000 fiscal year included a 13th monthly period for the international segment which increased reported revenue and operating earnings by approximately $8.0 million and $1.1 million, respectively.

(2)

Includes accrual in connection with an installment payment of $175.0 million ($173.3 million, net of expenses of $1.7 million) from Hillenbrand as part of an antitrust settlement. See note 16 to consolidated financial statements included elsewhere in this prospectus for discussion of the antitrust settlement.

(3)

We calculate EBITDA as net earnings plus depreciation and amortization (less amortization of loan issuance costs), income taxes, and interest expense. We find EBITDA to be a useful measure of, our ability to service our debt and our ability to generate cash for other purposes. EBITDA is a non-GAAP financial measure and should not be considered in isolation from, and is not intended to represent an alternative measure of operating or net earnings or cash flow from operating activities, or any other measure of performance determined in accordance with GAAP. Other companies may calculate EBITDA differently, and our EBITDA calculation is not necessarily comparable with similarly titled figures for other companies. Therefore, in evaluating EBITDA data, you should consider, among other factors, the non-GAAP nature of EBITDA data, actual cash flows and net earnings, the actual availability of funds for debt service, and capital expenditures and working capital.

We have provided below a reconciliation of EBITDA to net earnings, which we believe is the most directly comparable GAAP measure (dollars in thousands):

	Years Ended December 31,											Six Months Ended June 30				Last Twelve Months Ended June 30,
	1998		1999			2000(1)		2001		2002		2002		2003		2003
Net earnings	$	11,776	$	(314	)	$	9,129	$	23,901	$	150,156	$	20,029	$	35,945	$	166,072
Interest expense		48,594		46,502			48,635		45,116		40,943		20,692		16,228		36,479
Depreciation and amortization(5)		29,473		32,219			32,466		34,899		34,682		16,505		20,833		39,010
Income taxes		7,851		620			6,476		17,307		96,001		12,538		21,567		105,030
EBITDA	$	97,694	$	79,027		$	96,706	$	121,223	$	321,782	$	69,764	$	94,573	$	346,591

EBITDA for 2002 includes the installment payment of $175.0 million ($173.3 million net of expenses of $1.7 million) from Hillenbrand as part of an antitrust settlement that we accrued in January, 2003. EBITDA for all periods also includes the effects of payments aggregating $1.5 million per year that we have made since 1998 pursuant to a management services agreement with Fremont Partners, James R. Leininger, M.D. and Blum Capital. On August 11, 2003, the management services agreement was amended to, among other things, terminate the management fee and continue to provide for indemnification and reimbursement of expenses. We made final management fee payments of $300,000 and $450,000 in July and August 2003, respectively.

(4)

We calculate net capital expenditures as total expenditures for property, plant and equipment along with expenditures for inventory purchased to be converted into equipment for rental reduced by cash proceeds from dispositions of property, plant and equipment.

(5)

Working capital represents total current assets less total current liabilities.

(6)

Total debt equals both current and long-term debt along with capital lease obligations and our liability associated with interest rate swaps.

39

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

        Kinetic Concepts, Inc. is a global medical device company with leadership positions in (i) advanced wound care and (ii) therapeutic surfaces which treat and prevent complications resulting from patient immobility. We design, manufacture, market and service a wide range of proprietary products which can significantly improve clinical outcomes while reducing the overall cost of patient care by accelerating the healing process or preventing complications. We have an infrastructure designed to meet the specific needs of medical professionals and patients across all health care settings, including acute care hospitals, extended care facilities and patients' homes both in the United States and abroad.

        Since the fourth quarter of 2000, our growth has been driven primarily by increased revenue from V.A.C. rentals and sales, which accounted for approximately 60.6% of total revenue in the first six months of 2003, up from approximately 50.6% in the first six months of 2002. We expect V.A.C. growth and the percentage of total revenue from V.A.C. rentals and sales to continue to increase, as it has in each of the last three years. Driven by continued market penetration, increased awareness and the introduction of two new V.A.C. systems in 2002, revenue for V.A.C. products and related services increased 60.0% from $244.5 million for the twelve months ended June 30, 2002 to $391.3 million for the twelve months ended June 30, 2003. Both the U.S. and international business segments contributed to this growth.

        We have direct operations in the United States, Canada, Europe, Australia and South Africa, and conduct additional business through distributors in Latin America, the Middle East and Asia. We manage our business in two geographical segments, our USA and International divisions. In the United States, which accounted for 76.0% of our revenue for the twelve months ended June 30, 2003, we have a substantial presence in all care settings. In acute and extended care, which accounted for more than half of our revenue, we bill our customers directly. In home care, where our revenue comes predominantly from V.A.C. products, we provide products and services directly to patients and bill third party payers, including Medicare and private insurance. Home care revenue is growing faster than the acute or extended care settings. For the twelve month period ended June 30, 2003, worldwide V.A.C. revenue from the combined acute and extended care settings grew approximately 63.0% and V.A.C. revenue from the home care setting grew approximately 56.0% as compared to the twelve month period ended June 30, 2002. The home care market accounted for approximately 44.0% of V.A.C. business and approximately 26.0% of our total revenue for the twelve month period ended June 30, 2003. V.A.C. systems used in the home are reimbursed by both government insurance (Medicare and Medicaid) and private insurance and managed care organization payers.

        Internationally, substantially all of our revenue is generated from the acute care setting. A small amount of international V.A.C. revenue comes from home care. We expect this percentage to increase to the extent that we gain home care reimbursement for V.A.C. therapy.

        Our international operations are subject to foreign currency fluctuations. As a result, we establish and evaluate our business using a constant exchange rate by country. By using a constant exchange rate for comparing our current year activity with prior periods, we effectively eliminate from our operations the variances arising from foreign currency fluctuations. We refer to this internal analysis as revenue and expenses, on a constant exchange basis, throughout this report.

        As part of the recapitalization, we made an offer to repurchase a portion of our outstanding vested options to purchase common stock. Options subject to the offer to repurchase are subject to variable plan accounting, requiring them to be "marked to market" during such time as it is probable that the options will be subject to an offer to repurchase. We expect this to result in a charge to earnings in the

40

third quarter of 2003 of approximately $68.2 million. (See "Summary—The Recapitalization—Share Repurchase.")

Results of Operations

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

        The following table sets forth, for the periods indicated, the percentage relationship of each item to total revenue as well as the change in each line item as compared to the first six months of the prior year (dollars in thousands):

			Six Months Ended June 30,
			Revenue Relationship				Variance
			2002		2003		$		%
Revenue:
	Rental and service		79	%	77	%	$	61,286	29.3	%
	Sales and other		21		23			23,514	42.6
		Total revenue	100		100			84,800	32.1
Rental expenses			49		48			38,044	29.6
Cost of goods sold			8		8			6,989	32.7
	Gross profit		43		44			39,767	34.7
Selling, general and administrative expenses			24		24			21,632	33.9
		Operating earnings	19		20			18,135	35.8
Interest income			—		—			638	nm
Interest expense			(8	)	(5	)		4,464	21.6
Foreign currency gain (loss)			1		1			1,708	69.8
		Earnings before income taxes	12		16			24,945	76.6
Income taxes			4		6			9,029	72.0
		Net earnings	8	%	10	%	$	15,916	79.5	%

41

        Total Revenue.    Our revenue is divided between two primary operating segments: USA and International. The following table sets forth, for the periods indicated, the amount of revenue derived from each of these segments (dollars in thousands):

			Six Months Ended June 30,
							Variance
			2002		2003		$			%
USA
V.A.C.
	Rental		$	94,209	$	139,843	$	45,634		48.4	%
	Sales			21,702		36,947		15,245		70.2
		Total V.A.C.		115,911		176,790		60,879		52.5
Therapeutic surfaces/other
	Rental			75,618		74,235		(1,383	)	(1.8	)
	Sales			13,848		13,815		(33	)	(0.2	)
		Total therapeutic surfaces/other		89,466		88,050		(1,416	)	(1.6	)
Total USA rental				169,827		214,078		44,251		26.1
Total USA sales				35,550		50,762		15,212		42.8
		Subtotal—USA	$	205,377	$	264,840	$	59,463		29.0	%
International
V.A.C.
	Rental		$	8,207	$	17,660	$	9,453		115.2	%
	Sales			9,611		17,187		7,576		78.8
		Total V.A.C.		17,818		34,847		17,029		95.6
Therapeutic surfaces/other
	Rental			30,976		38,558		7,582		24.5
	Sales			10,078		10,804		726		7.2
		Total therapeutic surfaces/other		41,054		49,362		8,308		20.2
Total International rental				39,183		56,218		17,035		43.5
Total International sales				19,689		27,991		8,302		42.2
		Subtotal—International	$	58,872	$	84,209	$	25,337		43.0	%
		Total revenue	$	264,249	$	349,049	$	84,800		32.1	%

        Total revenue in the first six months of 2003 increased $84.8 million, or 32.1%, from the prior-year period due primarily to increased demand for V.A.C. systems and related disposables. Rental revenue increased $61.3 million, or 29.3%, from the first six months of 2002 while sales revenue increased $23.5 million, or 42.6%, compared to the prior-year period. Revenue growth in the first six months of 2003 was driven by the launch of two new V.A.C. systems during 2002 along with enhanced V.A.C. sales and marketing efforts, which increased customer awareness of the benefits of V.A.C. therapy.

        Total domestic revenue for the first six months of 2003 increased $59.5 million, or 29.0%, from the prior-year period due to increased usage of V.A.C. systems and related disposables. Domestic rental revenue in the first six months of 2003 increased $44.3 million, or 26.1%, from the prior-year comparable period and domestic sales revenue in the first six months of 2003 increased $15.2 million, or 42.8%, from the prior-year period. The increase in total domestic revenue is due primarily to increased V.A.C. systems rentals resulting in increased demand for associated disposables, partially offset by a 27.2% decrease in sales of vascular products and a 11.3% decrease in rentals in the extended care market. V.A.C. units out on rent declined slightly in January 2003 due to a significant realignment of our domestic sales force. Since that time, demand for V.A.C. systems has increased

42

steadily. For the six month period ended June 30, 2003, average V.A.C. units out on rent increased 50.9% as compared to the same period a year ago.

        Domestic V.A.C. revenue increased in the first six months of 2003 by $60.9 million, or 52.5%, from the prior-year period due to an increase of both rental and sales revenue. V.A.C. rentals increased $45.6 million, or 48.4%, from the prior-year period. The increased rental revenue resulted from an increase in average units on rent per month of 50.9% for the six-month period which was offset by a 1.6% decline in average rental price. Some managed care organizations pay an all-inclusive daily rate which covers the rental of V.A.C. systems and all needed disposables. All revenue associated with all-inclusive pricing is included in rental revenue. We are beginning to experience a shift away from all-inclusive pricing in the home care setting with third party payers. As we contract with these third party payers, our contracts are providing separate pricing for rental and disposable sale products versus the all-inclusive pricing previously used. Therefore, we have experienced, and expect to continue experiencing, a shift in revenue between the rental classification and the sales classification. V.A.C. sales increased $15.2 million, or 70.2%, from the prior-year period due to the shift in pricing methodology discussed above along with increased demand for V.A.C. disposables associated with increased V.A.C. systems rentals. The cost of V.A.C. disposables, whether purchased through all-inclusive pricing or by itemized sale, is included in cost of goods sold.

        Domestic therapeutic surfaces/other revenue of $88.1 million for the six month period ended June 30, 2003 decreased $1.4 million, or 1.6%, from the prior-year period, primarily due to a $1.3 million, or 25.5%, decrease in total vascular-compression therapy revenue. The following table sets forth, for the periods indicated, the amount of revenue derived from each of our domestic care settings (dollars in thousands):

		Six Months Ended June 30,
						Variance
		2002		2003		$			%
Domestic therapeutic surfaces/other revenue
Acute/extended		$	79,539	$	79,186	$	(353	)	(0.4	)%
Home			4,759		5,014		255		5.4
Vascular-compression therapy			5,168		3,850		(1,318	)	(25.5	)
	Total	$	89,466	$	88,050	$	(1,416	)	(1.6	)%

        The majority of our therapeutic surfaces/other business is generated in the hospital, or acute care, setting. Average acute care rental therapeutic surface units on rent per month remained essentially unchanged compared to the prior-year period, while average pricing increased 1.1% due primarily to product mix changes. Our acute care revenue is fueled by growth in our bariatric line. Extended care rental units decreased 18.0% due to lower overall Medicare Part A reimbursement in nursing homes and continued local and regional competition. Home care therapeutic surface revenue increased 5.4% from the prior-year comparable period due to a change in our revenue mix. We experienced increased sales of lower-therapy wound care therapeutic surface units, which, in turn, decreased the rental of therapeutic surfaces in the home care setting. Overall, the average number of domestic therapeutic surface rental units per month for the first six months of 2003 declined 5.7% as compared to the prior-year period, but this decline was offset by a 4.1% price increase resulting from changes in our product mix.

        Revenue from our international operating unit for the first six months of 2003, including the favorable effects of foreign currency exchange rate fluctuations, increased $25.3 million, or 43.0%, over the comparable period in 2002. The majority of our international revenue is generated in the acute care setting. International rental revenue increased $17.0 million, or 43.5%, from the prior-year period and sales revenue was up $8.3 million, or 42.2%, compared to the prior year. Favorable foreign

43

currency exchange movements accounted for $11.6 million of the total international revenue increase when compared to the prior year period. On a constant exchange basis, total international revenue increased $13.8 million, or 21.8%, from the prior-year period, rental revenue increased $9.2 million, or 21.9%, and sales revenue increased $4.6 million, or 21.7%. The rental revenue increase reflects a 58.8% increase in V.A.C. systems out on rent along with a 5.2% increase in therapeutic surface rental units in use, primarily in overlays. We also experienced improved rental pricing for our V.A.C. systems and our therapeutic surfaces for the six months ended June 30, 2003 as compared to the same period in the prior year. The international sales increase was due to increased demand for V.A.C. systems and related disposables.

        Rental Expenses.    Rental, or "field," expenses of $166.5 million for the six-month period increased $38.0 million, or 29.6%, from $128.4 million in the prior-year period. The field expense increase was due primarily to increased labor, incentive compensation, parts, and product licensing expenses directly associated with the growth in V.A.C. therapy revenue. Of the $38.0 million variance in rental expenses for the six months ended June 30, 2003, approximately $7.9 million resulted from favorable foreign currency exchange movements. Field expenses for the first half of 2003 represented 61.6% of total rental revenue compared to 61.4% in the first half of 2002.

        Cost of Goods Sold.    Cost of goods sold of $28.4 million in the first six months of 2003 increased $7.0 million, or 32.7%, from $21.4 million in the prior year due to increased sales of V.A.C. disposables and higher excess and obsolescence inventory reserve provisions related to therapeutic surface products with low demand. Sales margins increased to 64.0% in the first six months of 2003 as compared to 61.3% in the prior-year period due to the shift away from all-inclusive pricing arrangements discussed above and cost reductions resulting from favorable pricing in our global supply contract for V.A.C. disposables entered into in December 2002.

        Gross Profit.    Gross profit in the first six months of 2003 increased approximately $39.8 million, or 34.7%, to $154.2 million from $114.5 million in the prior year due primarily to the year-to-year increase in revenue resulting from increased demand for V.A.C. systems and related disposables. Gross profit margin in the first six months of 2003 was 44.2%, up slightly from 43.3% in the prior year due primarily to the increase in revenue discussed above.

        Selling, General and Administrative Expenses.    Selling, general and administrative expenses increased $21.6 million, or 33.9%, to $85.4 million in the first six months of 2003 from $63.8 million in the prior-year period. This increase was due primarily to an increase in variable costs associated with increased revenue from V.A.C. systems along with increases in insurance costs of $2.0 million and professional fees of $2.6 million. As a percentage of total revenue, selling, general and administrative expenses increased slightly to 24.5% in the first six months of 2003 as compared to 24.1% in the first six months of 2002.

        Operating Earnings.    Operating earnings for the first six months of 2003 increased $18.1 million, or 35.8%, to $68.8 million compared to $50.7 million in the prior-year period. The increase in operating earnings was directly attributable to the increase in revenue, partially offset by higher operating costs and expenses. Operating margins for the first six months of 2003, were 19.7%, up from 19.2% in the prior-year period, due to the increase in revenue without a corresponding increase in costs and expenses.

        Non-GAAP Measure.    We find earnings before interest expense, taxes and depreciation and amortization, or EBITDA, to be useful for measuring our ability to service our debt and our ability to generate cash for other purposes. EBITDA is a non-GAAP measure and should not be considered in isolation from, and is not intended to represent an alternative measure of, operating or net earnings or cash flow or any other measure of performance determined in accordance with GAAP. In addition, our definition of EBITDA is not necessarily comparable to similarly titled measures reported by other

44

companies. The following table presents a reconciliation of EBITDA to net earnings, which we believe is the most directly comparable financial measure in accordance with GAAP for the six months ended June 30, 2003 and 2002 (dollars in thousands):

		Six Months Ended June 30,
		2002		2003
Net earnings		$	20,029	$	35,945
Interest expense			20,692		16,228
Depreciation and amortization(1)			16,505		20,833
Income taxes			12,538		21,567
	EBITDA	$	69,764	$	94,573

(1)

Excludes amortization of loan issuance costs, which is included in interest expense.

        EBITDA for the first six months of 2003 increased $24.8 million, or 35.6%, from the prior-year period due substantially to the change in operating earnings discussed above.

        Interest Expense.    Interest expense in the first six months of 2003 was $16.2 million compared to $20.7 million in the prior year. The interest expense decrease was due primarily to the partial paydown on our existing credit facility resulting from the $175 million litigation settlement payment received in January 2003. (See notes 5 and 9 to the unaudited condensed consolidated financial statements included elsewhere in this prospectus.)

        Net Earnings.    Net earnings of $35.9 million for the first six months of 2003 increased $15.9 million, or 79.5%, from the prior-year period due to the increase in operating earnings discussed above. Effective tax rates for the first six months of 2003 and 2002 were 37.5% and 38.5%, respectively.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

        The following table sets forth, for the periods indicated, the percentage relationship of each item to total revenue as well as the change in each line item as compared to the prior year (dollars in thousands):

			Year Ended December 31,
			Revenue Relationship				Variance
			2001		2002		$			%
Revenue:
	Rental and service		79	%	78	%	$	91,426		25.3	%
	Sales and other		21		22			31,589		33.5
		Total revenue	100		100			123,015		27.0
Rental expenses			49		48			55,640		25.2
Cost of goods sold			7		9			18,872		57.3
		Gross profit	44		43			48,503		24.0
Selling, general and administrative expenses			25		24			26,766		23.3
Unusual item-litigation settlement			—		(30	)		(173,250	)	nm
		Operating earnings(1)	19		49			194,987		222.3
Interest income			—		—			216		77.1
Interest expense			(10	)	(7	)		4,173		9.2
Foreign currency gain			—		1			5,573		340.2
		Earnings before income taxes	9		43			204,949		497.4
Income taxes			4		17			78,694		454.7
		Net earnings	5	%	26	%	$	126,255		528.2	%

(1)

Operating earnings for 2002 includes an unusual gain of $173.3 million, before taxes, as described in "—Liquidity and Capital Resources."

45

        Total Revenue.    Our revenue is divided between two primary operating segments: USA and International. The following table sets forth, for the periods indicated, the amount of revenue derived from each of these segments (dollars in thousands):

			Year Ended December 31,
							Variance
			2001		2002		$			%
USA
V.A.C.
	Rental		$	134,428	$	214,979	$	80,551		59.9	%
	Sales			31,814		53,245		21,431		67.4
		Total V.A.C.		166,242		268,224		101,982		61.3
Therapeutic surfaces/other
	Rental			156,704		150,793		(5,911	)	(3.8	)
	Sales			31,177		27,770		(3,407	)	(10.9	)
		Total therapeutic surfaces/other		187,881		178,563		(9,318	)	(5.0	)
Total USA rental				291,132		365,772		74,640		25.6
Total USA sales				62,991		81,015		18,024		28.6
Subtotal—USA			$	354,123	$	446,787	$	92,664		26.2	%
International
V.A.C.
	Rental		$	11,577	$	21,946	$	10,369		89.6	%
	Sales			12,182		23,244		11,062		90.8
		Total V.A.C.		23,759		45,190		21,431		90.2
Therapeutic surfaces/other
	Rental			58,924		65,343		6,419		10.9
	Sales			19,141		21,642		2,501		13.1
		Total therapeutic surfaces/other		78,065		86,985		8,920		11.4
Total International rental				70,501		87,289		16,788		23.8
Total International sales				31,323		44,886		13,563		43.3
		Subtotal—International	$	101,824	$	132,175	$	30,351		29.8	%
		Total revenue	$	455,947	$	578,962	$	123,015		27.0	%

        Total revenue in 2002 increased $123.0 million, or 27.0%, from the prior year due to increased demand for V.A.C. systems and related disposables. Rental revenue increased $91.4 million, or 25.3%, from 2001 while sales revenue increased $31.6 million, or 33.5%, compared to the prior year. This revenue growth was driven by sales and marketing efforts, which increased customer awareness of the benefits of V.A.C. therapy, as well as the launch of two new enhanced V.A.C. systems in 2002.

        Total domestic revenue for 2002 increased $92.7 million, or 26.2%, from the prior year due to increased usage of V.A.C. systems which was offset by a slight decline in surface and compression therapy systems use. Domestic rental revenue in 2002 increased $74.6 million, or 25.6%, from 2001 and domestic sales revenue in 2002 increased approximately $18.1 million, or 28.6%, from 2001. The increases in domestic rental and sales revenue are due primarily to increased V.A.C. systems rentals resulting in increased demand for associated disposables.

        Domestic V.A.C. revenue increased $102.0 million, or 61.3%, from 2001 due to an increase of both rental and sales revenue. Average units on-rent increased 61.7% for the year which was partially offset by a decline in average price of 1.1%.

46

        Domestic therapeutic surface revenue decreased $9.3 million, or 5.0%, due to lower unit volume in the extended and home care markets and lower average pricing caused in part by the negotiation and extension of a GPO contract with Novation, LLC, which became effective September 2001, which was partially offset by higher utilization of bariatric therapeutic surfaces.

		Years Ended December 31,
						Variance
Domestic therapeutic surfaces/other revenue
		2001		2002		$			%
Acute/extended		$	162,528	$	158,815	$	(3,713	)	$	(2.3	)%
Home			11,860		9,769		(2,091	)		(17.6	)
Vascular-compression therapy			13,493		9,979		(3,514	)		(26.0	)
	Total	$	187,881	$	178,563	$	(9,318	)		(5.0	)%

        Average acute/extended care therapeutic surface units on-rent were substantially unchanged compared to the prior year. Acute care units increased 3.7% due primarily to higher utilization of the FirstStep line and bariatric therapeutic surfaces. The acute care unit increase was offset by a volume decrease in the extended care market of 11.0% due to customer concerns arising from reimbursement pressures. Average home care therapeutic surface rental units on-rent decreased 22.1% due to continued competition in this market and our focus on the V.A.C. in the home market. Overall, average domestic therapeutic surface units on-rent for 2002 declined 2.3% as compared to the prior year.

        Revenue from our international operating unit for 2002, including the favorable effects of foreign currency exchange rate fluctuations, increased approximately $30.3 million, or 29.8%, over 2001. International rental revenue increased $16.8 million, or 23.8%, from 2001 and sales revenue was up approximately $13.5 million, or 43.3%, compared to the prior year. The rental revenue increase reflects higher therapeutic surface rental units in use in a majority of markets and growth in usage of V.A.C. systems. Growth in V.A.C. systems and therapeutic surface units, primarily in overlays, was partially offset by lower overall prices. The international sales increase was primarily due to increased demand for V.A.C. systems and related disposables. International therapeutic surface/other revenue was up $8.9 million, or 11.4%, due primarily to higher rentals in Canada, Germany, Italy, France, Austria and Australia, and higher sales in the United Kingdom, Austria, France and Australia, which were partially offset by lower sales in Germany. Favorable foreign currency exchange movements added approximately $4.7 million to total international revenue when compared to 2001. On a constant exchange basis, total international revenue increased $25.6 million, or 25.1%, from the prior year; rental revenue increased $13.7 million, or 19.5%, and sales revenue increased $11.9 million, or 37.8%.

        Rental Expenses.    Rental, or "field", expenses of $276.1 million increased $55.6 million, or 25.2%, from $220.5 million in the prior year. The field expense increase was due primarily to increased labor, product marketing, parts, supplies and product licensing expenses directly associated with the growth in V.A.C. revenue. Field expenses for 2002 represented 60.9% of total rental revenue compared to 61.0% in 2001.

        Cost of Goods Sold.    Cost of goods sold of $51.8 million in 2002 increased approximately $18.8 million, or 57.3%, from $33.0 million in the prior year due to increased V.A.C. disposable sales and higher excess and obsolescence inventory reserve provisions related to therapeutic surface products with low demand. Sales margins decreased to 58.8% in 2002 as compared to 65.1% in the prior year due, in part, to higher sales activity in the home care setting. Approximately 34.0% of home care revenue in 2002 was reimbursed by managed care and private insurance organizations. Many managed care providers prefer an all-inclusive per diem rate, which covers the cost of the rental and all disposables used. This per diem rate is recorded as rental revenue and is not allocated between rentals and sales. However, the all-inclusive managed care revenue was recorded as rental revenue, while the cost of V.A.C. disposables associated with these placements has been recorded in cost of goods sold.

47

        Gross Profit.    Gross profit in 2002 increased $48.5 million, or 24.0%, to $251.0 million from $202.5 million in the prior year due primarily to the year-to-year increase in revenue resulting from increased demand for V.A.C. systems and related disposables. Gross profit margin in 2002 was 43.4%, down slightly from 44.4% in 2001 due primarily to investing in sales and service to drive future revenue.

        Selling, General and Administrative Expenses.    Selling, general and administrative expenses increased $26.8 million, or 23.3%, to $141.6 million in 2002 from $114.8 million in 2001. This increase was due, in part, to higher administrative labor costs associated with hiring additional personnel for claims billing, and for consulting fees associated with the increased usage of V.A.C. systems and related disposables, particularly in the home. The 2002 results also included approximately $7.9 million of legal expenses associated with the antitrust lawsuit filed against Hillenbrand compared to $4.3 million in the prior year.

        Incentive compensation, engineering, depreciation, marketing, research and development expenses and provisions for insurance expense were all higher in the current year when compared to 2001. Expenditures for research and development represented approximately 3.1% of our total operating expenditures for the current year compared to 3.2% in 2001. On a comparable basis, as a percentage of total revenue, selling, general and administrative expenses of 25.0% in 2002 were flat compared to the prior year.

        The results for 2002 also reflect an accounting change required under Statement of Financial Accounting Standards No. 142 ("SFAS 142"), Goodwill and Other Intangible Assets. Under SFAS 142, goodwill and other intangible assets that have indefinite lives are no longer amortized ratably over the estimated useful life of the asset. The effect of this change in 2002 was to lower goodwill amortization by $3.4 million as compared to the prior year. (See note 5 to the consolidated financial statements included elsewhere in this prospectus.)

        Unusual Item—Litigation Settlement.    During the fourth quarter of 2002, we recorded a gain from the favorable settlement of an antitrust lawsuit filed against Hillenbrand. Net of expenses of $1.7 million, this transaction added $173.3 million of pre-tax income to the 2002 results. (See note 16 to consolidated financial statements included elsewhere in this prospectus.)

        Operating Earnings.    Operating earnings for 2002 increased $195.0 million, or 222.4%, to $282.7 million compared to $87.7 million in the prior year. Excluding the favorable effects of the litigation settlement, operating earnings would have increased $21.7 million, or 24.8%, to $109.4 million. The increase in operating earnings was directly attributable to the increase in revenue, partially offset by higher operating costs and expenses. Operating margins for 2002, excluding the favorable effects of the litigation settlement, were 18.9%, down slightly from 19.2% in the prior year, due to the increase in cost of goods sold plus higher spending for the international sales and service infrastructure, claims administration and higher legal expenses.

        Non-GAAP Measure.    We find earnings before interest expense, taxes and depreciation and amortization to be useful for measuring our ability to service our debt and our ability to generate cash for other purposes. EBITDA is a non-GAAP measure and should not be considered in isolation from, and is not intended to represent an alterative measure of, operating or net earnings or cash flow or any other measure of performance determined in accordance with GAAP. The following table represents a

48

reconciliation of EBITDA to net earnings which we believe is the most directly comparable financial measure under GAAP for the years ended December 31, 2002 and 2001 (dollars in thousands):

	Year Ended December 31,
	2001		2002
Net earnings	$	23,901	$	150,156
Interest expense		45,116		40,943
Depreciation and amortization(1)		34,899		34,682
Income taxes		17,307		96,001
EBITDA	$	121,223	$	321,782

(1)

Excludes amortization of loan issuance costs, which is included in interest expense.

        EBITDA for 2002 increased $200.6 million, or 165.4%, from the prior year due to the change in operating earnings discussed above, including the effects of the favorable settlement of an antitrust litigation against Hillenbrand. Amortization expense was lower year-to-year due to the change in accounting for goodwill as required by SFAS 142, Goodwill and Other Intangible Assets. (See note 5 to the consolidated financial statements included elsewhere in this prospectus.)

        Interest Expense.    Interest expense in 2002 was $40.9 million compared to $45.1 million in the prior year. The interest expense decrease was due to lower effective interest rates associated with our existing senior credit facility. (See note 4 to the consolidated financial statements included elsewhere in this prospectus.)

        Net Earnings.    Net earnings of $150.2 million for 2002 increased $126.3 million, or 528.2%, from the prior year due to the increase in operating earnings discussed previously, including the favorable impact of the litigation settlement. Excluding the litigation settlement, net earnings increased $19.8 million, or 83.0%, to $43.7 million. Effective tax rates for 2002 and 2001 were 39.0% and 42.0%, respectively.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

        The following table sets forth, for the periods indicated, the percentage relationship of each item to total revenue as well as the change in each line item as compared to the prior year (dollars in thousands):

			Year Ended December 31,
			Revenue Relationship				Variance
			2000		2001		$			%
Revenue:
	Rental and service		78	%	79	%	$	87,303		31.8	%
	Sales and other		22		21			16,612		21.4
		Total revenue	100		100			103,915		29.5
Rental expenses			50		49			44,093		25.0
Cost of goods sold			8		7			3,307		11.2
		Gross profit	42		44			56,515		38.7
Selling, general and administrative expenses			23		25			34,534		43.0
		Operating earnings	19		19			21,981		33.5
Interest income			—		—			(617	)	(68.8	)
Interest expense			(14	)	(10	)		3,519		7.2
Foreign currency gain (loss)			(1	)	—			720		30.5
		Earnings before income taxes	4		9			25,603		164.1
Income taxes			1		4			10,831		167.2
		Net earnings (loss)	3	%	5	%	$	14,772		161.8	%

49

        Due to improvements in financial systems and processes, we began reporting international results on a current-month basis effective December 2000. Historically, we had presented international results using a one-month delay. As a result of this change, the 2000 fiscal year included a 13th monthly period for the international segment which increased reported revenue and operating earnings by approximately $8.0 million and $1.1 million, respectively. Unless otherwise noted, the results reported herein include the international 13th month for fiscal 2000.

        Total Revenue.    Our revenue is divided between two primary operating segments: USA and International. The following table sets forth, for the periods indicated, the amount of revenue derived from each of these segments (dollars in thousands):

			Year Ended December 31,
							Variance
			2000		2001		$			%
USA
V.A.C.
	Rental		$	55,343	$	134,428	$	79,085		142.9	%
	Sales			14,637		31,814		17,177		117.3
		Total V.A.C.		69,980		166,242		96,262		137.6
Therapeutic surfaces/other
	Rental			153,852		156,704		2,852		1.9
	Sales			32,750		31,177		(1,573	)	(4.8	)
		Total therapeutic surfaces/other		186,602		187,881		1,279		0.7
Total USA rental				209,195		291,132		81,937		39.2
Total USA sales				47,387		62,991		15,604		32.9
		Subtotal—USA	$	256,582	$	354,123	$	97,541		38.0	%
International
V.A.C.
	Rental		$	7,510	$	11,577	$	4,067		54.2	%
	Sales			8,256		12,182		3,926		47.6
		Total V.A.C.		15,766		23,759		7,993		50.7
Therapeutic surfaces/other
	Rental			57,625		58,924		1,299		2.3
	Sales			22,059		19,141		(2,918	)	(13.2	)
		Total therapeutic surfaces/other		79,684		78,065		(1,619	)	(2.0	)
Total International rental				65,135		70,501		5,366		8.2
Total International sales				30,315		31,323		1,008		3.3
		Subtotal—International	$	95,450	$	101,824	$	6,374		6.7	%
		Total revenue	$	352,032	$	455,947	$	103,915		29.5	%

        Total revenue in 2001 increased $103.9 million, or 29.5%, from the prior year due to increased demand for V.A.C. systems and related disposables. Rental revenue increased $87.3 million, or 31.8%, from 2000 while sales revenue increased $16.6 million, or 21.4%, compared to the prior year. Excluding the international 13th month for 2000, total revenue increased $111.9 million, or 32.5%, from 2000.

        Total domestic revenue for 2001 increased $97.5 million, or 38.0%, from the prior year due primarily to increased usage of V.A.C. systems. Domestic rental revenue increased $81.9 million, or 39.2%, due primarily to increased V.A.C. rentals. Domestic sales revenue increased $15.6 million, or 32.9%, from the prior year. This sales increase resulted from higher V.A.C. disposable sales, which were

50

partially offset by lower sales of vascular products. The V.A.C. growth resulted from higher unit demand due to increased customer awareness of the benefits of V.A.C. therapy and the start of Medicare reimbursement for V.A.C. usage in the home setting. Domestic V.A.C. revenue increased $96.3 million, or 137.6%, in 2001 over 2000 due primarily to a 160.3% increase in average units on-rent, which was somewhat offset by a decline in average price realized of 6.6%. Domestic therapeutic surface and other revenue in 2001 increased, approximately $1.3 million, or 0.7%, over 2000, due to higher units on-rent in the acute and extended markets offset by lower units on-rent in the home care market and an approximate 3.3% increase in average price arising mostly from product mix changes in the extended and home care market. Improved product mix, including increased demand for pulmonary and bariatric products, resulted in higher average rental prices during 2001.

		Year Ended December 31,
						Variance
		2000		2001		$			%
Domestic therapeutic surfaces/other revenue
Acute/extended care		$	157,141	$	162,526	$	5,385		3.4	%
Home			13,699		11,860		(1,839	)	(13.4	)
Vascular-compression therapy			15,762		13,495		(2,267	)	(14.4	)
	Total	$	186,602	$	187,881	$	1,279		0.7	%

        Domestic therapeutic surface volumes for the year were up in both the acute and extended care settings but were substantially offset by lower home care therapeutic surface rentals caused by increased competition and the increased focus on V.A.C. placements in the home care market during 2001. Revenue from our international operating unit in 2001 increased $6.4 million, or 6.7%, net of foreign currency exchange rate fluctuations. The international revenue increase in 2001 reflects higher patient therapeutic surface rental units in a majority of the international division's markets caused by a marketing focus in those markets and growth in V.A.C. systems and related disposables usage caused by increased customer awareness of the benefits associated with V.A.C. technology, partially offset by unfavorable currency exchange fluctuations. Growth in rental volume for the period, primarily in overlays and V.A.C. systems, was partially offset by lower overall prices. The increase in international sales revenue was primarily due to increased demand for V.A.C. related disposables, offset by unfavorable currency exchange fluctuations and decreases in surface sales of 13.2%. International revenue unrelated to V.A.C. systems was down $1.6 million, or 2.0%, due primarily to lower home care sales in the German market and unfavorable currency exchange rate variances. Excluding the international 13th month for fiscal 2000, total international revenue increased $14.4 million, or 16.4%; rental revenue increased $10.8 million, or 18.0%, and sales revenue increased $3.6 million, or 12.9%. On a comparable, constant exchange basis and excluding the international 13th month, total international revenue increased $19.9 million, or 26.1%, rental revenue increased $14.4 million, or 27.6%, and sales revenue increased $5.5 million, or 22.9%.

        Rental Expenses.    Rental, or "field", expenses of $220.5 million increased $44.1 million, or 25.0%, from $176.4 million in the prior year. The field expense increase was due primarily to increased labor, marketing, parts, disposables, travel and product licensing expenses associated with the growth in V.A.C. revenue and was partially offset by currency fluctuations. Field expenses for 2001 represented 61.0% of total rental revenue compared to 64.3% in 2000. This relative decrease is attributable to the increase in rental revenue combined with a relatively fixed cost structure. Excluding the international 13th month, field expenses would have increased $48.7 million, or 28.4%, from $171.7 million in 2000.

        Cost of Goods Sold.    Cost of goods sold of $33.0 million in 2001 increased approximately $3.4 million, or 11.2%, from $29.6 million in the prior year due to higher sales volumes arising from increased V.A.C. disposable sales associated with V.A.C. rentals. Sales margins increased to 65.1% in

51

2001 as compared to 61.8% in the prior year due to improved product mix and favorable manufacturing variances. On a comparable basis, excluding the international 13th month for 2000, cost of goods sold increased $4.4 million, or 15.6%.

        Gross Profit.    Gross profit increased $56.5 million, or 38.7%, to $202.5 million in 2001 from $146.0 million in 2000 due primarily to the year-to-year increase in rental revenue resulting from increased demand for V.A.C. systems and related disposables. On a comparable basis, excluding the international 13th month, gross profit increased $58.7 million, or 40.8%, from the prior year. Gross profit margin in 2001, on a comparable basis, was 44.4%, up from 41.8% in 2000.

        Selling, General and Administrative Expenses.    Selling, general and administrative expenses increased $34.5 million, or 43.0%, to $114.8 million in 2001 from $80.3 million in 2000. This increase was due primarily to higher labor costs, claims billings costs and consulting associated with the increased rentals and sales of V.A.C. systems and related disposables.

        In addition, incentive compensation, engineering, depreciation, research and development expenses and provisions for bad debts and insurance expense were higher in the current year when compared to 2000. On a comparable basis, as a percentage of total revenue, selling, general and administrative expenses were 25.2% in 2001 compared to 23.0% in 2000. Excluding the international 13th month for 2000, selling, general and administrative expenses increased $35.6 million, or 45.0%, from the prior year.

        Operating Earnings.    Operating earnings for 2001 increased $22.0 million, or 33.5%, to $87.7 million compared to $65.7 million in 2000. On a comparable basis, operating earnings increased $23.0 million, or 35.7%, from the prior year. The increase in operating earnings was directly attributable to the increase in rental revenue, largely offset by higher operating costs and expenses. On a comparable basis, operating profit margin in 2001 was 19.2%, up slightly from 18.8% in 2000.

        Non-GAAP Measure.    We find earnings before interest expense, taxes and depreciation and amortization to be useful for measuring our ability to service our debt and our ability to generate cash for other purposes. EBITDA is a non-GAAP measure and should not be considered in isolation from, and is not intended to represent an alternative measure of, operating or net earnings or cash flow or any other measure of performance determined in accordance with GAAP. The following table presents a reconciliation of EBITDA to net earnings which we believe is the most directly comparable financial measure in accordance with GAAP for the years ended December 31, 2001 and 2000 (dollars in thousands):

	Year Ended December 31,
	2000		2001
Net earnings	$	9,129	$	23,901
Interest expense		48,635		45,116
Depreciation and amortization(1)		32,466		34,899
Income taxes		6,476		17,307
EBITDA	$	96,706	$	121,223

(1)

Excludes amortization of loan issuance costs, which is included in interest expense.

        EBITDA for 2001 increased $24.5 million, or 25.4%, from the prior year due to the change in operating earnings discussed above.

        Interest Expense.    Interest expense in 2001 was $45.1 million compared to $48.6 million in 2000. The interest expense decrease was due to lower effective interest rates associated with our existing

52

senior credit facility obtained through fixed-rate interest contracts. (See note 4 to the consolidated financial statements included in this prospectus.)

        Net Earnings.    Net earnings in 2001 increased approximately $14.8 million, or 161.8%, from the prior year to $23.9 million due to the increase in operating earnings discussed previously. On a comparable basis, excluding the international 13th month for 2000, net earnings increased $15.5 million, or 185.7%. Effective income tax rates for 2001 and 2000 were 42.0% and 41.5%, respectively.

Liquidity and Capital Resources

General

        We require capital principally for capital expenditures, systems infrastructure, debt service and working capital, including the need for additional office space for our expanding workforce. Our capital expenditures consist primarily of manufactured rental assets and computer hardware and software. Working capital is required principally to finance accounts receivable and inventory. Our working capital requirements vary from period to period depending on manufacturing volumes, the timing of shipments and the payment cycles of our customers and payers.

Sources of Capital

        During the next twelve months, we expect our principal sources of capital to be cash flows from operating activities and availability under the new revolving credit facility. Based upon the current level of operations, we believe these sources of capital will be adequate to meet our anticipated cash requirements for interest payments, working capital and capital expenditures through 2004. Due to the anticipated growth in demand for V.A.C. systems going forward, slower payment cycles associated with certain payers and increased capital expenditures and working capital required to support and maintain such growth, our ability to generate cash flow sufficient to meet our 2005, 2006 and 2007 debt amortization requirements may be negatively impacted. In such an event, we may attempt to refinance all or a portion of our indebtedness, sell assets or raise funds in the capital markets. We cannot give any assurance that we will be successful in raising additional capital.

        During the first six months of 2003, our primary source of capital was cash from operations. The following table summarizes the net cash provided and used by operating activities, financing activities and investing activities for the six month periods ended June 30, 2003 and 2002 (dollars in thousands):

		Six Months Ended June 30,
		2002			2003
Net cash provided by operating activities		$	23,927		$	198,705	(1)
Net cash used by investing activities			(32,369	)		(37,696	)
Net cash provided (used) by financing activities			17,096			(114,010	)(2)
	Total	$	8,654		$	46,999

(1)

Includes receipt of $130.0 million, net of taxes paid, related to the Hillenbrand antitrust settlement.

(2)

Includes paydown of $107.0 million of indebtedness on the old senior credit facility utilizing funds received related to the Hillenbrand antitrust settlement.

53

        At June 30, 2003, cash and cash equivalents of $103.0 million were available for general corporate purposes. On a pro forma basis assuming the consummation of the recapitalization as of June 30, 2003, cash and cash equivalents of $44.8 million would have been available for general corporate purposes and $89.1 million would have been available under the revolving portion of the new senior credit facility. (See "Summary—The Recapitalization.") We are committed to purchase approximately $16.9 million of inventory associated with new products over the next twelve months as of June 30, 2003. We did not have any other material purchase commitments as of June 30, 2003.

Working Capital

        At June 30, 2003, we had current assets of $308.2 million and current liabilities of $143.0 million resulting in a working capital surplus of $165.2 million, compared to a surplus of $243.9 million at December 31, 2002. The paydown of amounts outstanding under our existing senior credit facility with funds from the payment received pursuant to the Hillenbrand settlement accounted for a majority of this change. Operating cash flows for the first six months of 2003 were $198.7 million as compared to $23.9 million for the prior-year period. This increase in operating cash flows was due primarily to the Hillenbrand settlement, higher net earnings for the period of $15.9 million and improved working capital management. On a pro forma basis assuming the consummation of the recapitalization as of June 30, 2003, we would have had current assets of $250.0 million and current liabilities of $127.7 million. (See "Summary—The Recapitalization.")

        During the remainder of 2003, we expect demand for V.A.C. systems and related disposables to continue to increase, which could have the effect of increasing accounts receivable due to extended payment cycles for third party payers. We have adopted a number of policies and procedures to reduce these extended payment cycles, which we believe have been effective and will continue to improve our collection turnaround times. For example, our revenue for the first six months of 2003 grew 32.1% over the prior-year period and our receivables have increased only 15.3% for the same period. If we were to have an increase in accounts receivable, we would expect to manage such an increase with available cash on hand and, if necessary, through increased borrowing under our credit arrangements, the refinancing of existing indebtedness or through the incurrence of additional indebtedness through new lending arrangements. We expect that cash on hand, cash flow from operations and additional borrowings under our credit agreements will be sufficient to meet our working capital needs.

Capital Expenditures

        During the first six months of 2003, we made net capital expenditures of $35.0 million compared to $27.6 million in the prior-year period. The period-to-period increase is primarily due to purchases of materials for V.A.C. systems and other high-demand rental products. As of June 30, 2003, we have commitments to purchase new product inventory of $16.9 million over the next twelve months. Other than commitments for new product inventory we have no material long-term purchase commitments. We expect future demand for V.A.C. systems to increase, which will require increased capital expenditures over time.

Debt Service

        As part of the recapitalization, we issued $205.0 million aggregate principal amount of our Series A 7³/8% Senior Subordinated Notes Due 2013, which we refer to throughout this prospectus as the old notes. Concurrently with the offering of the old notes, we entered into a new senior credit facility, under which we have borrowed $480.0 million in term loans. As of June 30, 2003, on a pro forma basis assuming the consummation of the recapitalization as of such date, scheduled principal payments under the new senior credit facility for the years 2003, 2004 and 2005 would have been $2.4 million, $4.8 million and $4.8 million, respectively.

54

Senior Credit Facility

        The new senior credit facility consists of $480.0 million in term loans and a $100.0 million revolving credit facility. The following table sets forth the amounts owing under each term loan and the revolving credit facility, the effective interest rates on such outstanding amounts, and amounts available for additional borrowing thereunder, as of August 31, 2003 (dollars in thousands):

Senior Credit Facility		Effective Interest Rate (1)	Amounts Outstanding		Amounts Available for Additional Borrowing
Revolving Credit Facility		—	$	—	$	88,700	(2)
Term Loan Facility		3.87%		480,000		—
	Total		$	480,000	$	88,700

(1)

Effective interest rates do not take into account existing interest rate hedging arrangements.

(2)

Amounts available under the revolving portion of our credit facility are reduced by $11.3 million of letters of credit issued on our behalf, none of which have been drawn upon by the beneficiaries thereunder.

        The new senior credit facility contains affirmative and negative covenants customary for similar facilities and transactions, including, but not limited to, quarterly and annual financial reporting and limitations on other debt, other liens or guaranties, mergers or consolidations, asset sales, certain investments, distributions to shareholders or share repurchases, early retirement of subordinated debt, capital expenditures, changes in the nature of the business, changes in organizational documents and documents evidencing or related to indebtedness that are materially adverse to the interests of the lenders under the new senior credit facilities and changes in accounting policies or reporting practices.

        In addition, the new senior credit facility contains financial covenants requiring us to meet certain leverage and interest coverage ratios and maintain minimum levels of EBITDA. Specifically, we are obligated not to permit:

•

for any period of four consecutive quarters ending at the end of any fiscal quarter beginning with the fiscal quarter ending December 31, 2003, the ratio of EBITDA to consolidated cash interest expense to be less than certain specified ratios ranging from 4.30 to 1.00, as defined in the new senior credit facility, for the fiscal quarter ending December 31, 2003 to 5.50 to 1.00 for the fiscal quarter ending December 31, 2006 and each fiscal quarter following that quarter;



•

as of the last day of any fiscal quarter beginning with the fiscal quarter ending December 31, 2003, the leverage ratio to be greater than certain specified leverage ratios ranging from 4.30 to 1.00 for the fiscal quarter ending December 31, 2003 to 2.50 to 1.00 for the fiscal quarter ending December 31, 2006 and each fiscal quarter following that quarter; or



•

for any period of four consecutive fiscal quarters ending at the end of any fiscal quarter beginning with the fiscal quarter ending December 31, 2003, EBITDA to be less than certain amounts ranging from $156.4 million for the fiscal quarter ending December 31, 2003 to $240.0 million for the fiscal quarter ending December 31, 2006 and each fiscal quarter following that quarter.

55

Long Term Commitments

        The following table summarizes our contractual cash obligations as of June 30, 2003, on a pro forma basis assuming the consummation of the recapitalization, for each of the periods indicated (dollars in thousands).

Fiscal	Long-Term Debt Amortization		Capital Lease Obligations		Operating Lease Obligations		Purchase Obligations		Total
2003	$	2,400	$	151	$	16,805	$	16,931	$	36,287
2004		4,800		19		13,850		—		18,669
2005		4,800		—		11,473		—		16,273
2006		4,800		—		9,790		—		14,590
2007		4,800		—		7,633		—		12,433
2008		4,800		—		3,695		—		8,495
Thereafter		658,600		—		12,655		—		671,255

Quantitative and Qualitative Disclosure About Market Risk

        We are exposed to various market risks, including fluctuations in interest rates and variability in currency exchange rates. We have established policies, procedures and internal processes governing our management of market risk and the use of financial instruments to manage our exposure to such risk.

Interest Rate Risk

        We have variable interest rate debt and other financial instruments, which are subject to interest rate risk and could have a negative impact on our business if not managed properly. We have a risk management policy, which is designed to reduce the potential negative earnings effect arising from the impact of fluctuating interest rates. We use interest rate swap agreements to minimize the impact of fluctuating interest rates. These contracts are initiated within the guidance of corporate risk management policies and are reviewed and approved by our top financial management. We do not use financial instruments for speculative or trading purposes.

        On December 31, 2002, two of our then-existing interest rate swap agreements expired. Because of unfavorable movements in interest rates under the agreements in 2002 and 2001, we incurred additional interest expense of approximately $2.8 million and $2.1 million in 2002 and 2001, respectively.

        As of December 31, 2002, two $100 million interest rate swap agreements were in effect to take advantage of low interest rates. On January 31, 2003, we sold $20 million of our $100 million, 1.745% interest rate swap effective March 31, 2003 which resulted in an expense of approximately $74,000 which was recorded in the first quarter of 2003. As of June 30, 2003, the current interest rate swap agreements effectively fix the base-borrowing rate on 86% of our variable interest rate debt. The fair value of these swaps at inception was zero. Due to subsequent movements in interest rates, as of June 30, 2003, the fair values of the $80 million and $100 million swap agreements were negative and were adjusted to reflect a liability of approximately $300,000 and $1.6 million, respectively. Both of these swap agreements are still in effect. The 1.745% swap agreement matures on December 31, 2003 and the 2.375% swap agreement matures on December 31, 2004.

        Our new senior credit facility requires that we fix the base-borrowing rate applicable to at least 50% of the outstanding amount of our term loan under the new senior credit facility for a period of two years from the date of issuance.

56

        In August 2003, we entered into six new interest rate swap agreements pursuant to which we fixed the rates on $250 million of our variable rate debt as follows:

2.150% per annum on $60 million of our variable rate debt through August 22, 2005;
2.130% per annum of $20 million of our variable rate debt through August 22, 2005;
2.135% per annum on $20 million of our variable rate debt through August 21, 2005;
2.755% per annum on $50 million of our variable rate debt through August 21, 2006;
2.775% per annum on $50 million of our variable rate debt through August 21, 2006;
2.788% per annum on $50 million of our variable rate debt through August 21, 2006.

        As a result of the eight swap agreements currently in effect, as of August 31, 2003, 89.6% of our variable interest rate debt outstanding is effectively fixed.

        All the swap agreements have quarterly interest payments, based on three month LIBOR, due on the last day of each March, June, September and December, commencing on September 30, 2003. The fair value of these swaps at inception was zero. Due to subsequent movements in interest rates, as of August 31, 2003, the fair values of the new swap agreements were positive.

        The table below provides information about our long-term debt and interest rate swaps, both of which are sensitive to changes in interest rates, as of the end of the 2001 and 2002 fiscal years. For long-term debt, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and weighted average interest rated by expected (contractual) maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average variable rates are based on implied forward rates in the field curve at the reporting date (dollars in thousands):

	December 31, 2002
	Expected maturity date
	2003		2004		2005		2006		2007		Total		Fair Value
Long-term debt
Fixed rate	—		—		—		—		$200,000		$200,000		$206,000
Average interest rate	—		—		—		—		9.625	%	9.625	%
Variable rate	$30,550		$86,750		$113,825		$90,725		—		$321,850		$321,850
Average interest rate	3.239	%	3.905	%	4.149	%	4.025	%	—		3.962	%
Interest rate swaps(1)
Variable to fixed	$100,000		$100,000		—		—		—		$200,000		$(1,341	)
Average pay rate	1.745	%	2.375	%	—		—		—		2.060	%
Average receive rate	1.400	%	1.400	%	—		—		—		1.400	%

	December 31, 2001
	Expected maturity date
	2002		2003		2004		2005		Thereafter		Total		Fair Value
Long-term debt
Fixed rate	—		—		—		—		$200,000		$200,000		$199,000
Average interest rate	—		—		—		—		9.625	%	9.625	%
Variable rate	$2,750		$42,050		$86,450		$84,650		$90,725		$306,625		$306,625
Average interest rate	5.599	%	4.719	%	5.561	%	5.806	%	5.435	%	5.476	%
Interest rate swaps(1)
Variable to fixed	$250,000		—		—		—		—		$250,000		$(2,512	)
Average pay rate	3.338	%	—		—		—		—		3.338	%
Average receive rate	1.910	%	—		—		—		—		1.910	%

(1)

Interest rate swaps are included in the variable rate debt under long-term debt.

57

Foreign Currency and Market Risk

        We have direct operations in Western Europe, Canada, Australia and South Africa and distributor relationships in many other parts of the world. Our foreign operations are measured in their applicable local currencies. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we have operations. Exposure to these fluctuations is managed primarily through the use of natural hedges, whereby funding obligations and assets are both managed in the applicable local currency.

        We maintain no other derivative instruments to mitigate our exposure to translation and/or transaction risk. International operations reported operating profit of $18.3 million for the year ended December 31, 2002. It is estimated that a 10% fluctuation in the value of the dollar relative to these foreign currencies at December 31, 2002 would change our net income for the year ended December 31, 2002 by approximately $1.3 million. Our analysis does not consider the implications that such fluctuations could have on the overall economic activity that could exist in such an environment in the U.S. or the foreign countries or on the results of operations of these foreign entities.

Critical Accounting Policies

        The SEC defines critical accounting policies as those that are, in management's opinion, very important to the portrayal of our financial condition and results of operations and require our management's most difficult, subjective or complex judgments. We are not aware of any reasonably possible events or circumstances that would result in different amounts being reported that would have a material effect on our results of operations or financial position. However, in preparing our financial statements in accordance with generally accepted accounting principles in the United States, we must often make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures at the date of the financial statements and during the reporting period. Some of those judgments can be subjective and complex. Consequently, actual results could differ from our estimates. The accounting policies that are most subject to important estimates or assumptions include those described below. (See note 1 to the consolidated financial statements included elsewhere in this prospectus for further description of these items.)

Revenue Recognition

        We recognize revenue in accordance with Staff Accounting Bulletin No. 101 when each of the following four criteria are met:

1.

A contract or sales arrangement exists.



2.

Products have been shipped and title has transferred or services have been rendered.



3.

The price of the products or services is fixed or determinable.



4.

Collectibility is reasonably assured.

        We recognize rental revenue based on the number of days a product is in use by the patient/facility and the contracted rental rate. Reductions to rental revenue are recorded to provide for payment adjustments including (1) capitation agreements, (2) evaluation/free trial days, (3) credit memos, (4) rebates, (5) pricing adjustments, (6) utilization adjustments, (7) cancellations and (8) payer adjustments. In addition, we establish reserves against revenue to allow for uncollectible items relating to (1) unbilled receivables over 60 days old and (2) patient co-payments, based on historical collection experience.

Accounts Receivable—Allowance for Doubtful Accounts

        We utilize a combination of factors in evaluating the collectibility of account receivables. For unbilled receivables, we establish reserves against revenue to allow for denied or uncollectible items beginning at 60 days after the end of service or usage. Items that remain unbilled for more than

58

90 days or beyond an established billing window are reversed out of revenue and receivables. For billed receivables, we generally establish reserves for bad debt based on the length of time that the receivables are past due. The reserve rates vary by payer group and are based upon our historical experience on a weighted average basis. The reserves range in value from 0% for current amounts to 100% for amounts over 180 days for certain payer groups. In addition, we have recorded specific reserves for bad debt when we become aware of a customer's inability to satisfy its debt obligations, such as in the event of a bankruptcy filing. If circumstances change such as, higher than expected claims denials, payment defaults or an unexpected material adverse change in a major customer's or payer's ability to meet its obligations, our estimates of the realizability of amounts due from trade receivables could be reduced by a material amount. (See note 1 to the consolidated financial statements included elsewhere in this prospectus.)

Goodwill and Other Intangible Assets

        Goodwill represents the excess purchase price over the fair value of net assets acquired. Goodwill represented 7.5% and 12.5% of total assets at December 31, 2002 and December 31, 2001, respectively. Effective January 1, 2002, we applied the provisions of Statement of Financial Accounting Standards No. 142, ("SFAS 142"), Goodwill and Other Intangible Assets in our accounting for goodwill. SFAS 142 requires that goodwill and other intangible assets that have indefinite lives not be amortized but instead by tested at least annually for impairment, or more frequently when events or changes in circumstances indicate that the asset might be impaired. For indefinite lived intangible assets, impairment is tested by comparing the carrying value of the asset to the fair value of the reporting unit to which they are assigned.

        Goodwill was tested for impairment during the first and fourth quarters of 2002 and will be tested for impairment at least annually, in the fourth quarter, using a two-step process. The first step is a comparison of an estimation of the fair value of a reporting unit with the reporting unit's carrying value. We have determined that our reporting units are our two operating segments—USA and International. If the fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered impaired, and as a result, the second step of the impairment test is not required. If required, the second step compares the fair value of reporting unit goodwill with the carrying amount of that goodwill. If we determine that reporting unit goodwill is impaired, the fair value of reporting unit goodwill would be measured by comparing the discounted expected future cash flows of the reporting unit with the carrying value of reporting unit goodwill. Any excess in the carrying value of reporting unit goodwill to the estimated fair value would be recognized as an expense at the time of the measurement. We recorded no impairments to our reporting units as a result of the implementation of SFAS 142 during 2002.

        The goodwill of a reporting unit will be tested annually or if an event occurs or circumstances change that would likely reduce the fair value of a reporting unit below its carrying amount. Examples of such events or circumstances include, but are not limited to: a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition.

Inventory

        Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value). Costs include material, labor and manufacturing overhead costs. Inventory expected to be converted into equipment for short-term rental is reclassified to property, plant and equipment. We review our inventory balances monthly for excess sale products or obsolete inventory levels. Except where firm orders are on-hand, inventory quantities of sale products in excess of the last twelve months demand are considered excess and are reserved at 50% of cost. For rental products, we review both product usage and product life cycle to classify inventory as active, discontinued or obsolete. Obsolescence reserve balances are established on an increasing basis from 0% for active, high-demand products to 100% for obsolete products. The reserve is reviewed, and if necessary, adjustments made on a monthly

59

basis. We rely on historical information to support our reserve and utilize management's business judgment for "high risk" items, such as products that have a fixed shelf life. Once the inventory is written down, we do not adjust the reserve balance until the inventory is sold.

Long Lived Assets

        Property, plant and equipment are stated at cost. Betterments, which extend the useful life of the equipment, are capitalized. Depreciation on property, plant and equipment is calculated on the straight-line method over the estimated useful lives (30 to 40 years for buildings and between three and five years for most of our other property and equipment) of the assets. We have not had an event that would indicate impairment of our tangible long-lived assets. If an event were to occur, we would review property, plant and equipment for impairment using an undiscounted cash flow analysis and if an impairment had occurred on an undiscounted basis, we would compute the fair market value of the applicable assets on a discounted cash-flow basis and adjust the carrying value accordingly.

Income Taxes

        We operate in multiple tax jurisdictions with different tax rates and must determine the allocation of income to each of our jurisdictions based on estimates and assumptions. In the normal course of our business, we will undergo scheduled reviews by taxing authorities regarding the amount of taxes due. These reviews include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. Tax reviews often require an extended period of time to resolve and may result in income tax adjustments if changes to the allocation are required between jurisdictions with different tax rates.

Legal Proceedings and Other Loss Contingencies

        We are subject to various legal proceedings, many involving routine litigation incidental to our business. The outcome of any legal proceeding is not within our complete control, is often difficult to predict and is resolved over very long periods of time. Estimating probable losses associated with any legal proceedings or other loss contingencies is very complex and requires the analysis of many factors including assumptions about potential actions by third parties. Loss contingencies are recorded as liabilities in the consolidated financial statements when it is both (1) probable or known that a liability has been incurred and (2) the amount of the loss is reasonably estimable, in accordance with Financial Accounting Standards Statement No. 5, "Accounting for Contingencies." If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability. If a loss contingency is not probable or not reasonably estimable, a liability is not recorded in the consolidated financial statements.

New Accounting Pronouncements

        In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS 143, "Accounting for Asset Retirement Obligations," effective for fiscal years beginning after June 15, 2002. This standard addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The standard requires us to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and to adjust its present value in each subsequent period. In addition, we must capitalize an amount equal to the adjustment by increasing the carrying amount of the related long-lived asset, which is depreciated over the remaining useful life of the related asset. We adopted SFAS 143 during the first quarter of 2003 and it did not have a significant effect on our financial position or results of operations.

        In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN 45 elaborates on the existing disclosure requirements for most guarantees, including residual value guarantees issued in conjunction with operating lease agreements. It also clarifies that at

60

the time a company issues a guarantee, we must recognize an initial liability for the fair value of the obligation it assumes under that guarantee and must disclose that information in its interim and annual financial statements. The initial recognition and measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. We have adopted FIN 45 and have determined that it will not have a material impact on our financial position or results of operations.

        In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based Compensation—Transition and Disclosure." SFAS 148 amends SFAS 123, "Accounting for Stock-Based Compensation," to provide alternate methods of transition for an entity that changes to the fair-value method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure provisions of SFAS 123 to require expanded and more prominent disclosure of the effects of an entity's accounting policy in the summary of significant accounting policies section with respect to stock-based employee compensation. The amendment of the annual disclosure requirements of SFAS 123 is effective for fiscal years ending after December 15, 2002. We have included the amended disclosure requirement of SFAS 148 in note 1 to the consolidated financial statements included in this prospectus.

        In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities," effective for fiscal years or interim periods beginning after June 15, 2003. FIN 46 addresses accounting for, and disclosure of, variable interest entities. FIN 46 requires the disclosure of the nature, purpose and exposure of any loss related to our involvement with variable interest entities. We adopted the provisions of FIN 46 for post-January 31, 2003 variable interest entities during the first quarter of 2003 and it did not have a significant effect on our financial position or results of operations. We continue to evaluate the potential effects of the consolidation provisions of FIN 46 that will be adopted during the quarter ended September 30, 2003.

        Specifically, we are evaluating the beneficial ownership of two Grantor Trusts which we acquired in December 1996 and December 1994. The assets held by each Trust consist of a McDonnell Douglas DC-10 aircraft and three engines. In connection with the acquisitions, KCI paid cash of $7.2 million and $7.6 million, respectively. The Trusts held debt of $48.4 million and $51.8 million, respectively, which is non-recourse to KCI. The DC-10 aircraft are leased to the Federal Express Corporation through June 2012 and January 2012, respectively. Federal Express pays monthly rent to a third party who, in turn, pays the entire amount to the holders of the non-recourse indebtedness, which is secured by the aircraft. The holder's recourse in event of a default is limited to the Trusts assets.

        In April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This statement amends SFAS 133 to provide clarification on the financial accounting and reporting of derivative instruments and hedging activities and requires contracts with similar characteristics to be accounted for on a comparable basis. The Company does not expect the adoption of SFAS 149, which will be effective for contracts entered into or modified after June 30, 2003, to have a material effect on its financial condition or results of operations.

        On May 15, 2003, the FASB issued SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." The statement established standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. SFAS 150 must be applied immediately to instruments entered into or modified after May 31, 2003. We have applied the terms of SFAS 150 to the convertible preferred stock issued as a part of the recapitalization and determined that it should be classified as equity and will be reported in the mezzanine section of our balance sheet. All dividends paid or accrued on the preferred stock will be reported as dividends in the statement of earnings. (See notes 1 and 11 to the consolidated financial statements included elsewhere in this prospectus for further description of these items.)

61

BUSINESS

General

        Kinetic Concepts, Inc. is a global medical device company with leadership positions in (i) advanced wound care and (ii) therapeutic surfaces which treat and prevent complications resulting from patient immobility. We design, manufacture, market and service a wide range of proprietary products which can significantly improve clinical outcomes while reducing the overall cost of patient care by accelerating the healing process or preventing complications. We have an infrastructure designed to meet the specific needs of medical professionals and patients across all health care settings, including acute care hospitals, extended care facilities and patients' homes both in the United States and abroad.

        Our advanced wound care systems are transforming the treatment of difficult-to-treat wounds. These systems incorporate our proprietary Vacuum Assisted Closure, or V.A.C., technology, which has been clinically demonstrated to promote wound healing and reduce the cost of treating patients with difficult-to-treat wounds. V.A.C. systems help treat a broad spectrum of acute and chronic wounds including failed surgical closures, trauma wounds, partial thickness burns, serious pressure ulcers and diabetic ulcers and help improve outcomes of skin grafting procedures. V.A.C. systems work by applying negative pressure to wounds through proprietary foam dressings. V.A.C. therapy removes excess fluids that may interfere with wound healing, promotes growth of granulation tissue, draws the wound edges closer together, stimulates blood flow and reduces bacterial levels. V.A.C. therapy has been demonstrated to promote the healing of wounds that, in some cases, have been open for years.

        Our therapeutic surfaces, including specialty hospital beds, mattress replacement systems and overlays, are designed to address complications associated with immobility and obesity, such as pressure sores and pneumonia. These complications, if left untreated, can be life threatening. We offer a broad line of therapeutic surfaces designed to deliver pressure relief, pulmonary care and bariatric care. Our beds and mattress overlays help reduce the amount of pressure on a patient's skin by using air, foam, silicon beads or viscous fluid as support. We also manufacture beds which rotate to prevent and treat medical problems suffered by immobile patients, such as pneumonia and blood clots. Our line of bariatric care products, which are designed to accommodate obese individuals weighing up to 1,000 pounds, permits patients to be treated effectively and reduces the risk of injury to health care personnel related to handling these patients.

        Our customers generally prefer to rent our V.A.C. systems and therapeutic surfaces and purchase the related disposable products, such as V.A.C. dressings. Our network of 135 U.S. and 80 international service centers enables us to deliver products and services to our customers when needed. This allows our customers to obtain the right product for each patient when they need it, without having to purchase and store large numbers of irregularly used items, thus avoiding substantial capital investments and costs associated with complex asset management and internal logistics. Our rental model and service center network also benefit us by improving capital efficiency and facilitating our ability to introduce new products.

        We have extensive contractual relationships and reimbursement coverage for the V.A.C. in the United States. In acute and extended care, we have contracts with nearly all major hospital, and most major extended care, group purchasing organizations. Hospitals and extended care facilities pay us directly for our service. In the home care market we provide V.A.C. products and services directly to patients and bill third party payers, including Medicare and private insurance. V.A.C. systems are covered by Medicare Part B and we currently have V.A.C. contracts with private insurance covering over 110 million lives in the United States. This represents more than one-half of all individuals covered by private insurance in the United States and is five times the number of covered lives we had under contract as of mid-2000.

62

        During 2002, we served approximately 2,100 medium to large hospitals in the United States. Our principal acute care marketing and selling priorities focus on expanding penetration in these existing accounts. Our first priority is to expand usage of V.A.C. systems among current V.A.C. users to other types of wound care patients.

        Our second priority is to extend that usage to other physicians and wound care nurses in those facilities. At the same time, we have also initiated marketing and selling efforts focused on an additional 500 similarly sized hospitals that are not current V.A.C. customers.

Clinical Applications

        Our advanced medical devices and therapeutic surfaces address four principal clinical applications:

Wound Healing and Tissue Repair

        Of the more than 10 million wounds treated worldwide by doctors, hospitals and clinics each year, approximately 10%–15% are complex, life threatening or difficult-to-treat conditions. We are the leading provider, in terms of revenue, of advanced technology systems used to treat these difficult wounds. V.A.C. products account for over half of our revenue.

        We estimate that the annual market opportunity in the United States for V.A.C. systems is approximately one million patients, representing approximately $2.3 billion in revenue. We also believe there is a significant market for our systems internationally. We expect these markets to continue to grow, as a result of several factors, including the acceptance of V.A.C. therapy as a treatment for additional wound types, medical trends such as continued growth in the incidence of diabetes, and the aging population.

        In the acute care setting, serious trauma wounds, failed surgical closures, amputations (especially those resulting from complications of diabetes), burns covering a large portion of the body and serious pressure ulcers present special challenges to the physician. In addition, when surgeons use skin grafts to close wounds, a substantial portion are not fully effective. Physicians and hospitals need a therapy that addresses the special needs of these wounds with high levels of clinical and cost effectiveness. Given the high cost and infection risk of treating these patients in health care facilities, the ability to achieve healthy wound beds and reduce bacterial levels in the wound are particularly important. Our V.A.C. Classic and V.A.C. ATS systems are designed to meet these needs.

        In the extended care and home care settings, different types of wounds—with different treatment implications—present the most significant challenges. Although a substantial number of acute wounds require post-discharge treatment, a majority of the challenging wounds in the home care setting are non-healing chronic wounds. These wounds often involve physiologic and metabolic complications such as reduced blood supply, compromised lymphatic system or immune deficiency that interfere with the body's normal wound healing processes. Diabetic ulcers, arterial and venous insufficiency wounds and pressure ulcers are often slow-to-heal wounds. These wounds develop due to a patient's impaired vascular and tissue repair capabilities. These conditions can also inhibit a patient's healing process, and wounds that develop often fail to heal for many months, and sometimes for several years. Difficult-to-treat wounds do not always respond to traditional therapies, such as hydrocolloids, hydrogels and alginates. Physicians and nurses look for therapies that can promote the healing process and overcome the obstacles of the patients' compromised conditions. They also seek therapies that are easy to administer, especially in the home care setting, where full-time skilled care is generally not available. In addition, because many of these patients are ambulatory, they want therapies which are minimally disruptive to their lives. Our V.A.C., mini V.A.C. and the V.A.C. Freedom systems are designed to allow patients mobility to conduct normal lives while their wounds heal.

63

Therapies to Treat Complications of Immobility

        The most critically ill patient population is cared for in the intensive care unit, or ICU, of a hospital, where they can receive the most intense medical attention. Patients seen in the ICU usually suffer from serious acute and chronic complications from a wide variety of diseases and traumatic injuries. These patients often have, or develop, pulmonary complications, such as Acute Respiratory Distress Syndrome, directly resulting from their conditions or stemming from their impaired mobility. When a patient cannot move normally, due to spinal cord injury, stroke or other medical conditions, fluids tend to accumulate and the patient is at risk of developing pneumonia, blood clots and other medical problems. Some ICU patients are in such acute distress that their organ systems are at risk of failure and many are on some type of life-support. In 2001, there were approximately 1.6 million ICU patients in the United States with pulmonary complications and approximately 10,000 with unstable spinal cord injuries. Treating pulmonary complications requires special equipment and treatment methods. Because of the aggressive and specialized treatments required to address these life-threatening conditions, daily patient care costs in the ICU are relatively high. Our Kinetic Therapy systems provide movement to patients who cannot move themselves. These systems are designed to meet the special needs of ICU patients and have been shown in independent clinical studies to reduce the incidence of certain pulmonary complications and length of stay in the ICU. Our specialized therapies for ICU patients include the Roto Rest Delta and TriaDyne Proventa for the treatment of pulmonary complications associated with immobility. Movement is essential to human physiology.

Wound Treatment and Prevention

        Our therapeutic surfaces for pressure relief and pressure reduction provide therapy in the treatment of pressure sores, burns, ulcers, skin grafts and other skin conditions. They also help prevent the formation of pressure sores that develop in certain immobile individuals by reducing the amount of pressure on a patient's skin through the use of surfaces supported by air, foam, silicon beads, or viscous fluid. Our products also help to reduce shear, a major factor in the development of pressure ulcers, by reducing the amount of friction between the skin surface and the surface of the bed. In addition to providing pressure relief and pressure reduction, some of our products provide a pulsing of the surface cushions, known as pulsation therapy, which helps improve blood and lymphatic flow to the skin. Some of our products further promote healing and reduce nursing time by providing an automated "wound care" turn of approximately 25 degrees. This "nurse assist" feature reduces the need for nurses to manually turn and position patients.

Bariatric Care

        We offer a line of bariatric products, which are designed to accommodate obese individuals by providing the support they need and enabling hospital staff to care for them in a safe and dignified manner. Our bariatric care products generally are used for patients weighing from 300 to 600 pounds, although some are expandable and can accommodate patients weighing up to 1,000 pounds. These individuals are often unable to fit into standard-sized beds and wheelchairs. Our most sophisticated bariatric care products can serve as a bed, chair, weight scale and x-ray table, and provide therapeutic functions like those in our wound treatment and prevention systems. Moreover, treating obese patients is a significant staffing issue for many health care facilities because moving and handling obese patients increases the risk of injury to health care personnel. We believe that these products enable health care personnel to treat these patients in a manner which is safer for health care personnel and more dignified for the patient.

64

Products

        We offer a wide range of products in each clinical application to meet the specific needs of different subsets of the market, providing innovative, cost effective, outcome driven therapies across multiple care settings.

Wound Healing and Tissue Repair

        Our four wound healing and tissue repair systems incorporate our proprietary V.A.C. technology. A V.A.C. system consists of the therapy unit and four types of disposables:

•

foam dressing;



•

occlusive drape;



•

tube; and



•

canister.

        The therapy unit consists of a pump that generates negative pressure and internal software that controls and monitors the application of the therapy. The therapy can be programmed for each individualized use. Recent advancements, which are incorporated in our V.A.C. ATS and V.A.C. Freedom, enable the unit to flexibly control the time, rate and application of negative pressure to the wound and adapt its operations as it senses the progress of the application of the therapy to the originally targeted levels. The V.A.C. unit also responds in real time to problems encountered during use and alerts users to any blockage or other interference with the pre-set protocol. The system has a number of on screen user assist features such as treatment protocols and suggestions to address specific patient issues.

        The negative pressure therapy is delivered to the wound cavity through a proprietary foam dressing cut to fit the wound size. The dressing is connected to the therapy unit through a tube which both delivers the negative pressure and senses the pressure delivered to the wound surface. An occlusive drape covers the dressing and secures the foam, thereby allowing negative pressure to be maintained at the wound site. The canister collects the fluids, or exudates, and helps reduce odors through the use of special filters. V.A.C. dressings are typically changed every 48 hours for non-infected wounds versus traditional dressings which often require dressing changes one or more times per day. Our original V.A.C. dressings were designed either to maximize granulation tissue growth in large open wounds or to help close superficial wounds where excessive granulation is undesirable. Newer versions address the unique physical characteristics of wounds such as grafts, diabetic foot ulcers and abdominal compartment syndrome.

        Each of our wound healing and tissue repair systems is targeted to meet the needs of specific care settings and wound or patient requirements.

The V.A.C.^ATS System was introduced in 2002 to meet the acute care requirements for a flexible, easy-to-use, high-capacity system that is effective with the largest and most challenging trauma, orthopedic reconstruction and abdominal wounds. The V.A.C.^ATS incorporates advanced features and controls to provide flexibility to customize the treatment protocol to the requirements of different wound types and physician preferences. It also incorporates our proprietary T.R.A.C. technology, which enables the system to monitor pressure at the wound site and automatically adjust system operation to maintain the desired therapy protocol. It also enables smart alarms to help ensure patient safety, and simplifies dressing changes.

The V.A.C. Freedom System, also introduced in 2002, was designed to meet the requirements for a robust, lightweight, high-performance device suitable for ambulatory patients. Similar to the V.A.C.^ATS system, it incorporates advanced features and T.R.A.C. technology, but in a 3.2 lbs. package adapted for

65

convenient unobtrusive use by more active patients. It also includes special filters that help reduce wound odor, a common and embarrassing problem for many ambulatory wound patients, and a controlled drawdown feature that helps reduce pain when therapy is initiated. While the design of the V.A.C. Freedom system addresses the treatment needs of chronic wound patients, its 300 cc canister capacity also makes it appropriate for patients with highly exudating wounds.

The mini V.A.C. System was specially designed for patients who need high levels of mobility. At 2.2 lbs., it provides a convenient solution for patients needing advanced wound healing performance in a highly portable package. It is best suited for smaller and drier wounds due to its smaller canister.

The V.A.C. Classic System is a first-generation system that provides the basic therapeutic functionality and wound healing capability of our other V.A.C. products. For those who do not require the advanced features of our newer V.A.C. products, it provides our most economical advanced wound-healing package.

Therapies to Treat Complications of Immobility

        Our Kinetic Therapy products include the TriaDyne Proventa, TriaDyne II, Roto Rest Delta and PediDyne products. The TriaDyne line is used primarily in acute care settings and provides patients with three distinct therapies on an air suspension surface. The TriaDyne line applies Kinetic Therapy by rotating the patient up to 45 degrees on each side and provides a novel feature of simultaneously turning the patient's torso and lower body in opposite directions while keeping the patient positioned in the middle of the bed. Our products also provide percussion therapy to loosen mucous buildup in the lungs and pulsation therapy to promote capillary and lymphatic flow. The Roto Rest Delta is a specialty bed that can rotate a patient up to 62 degrees on each side for the treatment of severe pulmonary complications. The Roto Rest has been shown to improve the care of patients suffering from multiple trauma, spinal cord injury, severe pulmonary complications, respiratory failure and deep vein thrombosis.

Wound Treatment and Prevention

        We offer a wide variety of therapeutic surfaces for wound treatment and prevention, providing pressure relief, pressure reduction or pulsation. Our pressure relief products include a variety of framed beds and overlays such as the KinAir III, KinAir MedSurg and KinAir IV framed beds; the FluidAir Elite and FluidAir II; the FirstStep, FirstStep Plus, FirstStep Select, FirstStep Advantage and TriCell overlays; TheraRest and the AtmosAir family of mattress replacement and seating surfaces; and the RIK fluid mattress and overlay. Our pulsation products include the TheraPulse and TheraPulse II framed beds and the DynaPulse overlay.

        The KinAir III, KinAir MedSurg and KinAir IV have been shown to provide effective skin care therapy in the treatment of pressure sores, burns and post-operative skin grafts and flaps and to help prevent the formation of pressure sores and certain other complications of immobility. The FluidAir Elite and FluidAir II support the patient on a low-pressure surface of air-fluidized beads providing pressure relief and shear relief for skin grafts or flaps, burns and pressure sores. The FirstStep family of overlays is designed to provide pressure relief and help prevent and treat pressure sores. Both the AtmosAir family and the TheraRest products are for-sale mattress replacement products for the prevention of pressure sores. The proprietary AtmosAir utilizes atmospheric pressure to deliver dynamic pressure relief. The RIK mattress and the RIK overlay are static, non-powered products that provide pressure relief using a patented viscous fluid and a patented anti-shear layer.

        The TheraPulse and TheraPulse II framed beds and the DynaPulse overlay provide a more aggressive form of treatment through a continuous pulsating action which gently massages the skin to help improve capillary and lymphatic circulation in patients suffering from severe pressure sores, burns, skin grafts or flaps, swelling or circulatory problems.

66

Bariatric Care

        Our bariatric products provide a range of therapy options and the proper support needed by obese patients and enable nurses to properly care for these patients in a safe and dignified manner. The most advanced product in this line is the BariAir therapy system, which can serve as a bed, cardiac chair or x-ray table. The BariAir provides low air loss pressure relief, continuous turn assist, percussion and step-down features designed for both patient comfort and nurse assistance. This product can be used for patients who weigh up to 850 pounds. We believe that the BariAir is the most advanced product of its type available today. The BariKare bed is our most frequently used bariatric product. It provides a risk management platform for patients weighing up to 850 pounds and is used primarily in hospitals. In 1996, we introduced the FirstStep Select Heavy Duty overlay which, when placed on a BariKare bed, provides pressure-relieving therapy. Our AirMaxxis product provides a therapeutic air surface for the home environment for patients weighing up to 650 pounds. The Maxxis 300 and Maxxis 400 provide a home care bariatric bed frame for patients weighing up to 600 pounds and 1,000 pounds, respectively.

        The newest product in our bariatric product line is the BariMaxx II. The BariMaxx II provides a basic risk management platform for patients weighing up to 1,000 pounds for those customers looking for a set of features including built-in scales and an expandable frame at a lower cost. Additionally, the BariMaxx II side exit feature allows the caregiver to assist patients in a more traditional exit of the bed. This is an important factor in a patient's rehabilitation and prepares them for facility discharge. Our bariatric beds are now combined with an EZ-Lift patient transfer system and other accessories such as wheelchairs, walkers and commodes to create a complete bariatric offering.

Corporate Organization

        Our business has two geographical segments: USA and International.

        With approximately 1,575 employees as of June 30, 2003, our USA division serves the domestic acute care, extended care and home care markets with the full range of our products. The domestic division distributes our medical devices and therapeutic surfaces to over 3,400 acute care hospitals and more than 4,200 extended care facilities and also directly serves the home care market through our service center network. Our USA division accounted for approximately 77%, 78% and 73% of our total revenue in the years ended December 31, 2002, 2001 and 2000, respectively.

        During 2002, our International division had direct operations in 15 foreign countries including Germany, Austria, the United Kingdom, Canada, France, the Netherlands, Switzerland, Australia, Italy, Denmark, Sweden, Ireland, Belgium, Spain and South Africa. The International division distributes our medical devices and therapeutic surfaces through a network of 80 service centers. Our international corporate office is located in Amsterdam, the Netherlands. As of June 30, 2003, international manufacturing and engineering operations are based in the United Kingdom. In addition, our International division serves the demands of a growing global market through relationships with approximately 70 active independent distributors in Latin America, the Middle East, Asia and Eastern Europe. The International division consists of approximately 1,050 employees who are responsible for all sales, service and administrative functions within the various countries we serve. Our International division accounted for approximately 23%, 22% and 27% of our total revenue in the years ended December 31, 2002, 2001 and 2000, respectively.

Sales and Marketing Organization

        We have broad reach across all health care settings. In the United States, for example, we have relationships with more than more than 3,400 acute care hospitals, more than 4,200 extended care facilities and approximately 2,700 home health care agencies. Our worldwide sales organization consists of approximately 1,050 individuals, many with medical or clinical backgrounds. Our sales organization is organized by care setting. Since physicians and nurses are critical to the adoption and use of advanced

67

medical devices, a major element of the sales force's responsibility is to educate and train these medical practitioners in the application of our products, including the specific knowledge necessary to assure that the use of our devices results in optimal clinical and economic outcomes. In 2003, we expect that our sales staff will make more than 110,000 contacts with these targeted clinical decision-makers. In addition we employ approximately 85 field-based specialists who train and consult with our customers regarding the often demanding and complex paperwork required by Medicare and private insurance companies.

        Our domestic sales support staff includes approximately 350 employees with medical or clinical backgrounds. The principal responsibility of approximately 200 of these clinicians is to make product rounds and assist facilities and home health agencies to develop their protocols. Our clinicians educate the hospital, long-term care facility or home health agency staff on the use of our products.

        Our international sales support staff includes more than 350 employees in 15 foreign countries. In addition, in each foreign market where we have a presence, we sell our products through our direct sales force or through local distributors with local expertise.

Service Organization

        Our USA division has a national 24-hour, seven day-a-week customer service communications system, which allows us to quickly and efficiently respond to our customers' needs. The domestic division distributes our medical devices and therapeutic surfaces to more than 3,400 acute care hospitals and more than 4,200 extended care facilities through a network of 135 domestic service centers and also directly serves the home care market through our extensive service center network. Our USA division's network gives us the ability to deliver our products to any major Level I domestic trauma center within hours. Our International division distributes our medical devices and therapeutic surfaces through a network of 80 service centers.

        In addition to delivery, pick-up, and technical support services, our service organization cleans, disinfects, and reconditions products between rentals. To assure availability when products are needed, the service organization manages our rental fleet of approximately 50,000 units, deploying units to meet individual service center demand patterns while maintaining high levels of rental asset utilization. Service is provided by more than 750 people in the United States and more than 380 people internationally.

Research and Development

        Innovation, through new products and significant enhancements to existing products, is essential to our success. It is one of the most critical components of the value we provide to our customers. Our primary focus for innovation is to increase the clinical and economic benefit of our products to our customers and their patients. In addition, we strive to make our products user-friendly and increase their operational efficiency, both of which are critical in the demanding and sometimes short-staffed world of health care today. Significant investments in our 2002 research and development included:

•

new wound healing devices and dressing types tailored to the needs of different care settings and wound types;



•

new technologies in wound healing and tissue repair;



•

new applications of V.A.C. technology and enhanced therapeutic effectiveness through improved understanding of the V.A.C. systems' various mechanisms of action;



•

new therapeutic surface to address critical needs of Acute Respiratory Distress Syndrome, cardiac arrest and stroke patients; and



•

significant upgrades to several of our core therapeutic surfaces products.

68

        Expenditures for research and development in each of the last three years ended December 31, were as follows (dollars in thousands):

	Fiscal
	2000			2001			2002
Research and development spending	$	7,000		$	12,492		$	15,952
Percentage of total revenue		2	%		3	%		3	%

        In addition, we are conducting 11 prospective, randomized and controlled clinical studies specifically designed to provide statistically significant evidence of V.A.C. therapy's clinical efficacy for treating a wide range of targeted wound types.

Manufacturing

        We entered into a sole-source agreement with Avail for our disposable products related to V.A.C. systems, effective October 2002, for our U.S. related orders and which will commence in mid-2003 for our international related orders. This supply agreement has a three-year term with an automatic extension for an additional twelve months if neither party gives notice of termination. Either party may terminate this supply agreement without cause upon 24-months' written notice. In 2002, approximately 13% of our total revenue was generated from the sale of these disposable supplies. We, together with Avail, will maintain certain levels of on-hand supply. In the event that Avail is unable to fulfill the terms of this agreement, we have identified other suppliers that could provide such inventory to meet our needs. However, in the event that we are unable to replace a shortfall in supply, our revenue could be negatively impacted in the short term.

Competition

        We believe that the principal competitive factors within our markets are clinical efficacy, cost of care, clinical outcomes and service. Furthermore, we believe that a national presence with full distribution capabilities is important to serve large, national and regional health care group purchasing organizations or GPOs. We have contracts with nearly all major hospital, and most major extended care, GPOs for the V.A.C. The medical device industry is highly competitive and is characterized by rapid product development and technological change. In order to remain competitive with other companies in our industry, we must continue to develop new cost-effective products and technologies.

        In wound healing and tissue repair, we compete with other treatment methods offered by a number of companies in the advanced wound care business. These methods are substantially different than the V.A.C. and include traditional wound care dressings, advanced wound care dressings (hydrogels, hydrocolloids, alginates), skin substitutes, products containing growth factors and medical devices used for wound care. Many of these devices can be used to compete with the V.A.C. or as adjunctive therapy which complements the V.A.C. For example, caregivers may use one of our V.A.C. systems to prepare a healthy wound bed in order to reduce the wound size, and then use a skin substitute to manage the wound to final closure.

        With respect to therapeutic surfaces for treatment of pulmonary complications in the ICU, wound treatment and prevention and bariatric care, our primary competitors are Hill-Rom Company, Huntleigh Healthcare and Pegasus Limited. We also compete on a regional, local and market segment level with a number of smaller companies.

69

Market Outlook

Health Care Reform

        Health care reform legislation will most likely remain focused on reducing the cost of health care. We believe that efforts by private payers to contain costs through managed care and other efforts will continue in the future as efforts to reform the health care system continue. The Balanced Budget Act of 1997 (the "BBA") significantly reduced the annual increases in federal spending for Medicare and Medicaid, changed the payment system for both skilled nursing facilities ("SNFs") and home health care services from cost-based to prospective payment systems and allowed states greater flexibility in controlling Medicaid costs at the state level. Although certain increases in reimbursement payments have subsequently been approved, the overall effect of the BBA continues to place increased pricing pressure on us and our customers. In particular, the changes in the method by which Medicare Part A reimburses SNFs has dramatically changed the manner in which our SNF customers make rental and purchase decisions.

        Certain portions of the BBA were amended by the Balanced Budget Refinement Act of 1999 (the "Refinement Act") and the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 ("BIPA"). In essence, the Refinement Act and BIPA attempted to lessen the detrimental economic impact which the BBA had on the health care industry. Regarding SNF reimbursement, some payment relief had been provided under the Refinement Act and BIPA, however, some of the relief expired on September 30, 2002. Because that reimbursement relief was not carried over into 2003, our therapeutic surfaces revenue in the extended care market is down approximately 12% for the six months ended June 30, 2003 as compared to the same period in 2002.

        On February 11, 2003, the Centers for Medicare and Medicaid Services ("CMS," formerly the Health Care Financing Administration) made effective an interim final rule implementing "inherent reasonableness" authority, which allows the agency and carriers to adjust payment amounts by up to 15% per year for certain items and services covered by Medicare Part B when the existing payment amount is determined to be grossly excessive or grossly deficient. The regulation lists factors that may be used by CMS and the carriers to determine whether an existing reimbursement rate is grossly excessive or grossly deficient and to determine what is a realistic and equitable payment amount. CMS may make a larger adjustment each year if they undertake prescribed procedures for determining the appropriate payment amount for a particular service. Using this authority, CMS and the carriers may reduce reimbursement levels for certain items and services covered by Medicare Part B.

        In addition, the BBA authorized CMS to explore possible ways of changing Medicare reimbursement rates so that they better reflect market levels. Specifically, the BBA authorized CMS to implement up to five competitive bidding systems by December 31, 2002, to evaluate how competitive bidding would impact Medicare program payments, access, diversity of product selection and quality. Under competitive bidding, CMS would change its approach to reimbursing products and services covered by Medicare Part B from the current fee schedule amount to an amount that would be established through a bidding process between the agency and suppliers. Two systems covering eight products have been completed and federal lawmakers are now considering expanding competitive bidding to the national level, which could reduce the number of suppliers providing products and services to Medicare beneficiaries and the amounts paid for such products and services. We do not know what impact inherent reasonableness and competitive bidding, if expanded to a national level, would have on us or the reimbursement of our products.

Health Insurance Portability and Accountability Act (HIPAA) Compliance

        The Health Insurance Portability and Accountability Act of 1996 ("HIPAA") covers a variety of provisions which will impact our business including the privacy of patient health care information, the security of that information and the standardization of electronic data transactions for billing. Sanctions

70

for violating HIPAA include criminal penalties and civil sanctions. The U.S. Department of Health and Human Services has promulgated regulations pursuant to a legislative mandate in HIPAA, which became effective in April 2003. In order to ensure our compliance with the HIPAA regulations by the April 2003 deadline, KCI established a multi-disciplinary HIPAA Compliance Team, which defined the legal requirements, reviewed KCI's prior HIPAA compliance efforts and developed a comprehensive compliance plan. We also designated a HIPAA Privacy Officer and HIPAA Information Security Officer to oversee the implementation of the compliance plan and monitor modifications to the current regulations.

        HIPAA regulations regarding standardization of electronic data billing transactions will also impact our business. At the present time, we invoice third-party payers using a variety of different systems. When the American National Standard Institute format for electronic data billing transactions is implemented in 2003, as required by HIPAA, we will transition our billing to that standardized format. In some instances, it may be difficult for us to differentiate between products which are covered by a single billing code but have different prices. Therefore, we have applied to CMS for additional product codes to support our current billing practices. However, there can be no assurance that CMS will establish any or all of the requested billing codes. We are beginning to work with our vendors in order to make the transition to standardized billing codes as smooth as possible. However, there can be no assurance that the transition to standardized billing codes will not create billing difficulties or business interruptions for us.

        Our cost of compliance with HIPAA could be significant. Moreover, although we believe our business practices comply with HIPAA, there can be no assurance that our practices will not be challenged under these laws in the future or that such a challenge would not have a material adverse effect on our business, financial condition or results of operations.

Consolidation of Purchasing Entities

        The many health care reform initiatives in the United States have caused health care providers to examine their cost structures and reassess the manner in which they provide health care services. This review, in turn, has led many health care providers to merge or consolidate with other members of their industry in an effort to reduce costs or achieve operating synergies. A substantial number of our customers, including proprietary hospital groups, GPOs, hospitals, national nursing home companies and national home health care agencies, have been affected by this consolidation. An extensive service and distribution network and a broad product line are key to servicing the needs of these larger provider networks. In addition, the consolidation of health care providers often results in the re-negotiation of contracts and the granting of price concessions. Finally, as GPOs and integrated health care systems increase in size, each contract represents a greater concentration of market share and the adverse consequences of losing a particular contract increases considerably.

Reimbursement of Health Care Costs

        The demand for our products is dependent in part on the reimbursement policies of the various payers. In order to be reimbursed, products generally must be found to be reasonable and necessary for the diagnosis or treatment of medical conditions and must otherwise fall within the payers' recognized categories of covered items and services. Our products are either rented or purchased, principally by hospitals and SNFs which receive reimbursement for the products and services they provide from various public and private third-party payers, including Medicare, Medicaid and private insurance programs. In the home care market, we provide our products and services to patients and bill insurance companies, including Medicare Part B and private insurance.

        The importance of payer coverage policies was recently demonstrated by our experience with our V.A.C. technology in the home care setting. On October 1, 2000, a Medicare Part B policy was

71

approved, which provided for reimbursement codes, an associated coverage policy and allowable rates for the V.A.C. devices and V.A.C. disposable products in the home care setting. The policy facilitated claims processing, permitted electronic claims submissions and created a more uniform claims review process. Because many payers look to Medicare for guidance in coverage, a specific Medicare policy is often relied upon by other payers.

        A significant portion of our wound healing device revenue is derived from home placements, which are reimbursed by both governmental and non-governmental third-party payers. The reimbursement process for home care placements requires extensive documentation, which has slowed the cash receipts cycle relative to the rest of the business.

        In light of increased scrutiny on Medicare spending, there can be no assurance regarding the outcome of future coverage or payment decisions for any of our products or services by governmental or non-governmental third-party payers. (See "Business—Market Outlook.")

Patient Demographics

        U.S. Census Bureau statistics indicate that the 65-and-over age group is one of the fastest growing population segments and is expected to be approximately 40 million by the year 2010. Management of wounds and circulatory problems is crucial for elderly patients. These patients frequently suffer from deteriorating physical conditions and their wound problems are often exacerbated by circulatory problems, incontinence and poor nutrition.

        Obesity is increasingly being recognized as a serious medical complication. In 2001, approximately 1,135,000 patients in U.S. hospitals had a primary or secondary diagnosis of obesity. Obese patients tend to have limited mobility and are, therefore, at risk for circulatory problems and skin breakdown.

Properties and Facilities

        Our corporate headquarters are currently located in a 170,400 square foot building in San Antonio, Texas, which was originally purchased in January 1992. In June 1997, we acquired a 2.6-acre tract of land adjacent to our corporate headquarters. There are four buildings on the land which contain an aggregate of approximately 40,000 square feet. In August 2002, we sold our corporate headquarters facility and adjacent land and buildings under a 10-year sale/leaseback arrangement. We utilize approximately 143,000 square feet of the headquarters building with the remaining space being leased to unrelated entities. We also lease approximately 28,300 square feet of the adjacent buildings that are used for general corporate purposes. In addition, in October 2001, we entered into a 66-month lease of office space at another location in San Antonio to be used as our customer service center. As of December 31, 2002, we leased approximately 88,500 square feet of office space under this lease.

        We conduct domestic manufacturing, shipping, receiving, engineering and storage activities in a 171,100 square foot facility in San Antonio, Texas, which we purchased in January 1988, and an adjacent 32,600 square foot facility purchased in 1993. Operations are conducted with approximately 75% cumulative utilization of plant and equipment. We also lease two storage facilities in San Antonio, Texas. We lease approximately 135 domestic distribution centers, including each of our seven regional headquarters.

        Internationally, we lease approximately 80 service centers. Our international corporate office is located in Amsterdam, The Netherlands. International manufacturing and engineering operations are based in the United Kingdom and are conducted in an 24,800 square foot plant, with 100% cumulative utilization of plant and equipment.

72

        The following is a summary of our major facilities:

Location	Description	Segment	Owned or Leased
KCI Tower, 8023 Vantage Drive San Antonio, TX	Corporate Headquarters	KCI	Leased
4958 Stout Drive San Antonio, TX	Manufacturing Plant	KCI	Owned
KCI North 5800 Farinon Drive, San Antonio, TX	Customer Service Center	KCI USA	Leased
Regus Building, Beech Avenue 54-80, 1119 PW Schipol-Rijk, The Netherlands	International Corporate Headquarters	KCI International	Leased
Unit 12, 11 Nimrod Way, Wimbome, Dorset, United Kingdom	Manufacturing Plant	KCI International	Leased

Patents, Trademarks and Licenses

        We rely on a combination of patents, copyrights, trademarks, trade secret and other laws, and contractual restrictions on disclosure, copying and transfer of title, including confidentiality agreements with vendors, strategic partners, co-developers, employees, consultants and other third parties, to protect our proprietary rights in our products, new developments, improvements and inventions. We seek patent protection in the United States and abroad. We have approximately 100 issued U.S. patents relating to our existing and prospective lines of therapeutic surfaces and medical devices. We also have more than 50 pending U.S. patent applications. Many of our specialized beds, medical devices and services are offered under proprietary trademarks and service marks. We have more than 45 trademarks and service marks registered with the United States Patent and Trademark Office. We also have agreements with third parties that provide for licensing of patented or proprietary technology.

        Most of the V.A.C. patents in our patent portfolio have an average life of 20 years from their date of filing. Our base V.A.C. patents begin to expire in 2013. However, many of our follow-on patents are relatively young. We have multiple patents covering unique aspects and improvements for the system.

        On October 6, 1993, we entered into a license agreement with Wake Forest University that we rely on in connection with our V.A.C. business. Under this agreement, Wake Forest University licensed to us on a worldwide, exclusive basis the right to use, lease, sell and sublicense its rights to certain patents that are integral to the technology that we incorporate in our V.A.C. products. The term of the agreement continues for as long as the underlying patents are in effect, subject to Wake Forest University's right to terminate earlier if we fail to make required royalty payments or are otherwise in material breach or default of the agreement.

Employees

        As of June 30, 2003, we had 3,817 employees. Approximately 1,350 of these employees are located in San Antonio, Texas and perform functions associated with corporate, manufacturing, finance and administration. Our employees are not represented by labor unions and we consider our employee relations to be good.

73

Government Regulation

United States

        Our products are subject to regulation by numerous governmental authorities, principally the United States Food and Drug Administration, or the FDA, and corresponding state and foreign regulatory agencies. Pursuant to the Federal Food, Drug, and Cosmetic Act, and the regulations promulgated thereunder, the FDA regulates the clinical testing, manufacture, labeling, distribution, sale and promotion of medical devices. Noncompliance with applicable requirements can result in, among other things, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, failure of the government to grant pre-market clearance or pre-market approval for devices, withdrawal of marketing clearances or approvals and criminal prosecution. The FDA also has the authority to demand the repair, replacement or refund of the cost of any device that we manufacture or distribute that violates statutory or regulatory requirements.

        In the United States, medical devices are classified into one of three classes (Class I, II or III) on the basis of the controls deemed necessary by the FDA to reasonably ensure their safety and effectiveness. Although many Class I devices are exempt from certain FDA requirements, Class I devices are subject to general controls (for example, labeling, pre-market notification and adherence to the Quality System Regulations). Class II devices are subject to general and special controls (for example, performance standards, post-market surveillance, patient registries and FDA guidelines). Generally, Class III devices are high-risk devices that receive significantly greater FDA scrutiny to ensure their safety and effectiveness (for example, life-sustaining, life-supporting and implantable devices, or new devices which have been found not to be substantially equivalent to legally marketed Class I or Class II devices). Before a new medical device can be introduced in the market, the manufacturer must generally obtain FDA clearance ("510(k) clearance") or pre-market application ("PMA") approval. All of our current products have been classified as Class I or Class II devices, which typically are marketed, based upon 510(k) clearance or related exemptions. A 510(k) clearance will generally be granted if the submitted information establishes that the proposed device is "substantially equivalent" in intended use and technological characteristics to a legally marketed Class I or Class II medical device or to a Class III device on the market since May 28, 1976, for which PMA approval has not been required. A PMA approval requires proof to the FDA's satisfaction of the safety and effectiveness of a Class III device. A clinical study is generally required to support a PMA application and is sometimes required for a 510(k) pre-market notification. For "significant risk" devices, such clinical studies generally require submission of an application for an Investigational Device Exemption, or IDE. The FDA's 510(k) clearance process usually takes from four to twelve months, but may take longer. The PMA approval process is much more costly, lengthy and uncertain. The process generally takes from one to three years, however, it may take even longer.

        Devices that we manufacture or distribute are subject to pervasive and continuing regulation by the FDA and certain state agencies, including record-keeping requirements and mandatory reporting of certain adverse experiences resulting from use of the devices. Labeling and promotional activities are subject to regulation by the FDA and, in certain circumstances, by the Federal Trade Commission. Current FDA enforcement policy prohibits the marketing of approved medical devices for unapproved uses and the FDA scrutinizes the labeling and advertising of medical devices to ensure that unapproved uses of medical devices are not promoted.

        Manufacturers of medical devices for marketing in the United States are required to adhere to applicable regulations, including the Quality System Regulation ("QSR," formerly the Good Manufacturing Practice regulation), which imposes design, testing, control and documentation requirements. Manufacturers must also comply with the Medical Device Reporting ("MDR") regulation, which generally requires that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or

74

contribute to a death or serious injury if it were to recur. We are subject to routine inspection by the FDA and certain state agencies for compliance with QSR requirements, MDR requirements and other applicable regulations.

Fraud and Abuse Laws

        The Company may also be subject to federal and state physician self-referral laws. Federal physician self-referral legislation (commonly known as the Stark Law) prohibits, subject to certain exceptions, physician referrals of Medicare and Medicaid patients to an entity providing certain "designated health services" if the physician or an immediate family member has any financial relationship with the entity. The Stark Law also prohibits the entity receiving the referral from billing any good or service furnished pursuant to an unlawful referral, and any person collecting any amounts in connection with an unlawful referral is obligated to refund such amounts. Various states have corollary laws to the Stark Law, including laws that require physicians to disclose any financial interest they may have with a health care provider to their patients when referring patients to that provider. Both the scope and exceptions for such laws vary from state to state.

        In addition, HIPAA created two new federal crimes: (i) health care fraud and (ii) false statements relating to health care matters. The health care fraud statute prohibits knowingly and willfully executing or attempting to execute a scheme or artifice to defraud any health care benefit program, including private payers. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation in connection with the delivery of or payment for health care benefits, items or services. This statute applies to any health benefit plan, not just Medicare and Medicaid. Additionally, HIPAA granted expanded enforcement authority to the U.S. Department of Health and Human Services and the U.S. Department of Justice ("DOJ") and provided enhanced resources to support the activities and responsibilities of the Office of the Inspector General ("OIG") and DOJ by authorizing large increases in funding for investigating fraud and abuse violations relating to health care delivery and payment.

        Under separate statutes, submission of claims for payment or causing such claims to be submitted that are "not provided as claimed" may lead to civil money penalties, criminal fines and imprisonment, and/or exclusion from participation in Medicare, Medicaid and other federally funded state health programs. These false claims statutes include the federal False Claims Act, which prohibits the knowing filing of a false claim or the knowing use of false statements to obtain payment from the U.S. federal government. When an entity is determined to have violated the False Claims Act, it must pay three times the actual damages sustained by the government, plus mandatory civil penalties of between $5,500 and $11,000 for each separate false claim. Suits filed under the False Claims Act, known as "qui tam" actions, can be brought by any individual on behalf of the government and such individuals (known as "relators" or, more commonly, as "whistleblowers") may share in the amounts paid by the entity to the government in fines or settlement. In addition, certain states have enacted laws modeled after the federal False Claims Act. Qui tam actions have increased significantly in recent years causing greater numbers of health care companies to have to defend false claim actions, pay fines or be excluded from the Medicare, Medicaid or other federal or state health care programs as a result of an investigation arising out of such action. Because we directly submit claims for payment for certain of our products, we are subject to these false claims statutes, and, therefore, could become subject to "qui tam" actions.

        The OIG has taken certain actions, which suggest that arrangements between manufacturers or suppliers of durable medical equipment or medical supplies and SNFs (or other providers) may be under continued scrutiny. In June 1995, the OIG issued a Special Fraud Alert setting forth fraudulent and abusive practices that the OIG had observed in the home health industry. Later that same year, OIG issued another Special Fraud Alert describing certain relationships between SNFs and suppliers that the OIG viewed as abusive under the federal anti-kickback statute. In July 1999, the OIG

75

published OIG compliance program guidance for the durable medical equipment, prosthetics, orthotics and supply (DMEPOS) industry developed by the OIG in cooperation with, and with input from, the Health Care Financing Administration ("HCFA"), which is now known as the Centers for Medicare and Medicaid Services, the DOJ and representatives of various trade associations and health care practice groups. The guidance identifies specific areas of DMEPOS industry operations that may be subject to fraud and abuse. Furthermore, the OIG Work Plan for 2002 focused on arrangements between durable medical equipment manufacturers and/or suppliers. These initiatives create an environment in which there will continue to be significant scrutiny regarding compliance with federal and state fraud and abuse laws.

        Several states also have referral, fee splitting and other similar laws that may restrict the payment or receipt of remuneration in connection with the purchase or rental of medical equipment and supplies. State laws vary in scope and have been infrequently interpreted by courts and regulatory agencies, but may apply to all health care products or services, regardless of whether Medicaid or Medicare funds are involved.

Claims Audits

        The industry in which we operate is generally characterized by long collection cycles for accounts receivable due to complex and time-consuming documentation requirements for obtaining reimbursement from private and governmental third-party payers. Such protracted collection cycles can lead to delays in obtaining reimbursement. Moreover, the four durable medical equipment regional carriers ("DMERCs"), private organizations that contract to serve as the government's agents for the processing of claims for products and services provided under Part B of the Medicare program for home use, and Medicaid agencies periodically conduct pre-payment and post-payment reviews and other audits of claims submitted. Medicare and Medicaid agents are under increasing pressure to scrutinize health care claims more closely. Reviews and/or similar audits or investigations of our claims and related documentation could result in denials of claims for payment submitted by us. Further, the government could demand significant refunds or recoupments of amounts paid by the government for claims which, upon subsequent investigation, are determined by the government to be inadequately supported by the required documentation.

        On June 20, 2003, we received two letters from the Region A DMERC concerning the results of a post-payment review conducted on Medicare Part B claims for our V.A.C. systems and related disposables for dates of service between January 1, 2000 and December 31, 2001. We received a third and final letter on June 27, 2003. The reviews, which concern 30 claims at each of our top three billing locations in Region A, identified certain medical record documentation deficiencies. This resulted in an alleged overpayment to us of approximately $620,000. Subsequently, we submitted rebuttal documentation for claims used in all three audits. Upon review of our submissions, the Region A DMERC reduced the overpayment for the three audits to a total of approximately $110,000.

ISO Certification

        Due to the harmonization efforts of a variety of regulatory bodies worldwide, certification of compliance with the ISO 9000 series of International Standards ("ISO Certification") has become particularly advantageous and, in certain circumstances, necessary for many companies in recent years. We received ISO 9001 and EN46001 Certification in the fourth quarter of 1997 and Medical Device Agency registration in the fourth quarter of 2002 and therefore are certified to apply the CE mark for direct selling and distributing of our products within the European community. In addition, we received certification for ISO 13485 in the fourth quarter of 2002 and certification with Health Canada and, therefore, are certified to sell and distribute our products within Canada.

76

Environmental Laws

        We are subject to various federal, state and local environmental laws and regulations that govern our operations, including the handling and disposal of nonhazardous and hazardous substances and wastes, and emissions and discharges into the environment. Failure to comply with such laws and regulations could result in costs for corrective action, penalties or the imposition of other liabilities. We also are subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment. Under certain of these laws and regulations, such liabilities can be imposed for cleanup of previously owned or operated properties, or properties to which substances or wastes were sent from current or former operations at our facilities. From time to time, we have incurred costs and obligations for correcting environmental noncompliance matters and for cleanup of certain of our properties and third party sites. We believe we have complied with our environmental obligations to date in all material respects and that such liabilities will not have a material adverse effect on our business or financial performance. There can be no assurance, however, that such liabilities in the future would not have a material adverse effect on our business or financial performance.

Other Laws

        We are subject to numerous federal, state and local laws and regulations relating to such matters as safe working conditions, manufacturing practices and fire hazard control.

International

        Sales of medical devices outside of the United States are subject to regulatory requirements that vary widely from country to country. Pre-market clearance or approval of medical devices is required by certain countries. The time required to obtain clearance or approval for sale in a foreign country may be longer or shorter than that required for clearance or approval by the FDA and the requirements vary. Failure to comply with applicable regulatory requirements can result in loss of previously received approvals and other sanctions and could have a material adverse effect on our business, financial condition or results of operations.

Reimbursement

        Our products are rented and sold principally to hospitals, extended care facilities and directly to patients who receive payment coverage for the products and services they utilize from various public and private third-party payers, including the Medicare and Medicaid programs and private insurance plans. In the home care market, we provide our products and services to patients and bill insurance companies, including Medicare Part B and private insurance. As a result, the demand and payment for our products are dependent, in part, on the reimbursement policies of these payers. The manner in which reimbursement is sought and obtained for any of our products varies based upon the type of payer involved and the setting to which the product is furnished and in which it is utilized by patients.

        We believe that government and private efforts to contain or reduce health care costs are likely to continue. These trends may lead third-party payers to deny or limit reimbursement for our products, which could negatively impact the pricing and profitability of, or demand for, our products.

Medicare

        Medicare is a federally funded program that provides health coverage primarily to the elderly and disabled. Medicare is composed of three parts: Part A, Part B and Part C. Medicare Part A (hospital insurance) covers, among other things, inpatient hospital care, home health care and skilled nursing facility services. Medicare Part B (supplemental medical insurance) covers various services, including those services provided on an outpatient basis. Medicare Part B also covers medically necessary durable medical equipment and medical supplies. Medicare Part C, also known as "Medicare+Choice," offers beneficiaries a choice of various types of health care plans, including several managed care options. The Medicare program has established guidelines for the coverage and reimbursement of certain equipment, supplies and support services. In general, in order to be reimbursed by Medicare, a health care item or service furnished to a Medicare beneficiary must be reasonable and necessary for the diagnosis or treatment of an illness or injury or to improve the functioning of a malformed body part. Effective October 1, 2000, we received Medicare Part B reimbursement codes, an associated coverage policy and allowable rates for our V.A.C. systems and related disposables in the home care setting.

77

        The methodology for determining the amount of Medicare reimbursement of our products varies based upon, among other things, the setting in which a Medicare beneficiary receives health care items and services. Most of our products are furnished in a hospital, skilled nursing facility or the beneficiary's home.

Hospital Setting

        Since the establishment of the prospective payment system in 1983, acute care hospitals are generally reimbursed for certain patients by Medicare for inpatient operating costs based upon prospectively determined rates. Under the prospective payment system, or PPS, acute care hospitals receive a predetermined payment rate based upon the Diagnosis-Related Group, or DRG, which is assigned to each Medicare beneficiary's stay, regardless of the actual cost of the services provided. Certain additional or "outlier" payments may be made to a hospital for cases involving unusually high costs or lengths of stay. Accordingly, acute care hospitals generally do not receive direct Medicare reimbursement under PPS for the distinct costs incurred in purchasing or renting our products. Rather, reimbursement for these costs is included within the DRG-based payments made to hospitals for the treatment of Medicare-eligible inpatients who utilize the products. Long-term care and rehabilitation hospitals also are now paid under a PPS rate that does not directly account for all actual services rendered. Since PPS payments are based on predetermined rates, and may be less than a hospital's actual costs in furnishing care, hospitals have incentives to lower their inpatient operating costs by utilizing equipment and supplies, such as our products, that will reduce the length of inpatient stays, decrease labor or otherwise lower their costs.

        Certain specialty hospitals also use our products. Such specialty hospitals are exempt from the PPS and, subject to certain cost ceilings, are reimbursed by Medicare on a reasonable cost basis for inpatient operating and capital costs incurred in treating Medicare beneficiaries. Consequently, such hospitals may have additional Medicare reimbursement for reasonable costs incurred in purchasing or renting our products. There has been little experience with PPS for long-term care and rehabilitation hospitals. A final rule for rehabilitation hospital PPS became effective on January 1, 2002. A final ruling was published in October 2002 implementing PPS for long-term care hospitals, effective January 1, 2003. We cannot predict the impact of the rehabilitation hospital PPS or the long-term care hospital PPS on the health care industry or on our financial position or results of operations.

Skilled Nursing Facility Setting

        On July 1, 1998, reimbursement for SNFs under Medicare Part A changed from a cost-based system to a prospective payment system which is based on resource utilization groups ("RUGs"). Under the RUGs system, a Medicare patient in a SNF is assigned to a RUGs category upon admission to the facility. The RUGs category to which the patient is assigned depends upon the medical services and functional support the patient is expected to require. The SNF receives a prospectively determined daily payment based upon the RUGs category assigned to each Medicare patient. These payments are intended generally to cover all inpatient services for Medicare patients, including routine nursing care, capital-related costs associated with the inpatient stay and ancillary services. Effective July 2002, the daily payments were based on the national average cost. Although the Refinement Act and BIPA increased the payments for certain RUGs categories, certain provisions of the Refinement Act and BIPA covering these payment increases expired on September 30, 2002 and, in effect, the RUGs rates for the most common categories of SNF patients decreased. Because the RUGs system provides SNFs with fixed daily cost reimbursement, SNFs have become less inclined to use products which had previously been reimbursed as variable ancillary costs.

78

Home Setting

        Our products are also provided to Medicare beneficiaries in home care settings. Medicare, under the Part B program, reimburses beneficiaries, or suppliers accepting an assignment of the beneficiary's Part B benefit, for the purchase or rental of DME for use in the beneficiary's home or a home for the aged (as opposed to use in a hospital or skilled nursing facility setting). As long as the Medicare Part B coverage criteria are met, certain of our products, including air fluidized beds, air-powered flotation beds, alternating pressure air mattresses and our V.A.C. systems and related disposables are reimbursed in the home setting under the DME category known as "Capped Rental Items." Pursuant to the fee schedule payment methodology for this category, Medicare pays a monthly rental fee (for a period not to exceed 15 months for products other than the V.A.C. system, for which the base treatment period may not exceed four months) equal to 80% of the established allowable charge for the item. The patient (or his or her insurer) is responsible for the remaining 20%.

Medicaid

        The Medicaid program is a cooperative federal/state program that provides medical assistance benefits to qualifying low income and medically needy persons. State participation in Medicaid is optional and each state is given discretion in developing and administering its own Medicaid program, subject, among other things, to certain federal requirements pertaining to eligibility criteria and minimum categories of services. The Medicaid program finances approximately 50% of all care provided in nursing facilities nationwide. We sell or rent our products to nursing facilities for use in furnishing care to Medicaid recipients. Typically, nursing facilities receive Medicaid reimbursement directly from states for the incurred costs. However, the method and level of reimbursement, which generally reflects regionalized average cost structures and other factors, varies from state to state and is subject to each state's budget constraints. Current economic conditions have resulted in reductions in funding for many state Medicaid programs. Consequently, states are revising their policies for coverage of durable medical equipment in long-term care facilities and the home. We cannot predict the impact of the policy changes on our Medicaid revenue.

Private Payers

        Many third-party private payers, including indemnity insurers, employer group health insurance programs and managed care plans, presently provide coverage for the purchase and rental of our products. The scope of coverage and payment policies varies among third-party private payers. Furthermore, many such payers are investigating or implementing methods for reducing health care costs, such as the establishment of capitated or prospective payment systems.

        We believe that government and private efforts to contain or reduce health care costs are likely to continue. These trends may lead third-party payers to deny or limit reimbursement for our products, which could negatively impact the pricing and profitability of, or demand for, our products.

Legal Proceedings

        On August 16, 1995, we filed a civil antitrust lawsuit against Hillenbrand. On September 27, 2002, a jury found in KCI's favor. On December 31, 2002, we settled our antitrust lawsuit with Hillenbrand.

        On February 21, 1992, Novamedix Limited, or Novamedix, filed a lawsuit against us in the United States District Court for the Western District of Texas. Novamedix manufactures a product that directly competes with the PlexiPulse. The suit alleges that the PlexiPulse infringes several patents held by Novamedix, that we breached a confidential relationship with Novamedix and a variety of ancillary claims. Novamedix seeks injunctive relief and monetary damages. A judicial stay which was in effect with respect to all patent claims in this case has been lifted. Although it is not possible to reliably predict the outcome of this litigation or the damages, which could be awarded, we believe that our

79

defenses to these claims are meritorious and that the litigation will not have a material adverse effect on our business, financial condition or results of operations.

        On July 1, 1998, Mondomed N.V. filed an opposition in the European Patent Office to a European patent owned by Wake Forest University, which we license for V.A.C. systems. They were joined in this opposition by Paul Hartmann A.G. on December 16, 1998. On February 17, 2002, the Opposition Division of the European Patent Office issued a non-binding Preliminary Opinion in our favor. The opposing parties will have additional opportunities to assert their arguments in relation to an oral hearing that will be held prior to the issuance of a Final Opinion. A final date for the oral hearing has not been set. Although it is not possible to reliably predict the outcome of the opposition, we believe that the patent will be upheld.

        In August 2003, KCI and Wake Forest University filed a lawsuit against BlueSky Medical Corporation and related parties alleging infringement of multiple claims under two V.A.C. patents, arising from the manufacturing and marketing of a medical device by BlueSky. KCI and Wake Forest have asserted additional related claims which, together with the infringement claims, which claims we believe are meritorious.

        We are a party to several lawsuits arising in the ordinary course of our business. Provisions have been made in our financial statements for estimated exposures related to these lawsuits. In the opinion of management, the disposition of these matters will not have a material adverse effect on our business, financial condition or results of operations.

        The manufacturing and marketing of medical products necessarily entails an inherent risk of product liability claims. We currently have certain product liability claims pending for which provision has been made in our financial statements. Management believes that resolution of these claims will not have a material adverse effect on our business, financial condition or results of operations. We have not experienced any significant losses due to product liability claims and management believes that we currently maintain adequate liability insurance coverage.

80

MANAGEMENT

Directors and Executive Officers

        Set forth below are the names, ages and positions of the directors and executive officers of KCI, together with certain other key personnel.

Name	Age	Position
Robert Jaunich II	63	Chairman of the Board
Dennert O. Ware	61	Director, President and Chief Executive Officer
James R. Leininger, M.D.	59	Director, Chairman Emeritus
John P. Byrnes	44	Director
Ronald W. Dollens	56	Director
James T. Farrell	38	Director
Harry R. Jacobson, M.D.	56	Director
N. Colin Lind	47	Director
David J. Simpson	56	Director
C. Thomas Smith	65	Director
Donald E. Steen	56	Director
Dennis E. Noll	48	Senior Vice President, General Counsel and Secretary
Christopher M. Fashek	54	President, KCI USA
Jorg W. Menten	46	President, KCI International
Martin J. Landon	44	Vice President, Chief Financial Officer (Acting)
G. Frederick Rush	54	Vice President, Corporate Development
Michael J. Burke	56	Vice President, Manufacturing
Rush E. Cone	53	Vice President, Human Resources
Daniel C. Wadsworth, Jr.	50	Vice President, Global Research and Development
Steven J. Hartpence	54	Vice President, Business Systems

        Robert Jaunich II    became a director and Chairman of the Board in November 1997. Mr. Jaunich is a Managing Director of Fremont Partners, which manages $1.6 billion targeted to private equity investments. He is also a member of the Board of Directors and Executive Committee of Fremont Group, a private investment company with assets in excess of $10 billion under management across a broad array of asset classes. Prior to joining Fremont Group in 1991, he was Executive Vice President and a member of the Chief Executive Office of Jacobs Suchard AG, a Swiss-based chocolate, sugar confectionery and coffee company. He currently serves as a director of CNF Transportation, Inc., as Chairman of the Managing General Partner of Crown Pacific Partners, L.P. and as Chairman of Juno Lighting, Inc. and several other privately held corporations.

        Dennert O. Ware    joined KCI in April 2000 as our President and Chief Executive Officer. Mr. Ware also serves as a director of KCI. From 1997 to his joining KCI in April 2000, he served as President and Chief Executive Officer of Roche Diagnostics Corporation, formerly Boehringer Mannheim Corporation, a manufacturer and distributor of medical diagnostic equipment. Mr. Ware served as President of the Biochemicals Division of Boehringer Mannheim from 1994 to 1997. Mr. Ware joined Boehringer Mannheim in 1972.

        James R. Leininger, M.D.    is the founder of KCI and served as Chairman of the Board of Directors from 1976 until 1997. From January 1990 to November 1994, Dr. Leininger served as President and Chief Executive Officer of KCI. From 1975 until October 1986, Dr. Leininger was also a director of the Emergency Department of the Baptist Hospital System in San Antonio, Texas.

        John P. Byrnes    became a director in 2003. He has served as Chief Executive Officer of Lincare Holdings Inc., a home health care company since January 1997 and as a director of Lincare since

81

May 1997. Mr. Byrnes was appointed Chairman of the Board of Lincare Holdings Inc. in March 2000. Mr. Byrnes has been President of Lincare since June 1996. Prior to becoming President, Mr. Byrnes served Lincare in a number of capacities over a ten-year period, including serving as the Company's Chief Operating Officer throughout 1996.

        Ronald W. Dollens    became a director in 2000. Since 1994, Mr. Dollens has served as President, Chief Executive Officer and a director of Guidant Corporation, a corporation that pioneers lifesaving technology for millions of cardiac and vascular patients worldwide. Previously, he served as President of Eli Lilly and Company's Medical Devices and Diagnostics Division from 1991 until 1994. Mr. Dollens joined Eli Lilly and Company in 1972. Mr. Dollens also held the position of President and Chief Executive Officer of Guidant's subsidiary, Advanced Cardiovascular Systems, Inc. Mr. Dollens currently serves on the boards of Beckman Coulter, Inc., the Advanced Medical Technology Association, the Eiteljorg Museum, St. Vincent Hospital Foundation, the Indiana Health Industry Forum, Alliance for Aging Research and Butler University. In 2003, he was elected to serve a two-year term as Chairman of the Healthcare Leadership Council.

        James T. Farrell    became a director in November 1997. Mr. Farrell is a Managing Director of Fremont Partners and also a Partner of Fremont Group. Before joining Fremont Group in 1991, he was an associate at ESL Partners, a private investment partnership. In 1985, he began his career at Copley Real Estate Advisors, a real estate investment advisor firm that has since merged with AEW Capital Management L.P., Mr. Farrell is a former director of Coldwell Banker Corporation. He serves as a director of the nonprofit Pacific Research Institute, as the Chairman of the Board of Directors at Tapco International Corporation and Resun Leasing, Inc.

        Harry R. Jacobson, M.D.    became a director in 2003. Dr. Jacobson is Vice Chancellor for Health Affairs of Vanderbilt University, Nashville, Tennessee, a position he has held since 1997. He has been a director of Renal Care Group since 1995 and was Chairman of the Board of Directors of Renal Care from 1995 to 1997. He also currently serves as Professor of Medicine at Vanderbilt University Medical Center, a position he has held since 1985.

        N. Colin Lind    became a director in November 1997. Mr. Lind is a Managing Partner of Blum Capital Partners, L.P. ("BCP"), a public strategic block and private equity investment firm with approximately $2.5 billion in assets under management. Mr. Lind joined BCP in 1986. He currently serves on the board of PRG-Schultz International, Inc. and has previously been a director of three public and nine private companies.

        David J. Simpson    became a director in 2003. Mr. Simpson was appointed Vice President, Chief Financial Officer and Secretary of Stryker Corporation, a worldwide medical products and services company from 1987 to 2002. He is currently Executive Vice President of Stryker Corporation. He had previously been Vice President and Treasurer of Rexnord Inc., a manufacturer of industrial and aerospace products and is currently a director of Regeneration Technologies, Inc.

        C. Thomas Smith    became a director in 2003. Prior to his retirement in April 2003, Mr. Smith served as Chief Executive Officer and President of VHA Inc., a member-owned and member-driven health care cooperative, since 1991. From 1977 to 1991, Mr. Smith was President of Yale-New Haven Hospital and President of Yale-New Haven Health Services Corp. From 1971 to 1976, he was Vice President and Executive Director of Hospitals and Clinics and a member of the board of trustees for Henry Ford Hospital in Detroit. From January 1987 until April 2003, Mr. Smith was a member of the VHA board. He also served on the boards of Novation, LLC and the Healthcare Leadership Council. Mr. Smith is a past Chairman of the Council of Teaching Hospitals and a former member of the boards of the Association of American Medical Colleges, the International Hospital Federation, the Hospital Research and Educational Trust, the National Committee on Quality Healthcare, the Jackson Hole Group and Genentech, Inc. He also currently serves on the board of Neoforma, Inc.

82

        Donald E. Steen    became a director in 1998. Mr. Steen founded United Surgical Partners International, Inc. ("USPI") in February 1998 and has served as its Chief Executive Officer and Chairman since that time. Mr. Steen served as President of the International Group of HCA—The Healthcare Company, formerly known as Columbia/HCA Healthcare Corporation, from 1995 until 1997 and as President of the Western Group of HCA from 1994 until 1995. Mr. Steen founded Medical Care International, Inc., a pioneer in the surgery center business, in 1982. Mr. Steen is also a member of the board of directors of Horizon Health Corporation.

        Dennis E. Noll    joined KCI in February 1992 as our Senior Corporate Counsel and was appointed Vice President, General Counsel and Secretary in January 1993. Mr. Noll was promoted to Senior Vice President in September 1995. Prior to joining KCI in February 1992, Mr. Noll was a shareholder of the law firm of Cox & Smith Incorporated.

        Christopher M. Fashek    joined KCI in February 1995 as President, KCI USA. Prior to KCI, he served as General Manager, New Zealand at Sterling Winthrop, a division of Eastman Kodak, from February 1993 to February 1995, and served as Vice President of Sales at Sterling Winthrop USA, a division of Eastman Kodak, from 1989 until February 1993.

        Jorg W. Menten    joined KCI in July 2001 as President, KCI International. From August 1999 to June 2001, Mr. Menten was Chief Financial Officer of 4Sigma GmbH, a health care services venture in Hamburg, Germany. From April 1998 to July 1999, Mr. Menten was Executive Vice President, Finance and Controlling of F. Hoffman—LaRoche AG, a pharmaceutical company in Basel, Switzerland. Prior to April 1998, Mr. Menten was Chief Financial Officer of Boehringer Mannheim Europe in Amsterdam, the Netherlands.

        Martin J. Landon    has served as Vice President and Acting Chief Financial Officer since December 2002. Mr. Landon joined KCI in May 1994 as Senior Director of Corporate Development and was promoted to Vice President, Accounting and Corporate Controller in October 1994. From 1987 to May 1994, Mr. Landon worked for Intelogic Trace, Inc., an independent computer maintenance company, where his last position was Vice President and Chief Financial Officer.

        G. Frederick Rush    joined KCI as Vice President, Corporate Development in June 2000. Prior to joining KCI, Mr. Rush was Senior Vice President, Strategy and Business Development for Roche Diagnostics Corporation, formerly Boehringer Mannheim Corporation from April 1998 to April 2000. During a portion of this time, he also served as Vice President, Laboratory Diagnostics from May 1999 to February 2000. From August 1995 to April 1998, Mr. Rush was Senior Vice President, Global Marketing and Sales for Boehringer Mannheim Biochemicals. Prior to that he was Vice President Strategy and Business Development for Boehringer Mannheim Diagnostics.

        Michael J. Burke    joined KCI in September 1995 as Vice President, Manufacturing. Prior to KCI, Mr. Burke worked for Sterling Winthrop, Inc., a division of Eastman Kodak Company, for 25 years, where he served as Vice President, Manufacturing and as General Manager, Sterling Health HK/China since 1992.

        Rush E. Cone    joined KCI in January 2001 as Vice President, Human Resources. From March 1999 to December 2000, Mr. Cone was a Senior Consultant with Holland & Davis, L.L.P., a general consulting firm. From August 1996 to March 1999, Mr. Cone, a licensed attorney, was head of Administration for Pacific Gas & Electric ("PG&E") Gas Transmission in Texas. Prior to August 1996, Mr. Cone worked in various legal and operational positions within PG&E and its predecessor, Valero Energy Corporation.

        Daniel C. Wadsworth, Jr.    joined KCI in March 2002 as Vice President, Research and Development. Prior to joining KCI, Mr. Wadsworth worked for C.R. Bard, Inc., a worldwide health

83

care products company focused on vascular, urology, and oncology disease states, for 18 years, where he most recently served as Staff Vice President, New Technology and Research Alliances.

        Steven J. Hartpence    joined KCI in October 2001 as Vice President, Reimbursement Systems and was promoted to Vice President, Business Systems in December 2002. Prior to joining KCI, Mr. Hartpence worked for Sigma-Aldrich Corporation, a biochemical and organic chemical products company, for 9 years, where he most recently served as Vice President, Engineering.

Executive Compensation

        The following table sets forth the compensation paid or accrued by Kinetic Concepts, Inc. to the Chief Executive Officer and each of the four most highly compensated executive officers (collectively, the "named executive officers") for their services for the years ended December 31, 2002, 2001 and 2000.

	Annual Compensation								Long Term Compensation Awards
Name and Principal Position	Year	Salary		Bonus			Other Annual Compensation(1)		Securities Underlying Options	All Other Compensation(2)
Dennert O. Ware Chief Executive Officer & President	2002 2001 2000	$	495,000 467,000 318,750	$	314,991 400,950 190,500		$	— — 332,799	— — 5,500,000	$	6,039 3,917 1,755
Dennis E. Noll Senior Vice President, General Counsel & Secretary	2002 2001 2000	$	233,200 220,000 153,900	$	323,716 170,200 84,000		$	— — —	— — 85,714	$	2,727 1,664 1,478
Christopher M. Fashek President, KCI USA	2002 2001 2000	$	247,200 246,600 239,250	$	139,239 144,067 97,000		$	— — —	— — 128,571	$	3,228 2,225 2,179
G. Frederick Rush Vice President, Corporate Development	2002 2001 2000	$	251,505 235,500 125,340	$	127,332 177,100 —		$	— — —	— 100,000 396,429	$	3,231 2,145 460
Michael J. Burke Vice President, Manufacturing	2002 2001 2000	$	221,220 213,333 200,000	$	106,080 109,200 84,000		$	— — —	— — 85,714	$	3,300 2,021 1,966
William M. Brown(3) Vice President & Chief Financial Officer	2002 2001 2000	$	260,303 252,300 226,000	$	860,000 149,122 95,000	(4)	$	— — 52,245	— — 128,571	$	4,515 3,250 3,074

(1)

The personal benefits provided to each of the named executive officers under various programs did not exceed 10% of the individual's combined salary and bonus in any year except Messrs. Ware and Brown. Mr. Ware received $204,399 for reimbursement of relocation expenses and $128,400 for reimbursement for the payment of taxes in 2000. Mr. Brown received $27,435 for reimbursement of relocation expenses and $18,290 for reimbursement for the payment of taxes in 2000.

(2)

The "All Other Compensation" column includes a contribution of $2,000 in 2002 and $1,000 in 2001 and 2000 to our 401(k) plan for the named individuals and a premium for term life insurance in an amount which varied depending on the age of the executive officer.

(3)

Mr. Brown served as KCI's Vice President and Chief Financial Officer from July 1998 to December 2002.

(4)

Mr. Brown received $750,000 as part of a severance package.

84

Management Plans

        In April 2000, we established the CEO Special Bonus Plan. This plan establishes a bonus pool for our chief executive officer of up to $13 million, which is payable based on meeting specific performance guidelines. Part one of this plan consists of the payment of up to $8 million in the event of an initial public offering or a sale transaction, in either case, where the per share price is at least $4.8125. If the per share price is less than $4.8125, however, the payment will be reduced by an amount equal to $175,000 multiplied by a fraction, the numerator of which is $4.8125 minus the per share price, and the denominator of which is .05. Part two of this plan consists of the additional payment of $5 million upon the consummation of an initial public offering or a sales transaction, in either case, where the per share price is equal to $9.00 or more or when the closing price of KCI's common stock on a national exchange or the Nasdaq National Market for thirty consecutive days has been at least $9.00 per share. The bonuses payable under the CEO Special Bonus Plan are payable to Dennert O. Ware, our chief executive officer. The Board of Directors may alter, amend, suspend or terminate the CEO Special Bonus Plan in whole or in part at any time, but no amendment may adversely affect awarded benefits previously granted without Mr. Ware's consent.

        In April 2000, we established the 2000 Special Bonus Plan. This plan establishes a 2000 bonus pool of up to $6 million, which is payable based on meeting specific performance guidelines. Part one of this plan consists of payment of $4 million in the event of an initial public offering or sale transaction, in either case, where the per share price is at least $4.8125. If the per share price is less than $4.8125, however, the payments will be reduced by an amount equal to $87,500 multiplied by a fraction, the numerator of which is $4.8125 minus the per share price and the denominator of which is .05. Part two of this plan consists of the additional payment of up to $2 million upon the consummation of an initial public offering or sale transaction, in either case, where the per share price is equal to $9.00 or more or when the closing price of KCI's common stock on a national exchange or the Nasdaq National Market for thirty consecutive days has been at least $9.00 per share. The bonuses under the 2000 Special Bonus Plan will be paid to members of management who received stock options in April 2000 and who are chosen by the Board of Directors, in its sole discretion, at the time of any initial public offering or a sale transaction. The Board of Directors may alter, amend, suspend or terminate the 2000 Special Bonus Plan in whole or in part at any time but no amendment may adversely affect awarded benefits of any participant without the participant's consent.

Employment and Severance Agreements

        Upon hiring each of the named officers, KCI and the named officer each signed an offer letter outlining the terms of employment for such officer. Each of the offer letters set forth standard terms summarizing salary, bonus and benefits. None of the offer letters establishes a term of employment for any named officer. For information on the most recent salary and bonus information for the named officers, see "—Executive Compensation." Under Mr. Ware's offer letter, he is entitled to severance equal to one year's salary in the event he leaves the employment of KCI for a reason other than an act of malfeasance or moral turpitude. None of the other named officers has any severance arrangement.

Compensation of the Board of Directors

        During 2002, each director who was not an employee of KCI or its affiliates received an annual fee of $15,000 plus $2,500 for each board meeting attended. Aggregate fees paid to directors in 2002 were $67,500. Except for the foregoing and except for reimbursement of travel expenses to attend board meetings, the directors of KCI received no other compensation for services as directors.

85

2003 Non-Employee Directors Stock Plan

        Our 2003 Non-Employee Directors Stock Plan became effective on May 28, 2003. The directors plan provides for the automatic grant to our non-employee directors of options to purchase shares of our common stock, restricted stock that is subject to vesting requirements and unrestricted stock that is not subject to vesting requirements.

Maximum Number of Shares

        The maximum aggregate number of shares of common stock that may be issued in connection with grants under the directors plan is 400,000 shares, subject to adjustment as provided for in the directors plan.

        If an option or restricted stock granted under this plan is forfeited, expires or terminates, the forfeited shares that are not purchased again become again available for issuance under the directors plan.

Administration

        The directors plan is administered by a committee of the board of directors. The committee has the authority to:

•

interpret the director plan;



•

prescribe the form of any agreement and notice and manner for executing such agreement and giving such notice;



•

amend all agreements under the director plan;



•

adopt, amend and rescind rules for the administration of the director plan;



•

make all determinations it deems advisable for the administration of the director plan;



•

amend the terms of outstanding options and impose terms and conditions on the shares of stock issued under the director plan;



•

impose restrictions, conditions or limitations as to the timing and manner of any resales, subject to consent of any participant whose rights would be adversely materially affected; and



•

waive conditions and/or accelerate the exercisability or vesting of an option or stock award under the director plan.

Automatic Option Grants and Restricted Stock Awards

        Each non-employee director who is not receiving a management fee from us or who was not appointed by any of our shareholders who receive a management fee from us and serving on May 28, 2003 will automatically be granted on such date (1) an option to purchase a number of shares of stock equal to $50,000 divided by the fair market value of the stock and (2) a restricted stock award equal to $50,000 divided by the fair market value of the stock as of the date of grant. Each such person who is elected to be a non-employee director after May 28, 2003 will automatically be granted an option to purchase a number of shares equal to $50,000 divided by the fair market value of the stock and a restricted stock award equal to $50,000 divided by the fair market value of the stock as of the date of grant, which is the first date after May 28, 2003 that the person is elected to serve as a board member. Each non-employee director who is receiving a management fee from us and each non-employee director who is a principal of, or a non-employee director appointed by, a shareholder of ours which is receiving a management fee from us, will automatically be granted an option to purchase a number of shares equal to $50,000 divided by the fair market value of the stock and a restricted stock award equal

86

to $50,000 divided by the fair market value of the stock as of the date of grant, which is the earlier of the date on which an underwriting agreement is executed and priced in connection with the initial public offering of common stock or the date such management fee is terminated. Each year thereafter, each non-employee director will automatically be granted an additional option to purchase a number of shares of stock equal to $50,000 divided by the fair market value of the stock and a restricted stock award equal to $50,000 divided by the fair market value of the stock on the anniversary of the initial grant date. Each option will vest over three years with one-twelfth of the number of shares of stock subject to the option vesting every three months, provided that the non-employee director is serving as a board member.

Option Terms

        The right to exercise an option will terminate seven years after the grant date. Generally, options will terminate three months after the optionholder's service terminates. However, if such termination is due to the optionholder's death or disability, the option may be exercised within 12 months after such death or disability. If an optionholder is terminated as a board member on account of fraud, dishonesty or other acts detrimental to our interests, the option will terminate as of the date of such termination.

Restricted Stock Terms

        The restricted stock award is granted to a non-employee director only pursuant to an agreement which sets forth the terms and conditions of the restricted stock award. The agreement may contain additional provisions and restrictions that are not inconsistent with the directors plan. During the restriction period a non-employee director may not sell, assign, transfer, pledge or otherwise dispose of the shares of stock subject to the restricted stock award except as provided for in the directors plan. The restriction period for the restricted stock is three years. However, if during the restriction period, the non-employee director is terminated as a board member by death or disability, or in the event the non-employee director fails to be re-elected to serve as a board member, then for each full year such director served as a board member, one-third of the shares of stock subject to the restricted share award will be deemed fully vested and the restriction with respect to these shares will lapse on the date of termination.

Unrestricted Stock Awards and Terms

        Each non-employee director who is not receiving a management fee from us or who was not appointed by any of our shareholders who receive a management fee from us and serving on May 28, 2003 will automatically be granted on such date an unrestricted stock award with respect to a number of shares of stock equal to $10,000 divided by the fair market value of the stock as of the date of grant. Each such person who is elected to be a non-employee director after May 28, 2003 will automatically be granted an unrestricted stock award with respect to a number of shares of stock equal to $10,000 divided by the fair market value of the stock as of the date of grant. Each non-employee director who is receiving a management fee from us and each non-employee director who is a principal of, or a non-employee director appointed by, a shareholder of ours which is receiving a management fee from us, will automatically be granted an unrestricted stock award with respect to a number of shares of stock equal to $10,000 divided by the fair market value of the stock as of the date of grant, which is the earlier of the date on which any underwriting agreement is executed and priced in connection with the initial public offering of common stock or the date such management fee is terminated. Each year thereafter on the anniversary of the initial grant date, each non-employee director will automatically be granted an additional unrestricted stock award with respect to a number of shares of stock equal to $10,000 divided by the fair market value of the stock on such date. Ownership of shares under an unrestricted stock award vests immediately upon the grant date.

87

Other Provisions

        Transactions such as stock dividends, stock splits, reverse stock splits, subdivisions consolidations or other similar events may change the number of shares subject to the directors plan and to outstanding options. In that event, the committee may appropriately adjust the directors plan as to the maximum number of shares of stock with respect to which options or stock awards may be granted and the exercise price of options. The committee may not modify the directors plan or the terms of any options or stock awards then outstanding or to be granted under the directors plan to provide for the issuance under the directors plan of a different class or stock or kind of securities.

        Generally, all options that are outstanding becomes fully vested and exercisable and the restriction period on an outstanding restricted stock award automatically expires and all restrictions imposed under such restricted stock award immediately lapse upon the occurrence of any of the following events:

•

any person other than an individual who is a shareholder on the date of the adoption of the directors plan becomes the "beneficial owner" of our securities representing more than 50% of the total voting power represented by our then outstanding voting securities;



•

shareholder approval of a merger or consolidation in which we are not the surviving corporation; or



•

shareholder approval of a liquidation or a sale or disposition of all of substantially all of our assets.

        In the event of any one of the above events, the committee may, in its own discretion, provide that:

•

any outstanding option be assumed by the surviving corporation or any successor corporation;



•

any outstanding option be converted into a right to receive cash in an amount equal to the aggregate value of the consideration that would have been paid or issued in exchange for shares of the stock had the option been exercised immediately prior to the above-mentioned events less the aggregate exercise price of the option;



•

any outstanding option cannot be exercised; or



•

any outstanding option may be dealt with in any other manner determined in the discretion of the committee.

Option Grants and Exercises in Last Fiscal Year

        No options were granted to or exercised by any of the named executive officers during 2002.

88

Fiscal Year-End Option Value

        The following table sets forth certain information concerning the number and value of the options held by the named executive officers at the end of the fiscal year ended December 31, 2002. There were no options exercised in 2002 by any of the named executive officers.

Name	Number of Underlying Unexercised Options at FY-End Exercisable/ Unexercisable	Unexercised Value of Options at In-the-Money FY-End Exercisable/ Unexercisable(1)
Dennert O. Ware	2,625,000	$	5,742,188
	2,875,000		1,914,063
Dennis E. Noll	536,000	$	1,503,750
	69,714		52,500
Christopher M. Fashek	1,024,800	$	3,346,125
	104,571		78,750
G. Frederick Rush	142,000	$	266,875
	354,429		575,313
Michael J. Burke	593,600	$	2,124,750
	69,714		52,500
William M. Brown(2)	—		—
	—		—

(1)

KCI's common stock is not publicly traded. In August 2001, the Board of Directors determined that the fair market value of our common stock, for purposes of the Kinetic Concepts, Inc. Management Equity Plan, was $7.00. Accordingly, for purposes of this calculation, the fair market value of the common stock as of December 31, 2002 was assumed to be $7.00 per share.

(2)

Mr. Brown's options were cancelled in connection with his severance agreement in December 2002.

Indemnification of Directors and Officers and Limitation of Liability

        Texas Law, our Restated Articles of Incorporation and our Second Amended and Restated By-Laws contain provisions for indemnification of our directors and officers.

        Article 2.02-1 of the Texas Business Corporation Act, or TBCA, provides generally that a person sued as a director, officer, employee or agent of a corporation, or while serving at the request of the corporation as a director, officer, partner, employee, agent, or similar functionary of another enterprise, may be indemnified by the corporation against judgments, penalties, fines, settlements and reasonable expenses if it is determined that such person has conducted himself in good faith and it is reasonably believed, in the case of conduct in his official capacity with the corporation, that his conduct was in the corporation's best interests, and in all other cases, that his conduct was at least not opposed to the corporation's best interests (and, in the case of any criminal proceeding, had no reasonable cause to believe his conduct was unlawful). Indemnification of a person found liable to the corporation or found liable on the basis that personal benefit was improperly received by him is limited to reasonable expenses actually incurred by the person in connection with the proceeding, and shall not be made if the person is found liable for willful or intentional misconduct in the performance of his duty to the corporation. Indemnification is mandatory, however, in the case of such person being wholly successful, on the merits or otherwise, in the defense of the proceeding.

89

        Article 2.02-1 of the TBCA also authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation or who is or was serving at the request of the corporation as a director officer, employee agent or similar functionary of another entity or enterprise against any liability asserted against him and incurred by him in such a capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against that liability under Article 2.02-1.

        Article 1302-7.06 of the Texas Miscellaneous Corporation Laws Act provides that a corporation's articles of incorporation may limit or eliminate the directors' liability for monetary damages to the corporation or its shareholders for an act or omission in the director's capacity as a director, except that no limitation or elimination of liability is permitted to the extent the director is found liable for a breach of the duty of loyalty, an act or omission not in good faith or that involves intentional misconduct or a knowing violation of the law, a transaction involving an improper personal benefit to the director, or an act or omission for which liability is expressly provided by an applicable statute.

        Article Eight paragraph (2) of our Amended and Restated Articles of Incorporation states that, to the extent permitted by the TBCA, a director of the Company shall not be personally liable to the Company or its shareholders for monetary damages for an act or omission in the director's capacity as a director, except for liability for (a) a breach of the director's duty of loyalty to the Company or its shareholders, (b) an act or omission not in good faith that constitutes a breach of duty of the director to the Company or an act or omission that involves intentional misconduct or a knowing violation of the law, (c) a transaction from which the director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director's office, or (d) an act or omission for which the liability for the director is expressly provided for by statute.

        Article Twelve of our Amended and Restated Articles of Incorporation states that we shall indemnify our directors to the fullest extent provided by the TBCA.

        Article VIII, Section 2 of our Restated By-Laws provides that, subject to certain conditions, we shall indemnify a director who acted in good faith and in a manner which he reasonably believed to be in, or not opposed to, our best interests, and in the case of any criminal proceeding, had no reasonable cause to believe the conduct was unlawful. Indemnification would cover expenses reasonably incurred, including attorneys' fees, judgments, fines and amounts paid in settlement.

        Article VIII, Section 16 of our Restated By-Laws provide that our board of directors may cause us to purchase and maintain insurance on behalf of any present or past director, officer, employee or agent (including any such person who is serving, at the request of the Company, in a similar or related capacity for another entity), insuring against any liability asserted against such person incurred in the capacity of such position or arising out of such status, regardless of whether we would have the power to indemnify such person.

        We will indemnify each of Fremont Partners, James R. Leininger, M.D. and Blum Capital Partners and its respective directors, members, officers, employees, agents, representatives and affiliates for losses, damages, costs or expenses which it may suffer arising out of its performance of services under the Management Services Agreement, provided that it will not be indemnified for losses resulting primarily from its gross negligence or willful misconduct.

        We maintain directors' and officers' liability insurance and intend to continue to maintain this insurance in the future.

90

PRINCIPAL SHAREHOLDERS

Beneficial Ownership of Capital Stock

        Based upon information received upon request from the persons concerned, each person known to be the beneficial owner of more than five percent of our outstanding common stock or our Series A Convertible Preferred Stock, each director, nominee for director, named executive officer and all directors and executive officers as a group, owned beneficially, as of September 15, 2003, the number and percentage of outstanding shares of common stock and Series A Convertible Preferred Stock indicated in the following table. Unless otherwise indicated, the address of each of the individuals listed in this table is c/o Kinetic Concepts, Inc., 8023 Vantage Drive, San Antonio, Texas 78230.

		Common Stock			Series A Convertible Preferred Stock
Name		Shares Beneficially Owned(1)	Percent of Class		Shares Beneficially Owned	Percent of Class
Fremont Partners, L.P. and related parties(2)(3)		20,821,393	45.54	%	75,872	28.76	%
Blum Capital Partners, L.P. and related parties(4)		13,754,771	31.14	%	50,122	19.00	%
DLJ Merchant Banking and related parties(2)(5)		2,227,748	5.14	%	37,000	14.03	%
Goldman, Sachs & Co. and related parties(2)(6)		2,107,329	4.87	%	35,000	13.27	%
Directors and Executive Officers
	Robert Jaunich II(2)(7)	20,821,393	45.54	%	75,872	28.76	%
	James R. Leininger, M.D.(8)	17,559,315	39.02	%	64,006	24.26	%
	Dennert O. Ware(9)	2,023,000	4.69	%	—	—
	John P. Byrnes(10)(11)	66,625	*		1,000	*
	Ronald W. Dollens(10)(12)	78,283	*		—	—
	James T. Farrell(2)(7)	20,821,393	45.54	%	75,872	28.76	%
	Harry R. Jacobson, M.D.(10)(13)	36,520	*		500	*
	N. Colin Lind(4)(14)	13,754,771	31.14	%	50,122	19.00	%
	David J. Simpson(10)(15)	21,468	*		250	*
	C. Thomas Smith(10)(16)	9,065	*		44	*
	Donald E. Steen(10)(17)	97,752	*		—	—
	Dennis E. Noll(9)	314,432	*		—	—
	Christopher M. Fashek(9)	599,271	1.44	%	—	—
	G. Frederick Rush(9)	128,894	*		—	—
	Michael J. Burke (9)	347,725	*		—	—
	Rush E. Cone(9)	46,240	*		—	—
	Steven J. Hartpence(9)	16,000	*		—	—
	Martin J. Landon(9)	80,920	*		—	—
	Jorg W. Menten(9)	34,680	*		—	—
	Daniel C. Wadsworth, Jr.(9)	16,000	*		—	—
Directors and Officers as a Group		56,052,354	99.31	%	191,794	72.70	%

*

Less than one percent (1%).

(1)

Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage of ownership of that person, (i) shares of common stock subject to options held by that person that are currently exercisable or become exercisable within 60 days of September 15, 2003 are considered to be beneficially owned by such person and (ii) shares of common stock which can be acquired upon the conversion of Series A Convertible Preferred Stock within 60 days of September 15, 2003 are

91

considered to be beneficially owned by such person. Such shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.

(2)

The person or entity named has sole voting power and investment power with respect to all shares indicated.

(3)

Shares of common stock currently held by Fremont Partners, L.P. and its related parties include (i) 8,655,164 shares held by Fremont Acquisition Co. II, L.L.C., (ii) 2,154,186 shares held by Fremont Acquisition Co. IIA, L.L.C., (iii) 3,318,502 shares held by Fremont-KCI Co-Investment Co., L.L.C. and (iv) 2,125,327 shares held by Fremont-KCI Co-Investments II, L.L.C. Shares of Series A Convertible Preferred Stock held by Fremont Partners, L.P. includes (i) 47,824 shares held by Fremont Partners III, L.P., (ii) 2,176 shares held by Fremont Partners III Side-By-Side, L.P., (iii) 21,355 shares held by Fremont Acquisition Company II, L.L.C., and (iv) 4,517 shares held by Fremont Acquisition Company IIA, L.L.C. The address for Fremont Partners, L.P. and its related parties is 199 Fremont Street, Suite 2300, San Francisco, CA 94105.

(4)

Shares of common stock held by Blum Capital Partners, L.P. and its related parties include (i) 9,641,891 shares held by RCBA-KCI Capital Partners, L.P., (ii) 598,115 shares held by Stinson Capital Partners II, L.P., (iii) 486,907 shares held by Blum Strategic Partners II, L.P. and (iv) 10,040 shares held by Blum Strategic Partners II GmbH & Co. KG. Shares of Series A Convertible Preferred Stock held by Blum Capital Partners, L.P. and its related parties includes (i) 2,273 shares held by Blum Strategic Partners II, L.P., (ii) 47 shares held by Blum Strategic Partners II GmbH and Co. KG, (iii) 2,792 shares held by Stinson Capital Partners II, L.P., and (iv) 45,010 shares held by RCBA-KCI Capital Partners, L.P.

Blum Capital Partners, L.P. serves as the general partner of RCBA-KCI Capital Partners, L.P. and Stinson Capital Partners II, L.P. with voting and investment discretion. The shares owned by RCBA-KCI Capital Partners, L.P. and Stinson Capital Partners II, L.P. may be deemed to be owned indirectly by the following parties: (a) Blum Capital Partners, L.P.; (b) Richard C. Blum & Associates, Inc., the sole general partner of Blum Capital Partners, L.P.; and (c) Richard C. Blum, Chairman of Richard C. Blum and Associates, Inc. Richard C. Blum & Associates, Inc., Blum Capital Partners, L.P. and Mr. Blum disclaim beneficial ownership of these shares, except to the extent of any pecuniary interest therein.

Blum Strategic GP II, L.L.C. serves as the general partner of Blum Strategic Partners II, L.P. and as the managing limited partner of Blum Strategic Partners II GmbH & Co. KG. The shares owned by Blum Strategic Partners II, L.P. and Blum Strategic Partners II GmbH & Co. KG, may be deemed to be owned indirectly by the following parties: (a) Blum Strategic GP II, L.L.C., the general partner of Blum Strategic Partners II, L.P. and the managing limited partner of Blum Strategic Partners II GmbH & Co. KG.; and (b) Richard C. Blum, a managing member of Blum Strategic GP II, L.L.C. Both Blum Strategic GP II, L.L.C. and Mr. Blum disclaim beneficial ownership of these shares, except to the extent of any pecuniary interest therein. The address for Blum Capital Partners, L.P. and its related parties is 909 Montgomery Street, Suite 400, San Francisco, CA 94133.

(5)

Shares of Series A Convertible Preferred Stock held by DLJ Merchant Banking and its related parties include (i) 29,311 shares held by DLJ Merchant Banking Partners III, L.P., (ii) 2,018 shares held by DLJ Merchant Banking III, Inc., on behalf of DLJ Offshore Partners III, C.V., (iii) 518 shares held by DLJ Merchant Banking III, Inc., on behalf of DLJ Offshore Partners III-1, C.V., (iv) 369 shares held by DLJ Merchant Banking III, Inc., on behalf of DLJ Offshore Partners III-2, C.V., (v) 245 shares held by DLJ MB PartnersIII GmbH & Co. KG, (vi) 99 shares held by Millennium Partners II, L.P. and (vii) 4,440 shares held by MBP III Plan Investors, L.P. The address for DLJ Merchant Banking and its related parties is Eleven Madison Ave., 16th Floor, New York, NY 10010.

92

(6)

Shares of Series A Convertible Preferred Stock held by Goldman, Sachs & Co. and its related parties includes (i) 18,864 shares held by GS Capital Partners 2000, L.P., (ii) 6,854 shares held by GS Capital Partners 2000 Offshore, L.P., (iii) 788 shares held by GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, (iv) 5,994 shares held by GS Capital Partners 2000 Employee Fund, L.P., and (v) 2,500 shares held by Goldman Sachs Direct Investment Fund 2000, L.P. The address for Goldman, Sachs & Co. and its related parties is 85 Broad Street, 10^th Floor, New York, NY 10004.

(7)

Messrs. Jaunich and Farrell are managing directors of Fremont Partners, L.P. and certain of its related parties. The shares shown include the shares beneficially owned by Fremont Partners, L.P. and such related parties. Messrs. Jaunich and Farrell disclaim beneficial ownership of the shares held by Fremont Partners, L.P. and such related parties, except to the extent of their respective proportionate pecuniary interest in such shares.

(8)

Includes 10,100 shares of common stock held by J&E Investments, L.P., in which Mr. Leininger is a 1% general partner. Mr. Leininger disclaims beneficial ownership in such shares, except to the extent of his proportionate pecuniary interest in such shares.

(9)

Shares consist entirely of common stock acquirable upon the exercise of options.

(10)

The persons named are outside directors and are not affiliated with Fremont Partners, L.P. or Blum Capital Partners, L.P.

(11)

Common stock holdings include 6,000 shares currently held (5,000 of which are restricted shares), 416 shares acquirable upon the exercise of options and 60,209 shares acquirable upon the conversion of Series A Convertible Preferred Stock.

(12)

Common stock holdings include 6,000 shares currently held (5,000 of which are restricted shares) and 72,283 shares acquirable upon the exercise of options.

(13)

Common stock holdings include 6,000 shares currently held (5,000 of which are restricted shares), 416 shares acquirable upon the exercise of options and 30,104 shares acquirable upon the conversion of Series A Convertible Preferred Stock.

(14)

N. Colin Lind is the managing director of Richard C. Blum & Associates, Inc., which is the general partner of Blum Capital Partners, L.P. and a Managing Member of Blum Strategic GP II, L.L.C., which is the general partner of Blum Strategic Partners II, L.P. and the Managing limited partner of Blum Strategic Partners II GmbH & Co. KG. Mr. Lind disclaims beneficial ownership of the shares held by Blum Capital Partners, L.P. and its related parties, except to the extent of his proportionate pecuniary interest in such shares.

(15)

Common stock holdings include 6,000 shares currently held (5,000 of which are restricted shares), 416 shares acquirable upon the exercise of options and 15,052 shares acquirable upon the conversion of Series A Convertible Preferred Stock.

(16)

Common stock holdings include 6,000 shares currently held (5,000 of which are restricted shares), 416 shares acquirable upon the exercise of options and 2,649 shares acquirable upon the conversion of Series A Convertible Preferred Stock.

(17)

Common stock holdings include 39,536 shares currently held (5,000 of which are restricted shares) and 58,216 shares acquirable upon the exercise of options.

93

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Pursuant to a Management Services Agreement entered into in November 1997 by and among KCI, Fremont Partners, L.P., James R. Leininger, M.D., and Blum Capital Partners, L.P., we have made semi-annual payments to each of Fremont Partners, L.P., James R. Leininger, M.D., and Blum Capital Partners, L.P. of approximately $300,000, $250,000 and $200,000 respectively, as a management fee. On August 11, 2003, we amended the Management Services Agreement to, among other things, terminate the management fee and continue to provide for indemnification and reimbursement of expenses. We made final management fee payments of $300,000 and $450,000 in July and August 2003, respectively, relating to services performed through June 30, 2003. Fremont Partners, Dr. Leininger and Blum Capital Partners own approximately 36.5%, 30.8% and 24.1%, respectively, of the outstanding voting stock of KCI. In addition, Dr. Leininger serves as Chairman Emeritus on the board of directors and each of Blum and Fremont have representatives who serve on the board of directors.

        KCI will indemnify each of Fremont Partners, Dr. Leininger and Blum Capital Partners and their respective directors, members, officers, employees, agents, representatives and affiliates for losses, damages, costs or expenses which they may suffer arising out of their performance of services under the Management Services Agreement, provided that they will not be indemnified for losses resulting primarily from their gross negligence or willful misconduct.

        For 2002, we purchased critical care frames used to manufacture one of our therapeutic surface products from Stryker Corporation in the amount of approximately $3.6 million. David J. Simpson, one of our directors, is an executive officer of Stryker Corporation.

        Fremont Partners, L.P., Blum Capital Partners, L.P. and James R. Leininger, M.D., and their affiliates, purchased an aggregate $190.0 million of the convertible preferred stock we offered concurrently with the offering of the old notes. In addition, John P. Byrnes, Harry R. Jacobson, M.D., David J. Simpson and C. Thomas Smith, all of whom are non-employee directors of the Company, purchased an aggregate $1.316 million of the convertible preferred stock that we offered in connection with the recapitalization. (See "Summary—The Recapitalization.")

        In connection with the preferred stock sale, Fremont Partners, L.P., Blum Capital Partners, L.P. and James R. Leininger, M.D., and their affiliates, along with certain other non-affiliates that concurrently purchased additional preferred stock as part of the recapitalization, entered into an Investors' Rights Agreement with us. The Investor Rights' Agreement provides for, among other things, "piggy-back" registration rights, restrictions on transfer of the shares of preferred stock, rights of first offer, "tag-along" rights and "bring-along" rights. (See "Description of the Investors' Rights Agreement.")

94

DESCRIPTION OF THE SHAREHOLDER RIGHTS AGREEMENT

        In connection with the recapitalization in 1997, we entered into an Agreement Among Shareholders ("Shareholder Rights Agreement"), dated November 5, 1997, with Fremont Partners, L.P. ("Fremont"), Richard C. Blum & Associates, L.P. ("RCBA"), James R. Leininger, M.D. and other shareholders as of the date of the agreement. The following is a summary of the material provisions of the Shareholder Rights Agreement, as amended on June 25, 2003 and August 11, 2003, but does not restate the agreement in its entirety.

Transfer of Shares

        Restrictions on Transfer.    Subject to certain exceptions, no shares of common stock may be sold, transferred, pledged or hypothecated until six months after the common stock has been the subject of a public offering.

        Tag-Along Rights.    If, at any time after the restrictions on transfer have expired, a shareholder proposes to sell common stock for value, subject to certain exceptions and notice provisions, the shareholder must offer to include in the proposed sale shares of common stock designated by any of the other shareholders on a pro rata basis. If the consideration to be received includes any securities, only shareholders that are accredited investors under the Securities Act may include their shares in the sale.

        Drag-Along Rights.    If, at any time after the restrictions on transfer have expired, Fremont or RCBA, or certain of their affiliates, proposes to sell all of the common stock they own to a third party, they will have the right to require Dr. Leininger to include all of the shares he holds in such sale, subject to certain notice requirements. Dr. Leininger is not required to sell his shares if he holds less than 10% of the issued and outstanding shares on the date he receives notice.

Governance and Voting

        Until the common stock is the subject of a public offering, the Board of Directors of KCI is required to have at least eight members, consisting of (1) one designated by Fremont, (2) one designated by Fremont Partners III, L.P., an affiliate of Fremont, (3) two designated by RCBA, (4) Dr. Leininger (so long as he shall own at least 15% of the outstanding equity of KCI), (5) Dennert O. Ware (or any successor chief executive officer and (6) two or more independent outside directors, not affiliated with Fremont or RCBA and) designated by the unanimous vote of the nominating committee of KCI's board of directors. The nominating committee shall comprise (i) Dr. Leininger, (ii) one director designated by Fremont and (iii) one director designated by RCBA.

Preemptive Rights

        Each shareholder has the right to purchase up to that shareholder's pro rata share of any capital stock that KCI may propose to sell or issue. The preemptive rights granted to Dr. Leininger will be suspended if at the time of the proposed issuance and sale of capital stock, the exercise of that right would result in Fremont or RCBA, alone or together with certain of their affiliates, collectively holding less than a majority of the issued and outstanding shares of common stock. The preemptive rights do not apply to any issuance as a dividend or stock split or in an underwritten public offering.

Registration Rights

        Demand Registration.    If there has not been a public offering five years after the Shareholder Rights Agreement, each shareholder may make one written request to KCI for the registration of at least 33% of their shares under Form S-3. Each shareholder also has the right to request an additional registration of at least 33% of their shares held between one and three years following a public

95

offering. The order of sale is: (1) the demand registration; (2) any shares pursuant to a piggyback registration right; and (3) the shares of KCI. The shareholder shall select the investment bankers and managers subject to KCI's approval. KCI will pay any related expenses.

        Piggyback Registration Rights.    KCI is obligated to provide 20 days written notice to shareholders if it prepares and files a registration statement (other than on Form S-4, Form S-8 or other limited purpose form) in connection with KCI's or another security holder's proposed offer and sale of common stock or equity securities convertible into common stock. Each shareholder then has ten days to notify KCI of the number of shares the shareholder desires to be included in the registration statement. The order of sale for a piggyback registration will be KCI's shares and then the shares requested by the shareholders on a pro rata basis. KCI will pay expenses related to such registration.

        Indemnification.    KCI will indemnify each shareholder, underwriter and controlling person for losses, damages, liabilities, costs, or expenses caused by any alleged untrue statement or alleged omission of a material fact by KCI in a registration statement, any prospectus contained in a registration statement, or any amendment or supplement thereto. Each shareholder will indemnify KCI, its directors and officers, any controlling person, and any underwriter for losses, damages, liabilities, costs, or expenses caused by any alleged untrue statement or alleged omission of a material fact made by KCI in a registration statement, any prospectus contained in a registration statement, or any amendment or supplement thereto, in reliance upon information furnished in writing by the shareholder.

        Holdback Agreements.    Each shareholder will not effect any public sale or distribution of common stock or any securities convertible into common stock during the 14 days prior to and the 180 days following the effective date of any registration statement (except as part of the registration statement) if reasonably requested by the managing underwriter.

        Pursuant to a Waiver and Consent, effective September 27, 2002, the shareholders party to the Shareholder Rights Agreement and KCI consented to certain actions, including: (1) the pledge by Dr. Leininger of shares owned by him constituting 19.947% of the outstanding common stock of KCI to JPMorgan Chase Bank as administrative agent for the benefit of the lenders under the Shareholders' Agreement, including Bank One, NA, and pursuant to a Security and Pledge Agreement; (2) the exercise of any of the rights or remedies with respect to a disposition of those shares pursuant to the Security and Pledge Agreement; and (3) any subsequent transfer by JPMorgan Chase Bank, Bank One, NA or any of their respective affiliates to any person who agrees to be bound by the Shareholder Rights Agreement. Further, the shareholders and KCI waived certain rights under the Shareholder Rights Agreement, including tag-along and participation rights.

96

DESCRIPTION OF THE INVESTORS' RIGHTS AGREEMENT

        In connection with the sale and issuance of Series A Convertible Preferred Stock as part of the recapitalization, we entered into an Investors' Rights Agreement ("Investors' Rights Agreement"), dated August 11, 2003, with (a) Fremont Partners III, L.P., Fremont Partners III Side-By-Side, L.P., Fremont Acquisition Company II, L.L.C., Fremont Acquisition Company IIA, L.L.C., Blum Strategic Partners II, L.P., Blum Strategic Partners II GmbH & Co., KG, Stinson Capital Partners II, L.P., RCBA-KCI Capital Partners, L.P. and James R. Leininger, M.D. (collectively, the "Sponsors") and (b) GS Capital Partners 2000, L.P., GS Capital Partners 2000 Offshore, L.P., GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, GS Capital Partners 2000 Employee Fund, L.P., Goldman Sachs Direct Investment Fund 2000, L.P., DLJ Merchant Banking Partners III, L.P., DLJ Merchant Banking III, Inc., DLJ MB Partners III GmbH & Co. KG, Millennium Partners II, L.P., MBP III Plan Investors, L.P., John P. Byrnes, Harry R. Jacobson, M.D., David J. Simpson and C. Thomas Smith (together with the Sponsors, the "Investors"). The following is a summary of the material provisions of the Investors' Rights Agreement, but does not restate the agreement in its entirety.

Registration Rights

        Piggyback Registration Rights.    If KCI proposes to register the public offering of any of its capital stock under the Securities Act (other than in connection with (i) an initial firm commitment underwritten public offering, (ii) a registration relating solely to the sale of securities to participants in a KCI benefit plan, (iii) a registration relating to a corporate reorganization or other transaction under Rule 145 of the Securities Act or (iv) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of (A) the Series A Preferred Stock and any common stock issued or issuable upon conversion of such stock and (B) any common stock issued as a dividend or other distribution with respect to, or in exchange for, or in replacement of, the shares referenced in (A) above (collectively, "Registrable Securities")), KCI is obligated to give each Investor prompt written notice of the proposed registration. Upon receipt by KCI of the written request of any Investor given within 20 days after mailing of notice by KCI, KCI must, subject to certain exceptions, use its reasonable best efforts to cause to be registered under the Securities Act all Registrable Securities that each Investor has requested to be registered. If the total amount of Registrable Securities requested by Investors to be included in the offering, together with the securities to be included in the offering by KCI and any other shareholder that is not an Investor, exceeds the amount of securities that the underwriters determine in their sole discretion is compatible with the success of the offering, then the company is required to include in the offering only that number of Registrable Securities and securities to be included by shareholders that are not Investors that the underwriters determine will not jeopardize the success of the offering. In that case, the number of securities to be included in the offering will be apportioned pro rata among the selling Investors and other shareholders who are not Investors.

        Indemnification.    KCI will indemnify each Investor, the partners or officers, directors, shareholders, members, managers, employees, subsidiaries and other affiliates of each Investor, any underwriter for such Investor and each person, if any, who controls such Investor or underwriter within the meaning of the Securities Act or the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), against any losses, claims, damages, liabilities (joint or several) and legal and other expenses to which they may become subject under the Securities Act, the Exchange Act or any state securities laws or otherwise, caused by (a) any untrue or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained in the registration statement, or any amendment or supplement thereto, (b) any violation or alleged violation by KCI of the Act, the Exchange Act or any state securities laws or otherwise. Each Investor will indemnify KCI, its directors, officers, persons who control KCI within the meaning of the Securities Act, any underwriter, any other Investor selling securities in such registration statement and

97

any controlling person of any such underwriter or other Investor against any losses, claims, damages, liabilities (joint or several) and legal and other expenses to which they may become subject under the Securities Act, the Exchange Act or any state securities laws or otherwise, caused by an untrue statement or alleged untrue statement or omission or alleged omission made in the registration statement, any such preliminary prospectus or final prospectus or any amendments or supplements, to the extent that such statement or omission was made in reliance upon and in conformity with written information furnished by the Investor expressly for use in connection with the registration.

        Market Stand-Off Agreement.    Each Investor will not (a) transfer or dispose of, directly or indirectly, any Registrable Securities, other than those included in the registration, or (b) enter into any swap or other arrangement that transfers to another any of the economic consequences of ownership of the Registrable Securities for a period equal to (x) 180 days after the consummation of an initial firm commitment underwritten public offering, (y) 90 days after the effective date of any registration with respect to any offering subsequent such initial offering or (z) in each case, any longer period of time as may be reasonably requested or shorter period as may reasonably be deemed appropriate by the managing underwriter in connection with such offering.

Transfer of Shares

        Restrictions on Transfer.    Subject to certain exceptions, prior to the consummation of an initial firm commitment underwritten public offering of shares of common stock, no Investor may, directly or indirectly, (a) transfer or otherwise dispose of any shares of Series A Preferred Stock or shares of common stock issuable on conversion of such shares, subject to certain exceptions, or (b) transfer any shares of Series A Preferred Stock or shares of common stock issuable on conversion of such shares to a direct or indirect competitor of KCI or to any person with a material interest in, or a material degree of control over a competitor of KCI, without the prior written consent of KCI's board of directors.

        Rights of First Offer.    Beginning on August 11, 2010, if any Investor desires to transfer any shares of Series A Preferred Stock or shares of common stock issued or issuable on conversion of such stock, subject to certain exceptions, such Investor must, prior to soliciting a written offer from a third-party, deliver to each of KCI and the Sponsors a written notice offering such shares first to the Company and secondly to the Sponsors. KCI then has 30 days to exercise its right of first offer. If KCI does not exercise its right of first offer, then the Sponsors have the option to exercise a right of first offer within 10 days after the end of the 30-day period. The rights of first offer terminate upon the consummation of an initial firm commitment underwritten public offering of shares of common stock.

        Tag-Along Rights.    If any Sponsor or any of its affiliates proposes to enter into any agreement to sell shares of Series A Preferred Stock or KCI common stock to any person (other than transfers among each Sponsor and its affiliates) that, when taken together with all other sales of Series A Preferred Stock or common stock by Sponsor and its affiliates (other than transfers among such Sponsor and its affiliates) from and after August 11, 2003, would exceed 50% of the aggregate number of shares of common stock (on an as-converted basis) owned by that Sponsor and its affiliates on August 11, 2003, then, subject to certain exceptions and notice provisions, each Investor has the right, but not the obligation, to participate in that sale or transfer of such shares of Series A Preferred Stock or common stock by the Sponsor and its affiliates on a pro rata basis and on the same terms and subject to the same conditions as those on which the Sponsor and its affiliates propose to transfer their shares.

        Bring-Along Rights.    If one or more of the Sponsors and/or any of their affiliates propose to enter into any agreement to sell or otherwise dispose of any KCI common stock or Series A Preferred Stock that would constitute 50% or more of the outstanding KCI common stock (on an as-converted basis) held by the Sponsors and their affiliates on August 11, 2003, then, subject to certain exceptions and notice provisions, the Sponsor and/or any of its affiliates have the right to compel each of the Investors

98

and any permitted transferees of the Investors to sell, free and clear of any liens or encumbrances, shares of Series A Preferred Stock and/or KCI common stock on a pro rata basis with the Sponsor and/or any of its affiliates, for the same consideration as the Sponsor and/or its affiliates would receive and on the same terms and subject to the same conditions as the Sponsor and/or its affiliates are able to obtain.

99

DESCRIPTION OF THE NEW NOTES

        The form and the terms of the new notes and the old notes are identical in all material respects, except that the new notes:

•

will have been registered under the Securities Act;



•

will not bear restrictive legends restricting their transfer under the Securities Act;



•

will not be entitled to registration rights that apply to the old notes; and



•

will not contain provisions relating to liquidated damages in connection with the old notes under circumstances related to the timing of the exchange offer.

        The Series B Senior Subordinated Notes due 2013 (the "New Notes") will be issued under an Indenture, dated as of August 11, 2003 by and among Kinetic Concepts, Inc., the Guarantors and U.S. Bank National Association, as Trustee (the "Trustee").

        The following summary of selected provisions of the Indenture is not complete and is subject to, and is qualified in its entirety by reference to, the Trust Indenture Act of 1939, as amended (the "TIA"), and to all of the provisions of the Indenture, including the definitions of terms in the Indenture and those terms made a part of the Indenture by reference to the TIA as in effect on the date of the Indenture. We urge you to read the Indenture because it, and not this description, defines your rights as holders of the New Notes. The definitions of some of the capitalized terms used in the following summary are set forth below under "—Definitions." For purposes of this section, references to "KCI" include only Kinetic Concepts, Inc. and not its Subsidiaries.

General

        The New Notes will be unsecured obligations of KCI, ranking subordinate in right of payment to all Senior Debt of KCI.

        The New Notes will be issued in fully registered form only, without coupons, in denominations of $1,000 and integral multiples. Initially, the Trustee will act as paying agent and registrar for the New Notes. The New Notes may be presented for registration or transfer and exchange at the offices of the Registrar, which initially is the Trustee's corporate trust office at 60 Livingston Ave, St. Paul, Minnesota 55107-2292. KCI may change any Paying Agent and Registrar without notice to Holders of the New Notes. KCI will pay principal, and premium, if any, on the New Notes at the Trustee's corporate office in New York, New York. At KCI's option, interest may be paid at the Trustee's corporate trust office or by check mailed to the registered address of Holders.

        In this exchange offer, KCI will issue up to $205 million aggregate principal amount of New Notes in exchange for up to $205 million aggregate principal amount of the Series A Senior Subordinated Notes due 2013 (the "Old Notes"). The Indenture will provide for the issuance of an unlimited amount of additional Senior Subordinated Notes due 2013 ("Additional Notes") having identical terms and conditions to the Notes offered in this offering. Additional Notes may be issued in one or more series from time to time subject to the limitations set forth under "—Covenants—Limitation on Incurrence of Additional Indebtedness." The Old Notes, the New Notes and the Additional Notes (if any) are referred to collectively in this section as the "Notes".

        Interest on the New Notes will accrue at the rate of 7.375% per annum and will be payable semiannually in cash on each May 15 and November 15, commencing on November 15, 2003, to the persons who are registered Holders at the close of business on May 1 and November 1 immediately preceding the applicable interest payment date. Interest on the New Notes will accrue from and including the most recent date to which interest has been paid or, if no interest has been paid, from and including the date of issuance of the Old Notes. Interest will be computed on the basis of a

100

360-day year of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed. The New Notes offered hereby, the Old Notes and any Additional Notes would be treated as a single class for all purposes under the Indenture.

        The New Notes will not be entitled to the benefit of any mandatory sinking fund.

Optional Redemption

        The Notes will be redeemable, at KCI's option, in whole at any time or in part from time to time, on and after May 15, 2008, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on May 15 of the year set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption:

If Redeemed During the 12-Month Period Commencing	Redemption Price
2008	103.688	%
2009	102.458	%
2010	101.229	%
2011 and thereafter	100.000	%

        In addition, at any time prior to May 15, 2008, KCI may, at its option, redeem the Notes, in whole or in part, from time to time, upon not less than 30 nor more than 60 days' notice at a redemption price equal to the greater of (i) 101% of the principal amount of the Notes so redeemed, plus accrued and unpaid interest, and (ii) the Make-Whole Premium with respect to the Notes, or the portions thereof, to be redeemed, plus, to the extent not included in the Make-Whole Premium, accrued and unpaid interest to the date of redemption.

        At any time, or from time to time, on or prior to May 15, 2006, KCI may, at its option, on one or more occasions use all or a portion of the net cash proceeds of one or more Equity Offerings to redeem the Notes issued under the Indenture at a redemption price equal to 107.375% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of redemption; provided that at least 65% of the principal amount of Notes originally issued remains outstanding immediately after any such redemption. In order to effect the foregoing redemption with the proceeds of any Equity Offering, KCI shall make such redemption not more than 90 days after the consummation of any such Equity Offering.

Selection and Notice of Redemption

        In the event that less than all of the Notes are to be redeemed at any time, selection of such Notes, or portions thereof, for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed or, if such Notes are not then listed on a national securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that no Notes of a principal amount of $1,000 or less shall be redeemed in part; provided, further, that if a partial redemption is made with the proceeds of an Equity Offering, selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to DTC procedures), unless such method is otherwise prohibited.

        Notice of redemption shall be mailed by first-class mail at least 30 but not more than 60 days, before the redemption date to each Holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions

101

thereof called for redemption as long as KCI has deposited with the paying agent funds in satisfaction of the applicable redemption price pursuant to the Indenture.

Subordination

        The payment of all Obligations on the New Notes is subordinated in right of payment to the prior payment in full in cash or Cash Equivalents of all Obligations on Senior Debt. Upon any payment or distribution of assets of KCI of any kind or character, whether in cash, property or securities, to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors or marshaling of assets of KCI or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to KCI or its property, whether voluntary or involuntary, all Obligations due or to become due upon all Senior Debt shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt, before any payment or distribution of any kind or character is made on account of any Obligations on the Notes, or for the acquisition of any of the Notes for cash or property or otherwise.

        If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees or commissions with respect to, any Senior Debt, no payment or distribution of any kind or character shall be made by or on behalf of KCI or any other Person on its or their behalf with respect to any Obligations on the Notes or to acquire any of the Notes for cash or property or otherwise.

        In addition, if any other event of default occurs and is continuing with respect to any Designated Senior Debt, as such event of default is defined in the instrument creating or evidencing such Designated Senior Debt, permitting the holders of such Designated Senior Debt then outstanding to accelerate the maturity thereof and if the Representative for the respective issue of Designated Senior Debt gives written notice of the event of default to the Trustee (a "Default Notice"), then, unless and until all events of default have been cured or waived or have ceased to exist or the Trustee receives notice from the Representative for the respective issue of Designated Senior Debt terminating the Blockage Period (as defined below), during the 180 days after the delivery of such Default Notice (the "Blockage Period"), neither KCI nor any other Person on its behalf shall:

(a)

make any payment or distribution of any kind or character with respect to any Obligations on the Notes, or



(b)

acquire any of the Notes for cash or property or otherwise.

        Notwithstanding anything herein to the contrary, in no event will a Blockage Period extend beyond 180 days from the date the payment on the Notes was due and only one such Blockage Period may be commenced within any 360 consecutive days. No event of default which existed or was continuing on the date of the commencement of any Blockage Period with respect to the Designated Senior Debt shall be, or be made, the basis for commencement of a second Blockage Period by the Representative of such Designated Senior Debt whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of commencement of such Blockage Period that, in either case, would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose).

        By reason of such subordination, in the event of the insolvency of KCI, creditors of KCI who are not holders of Senior Debt, including the Holders of the New Notes, may recover less, ratably, than holders of Senior Debt.

102

        As of June 30, 2003, on a pro forma basis after giving effect to the recapitalization, KCI and the Guarantors would have had approximately $480.6 million of Senior Debt outstanding and $89.1 million of availability under the Credit Agreement.

Guarantees

        Each Guarantor unconditionally guarantees, on a senior subordinated basis, jointly and severally, to each Holder and the Trustee, the full and prompt performance of KCI's obligations under the Indenture and the Notes, including the payment of principal of and interest on the Notes. The Guarantees are subordinated to Guarantor Senior Debt on the same basis as the Notes are subordinated to Senior Debt. The obligations of each Guarantor are limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under the Indenture, will result in the obligations of such Guarantor under the Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Guarantor that makes a payment or distribution under a Guarantee shall be entitled to a contribution from each other Guarantor in an amount pro rata, based on the net assets of each Guarantor, determined in accordance with GAAP.

        Each Guarantor may consolidate with or merge into or sell its assets to KCI or another Guarantor that is a Wholly Owned Restricted Subsidiary of KCI without limitation, or with or into or to other Persons upon the terms and conditions set forth in the Indenture. See "Covenants—Merger, Consolidation and Sale of Assets." In the event all of the Capital Stock of a Guarantor is sold by KCI and/or by one or more of KCI's Restricted Subsidiaries, the Guarantor's Guarantee will be automatically and unconditionally released. In addition, any Guarantor that is designated as an Unrestricted Subsidiary in accordance with the terms of the Indenture will be relieved of its obligations under its Guarantee.

Change of Control

        The Indenture provides that upon the occurrence of a Change of Control, KCI will make an offer described below (the "Change of Control Offer") and each Holder will have the right to require that KCI purchase all or a portion of such Holder's Notes at a purchase price equal to 101% of the principal amount thereof plus accrued interest to the date of purchase.

        The Indenture provides that, prior to the mailing of the notice referred to below, but in any event within 30 days following any Change of Control, KCI will:

(a)

obtain the requisite consents under the Credit Agreement (so long as the terms of which provide that a Change of Control would result in a default or event of default or would otherwise require repayment) and all other Senior Debt (the terms of which provide that a Change of Control would result in a default or event of default or would otherwise require repayment) to permit the repurchase of the Notes as provided below, or



(b)

in the event a consent is not obtained with respect to such Credit Agreement or any such other Senior Debt, repay in full and terminate all commitments under Indebtedness under such Credit Agreement or such other Senior Debt, as the case may be, or offer to repay in full and terminate all commitments under all Indebtedness under such Credit Agreement or such other Senior Debt, as the case may be, and to repay the Indebtedness owed to each lender which has accepted such offer.

        KCI shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase Notes pursuant to the provisions described below. KCI's failure to comply with

103

the covenant described in the first sentence of this paragraph shall be governed by clause (c) and not clause (b) under "Events of Default" below.

        Within 30 days following the date upon which the Change of Control occurred, KCI must send, by first class mail, a notice to each Holder, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. Such notice shall state, among other things, the purchase date, which must be no earlier than 30 days nor later than 45 days from the date such notice is mailed, other than as may be required by law (the "Change of Control Payment Date"). Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third business day prior to the Change of Control Payment Date.

        If a Change of Control Offer is made, there can be no assurance that KCI will have available funds sufficient to pay the Change of Control purchase price for all the Notes that might be delivered by Holders seeking to accept the Change of Control Offer. In the event KCI is required to purchase outstanding Notes pursuant to a Change of Control Offer, KCI expects that it would seek third party financing to the extent it does not have available funds to meet its purchase obligations. However, there can be no assurance that KCI would be able to obtain such financing.

        Neither the Board of Directors of KCI nor the Trustee may waive the covenant relating to a Holder's right of redemption upon a Change of Control. Restrictions in the Indenture on the ability of KCI and its Restricted Subsidiaries to incur additional Indebtedness, to grant liens on its property, to make Restricted Payments and to make Asset Sales may also make more difficult or discourage a takeover of KCI, whether favored or opposed by the management of KCI. Consummation of any of these transactions may require redemption or repurchase of the Notes, and there can be no assurance that KCI or the acquiring party will have sufficient financial resources to effect that redemption or repurchase. The restrictions in the Indenture described above, as well as the restrictions on transactions with Affiliates described below may make more difficult or discourage any leveraged buyout of KCI or any of its Subsidiaries by the management of KCI. While those restrictions cover a wide variety of arrangements which have traditionally been used to effect highly leveraged transactions, the Indenture may not afford the Holders of Notes protection in all circumstances from the adverse aspects of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction.

        KCI will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Change of Control" provisions of the Indenture, KCI shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Change of Control" provisions of the Indenture by virtue thereof.

Registration Rights

        The Company and the placement agents for the Old Notes entered into a Registration Rights Agreement on the Issue Date. The following is a summary of the material provisions of the Registration Rights Agreement.

        KCI and each Guarantor have agreed with the placement agents, that they will use their best efforts, at their cost, to file and cause to become effective a registration statement with respect to a registered offer (the "Exchange Offer") to exchange the Old Notes for an issue of subordinated notes of KCI (the "Exchange Notes"), guaranteed by the Guarantors, with terms identical to the Old Notes (except that the Exchange Notes will not bear legends restricting transfer).

104

        KCI and the Guarantors are obligated to cause the Exchange Offer to remain open for not less than 20 business days after the date KCI mails notice of the Exchange Offer to Holders of the Old Notes. For each Old Note surrendered to KCI under the Exchange Offer, the Holder will receive an Exchange Note of equal principal amount. Interest on each Exchange Note shall accrue from the last interest payment date on which interest was paid on the Old Notes so surrendered or, if no interest has been paid on such Old Notes, from the Issue Date.

        If KCI effects the Exchange Offer, KCI will be entitled to close the Exchange Offer 20 business days after the commencement thereof, provided that it has accepted all Old Notes validly surrendered in accordance with the terms of the Exchange Offer. Old Notes not tendered in the Exchange Offer will bear interest at the rate of 7.375% per annum and be subject to all of the terms and conditions specified in the Indenture and to the transfer restrictions described in "Transfer Restrictions."

        In the event that applicable interpretations of the staff of the SEC do not permit KCI to effect the Exchange Offer, or under other specified circumstances, KCI and the Guarantors will, at their cost, use their best efforts to cause to become effective a shelf registration statement (the "Shelf Registration Statement") with respect to resales of the Old Notes. KCI and the Guarantors will use their best efforts to keep such Shelf Registration Statement effective until the expiration of the time period referred to in Rule 144(k) under the Securities Act of 1933, as amended (the "Securities Act") after the Issue Date, or such shorter period that will terminate when all Old Notes covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement. KCI and the Guarantors will, in the event of such a shelf registration, provide to each Holder of Old Notes copies of the prospectus, notify each Holder of Old Notes when the Shelf Registration Statement for the Old Notes has become effective and take certain other actions as are required to permit resales of the Old Notes. A Holder that sells its Old Notes pursuant to the Shelf Registration Statement:

(1)

generally will be required to be named as a selling securityholder in the related prospectus and to deliver a prospectus to purchasers;



(2)

will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales; and



(3)

will be bound by the provisions of the Registration Rights Agreement that are applicable to such Holder (including indemnification obligations).

        In the event that the Exchange Offer is not consummated and a Shelf Registration Statement is not declared effective on or prior to the date that is 240 days after the Issue Date, the annual interest rate borne by the Old Notes will be increased by 0.5% over the interest rate of 7.375% per annum otherwise applicable to such Old Notes. The amount of additional interest will increase by an additional 0.25% for each subsequent 90-day period, up to a maximum additional 1.0% over the rate of 7.375% per annum initially applicable to the Old Notes, until the Exchange Offer is consummated or a Shelf Registration Statement is declared effective. Once the Exchange Offer is consummated or a Shelf Registration Statement is declared effective, the annual interest rate borne by the Old Notes shall be changed to again be the rate of 7.375% per annum.

Covenants

Overview.

        In the Indenture, KCI has agreed to covenants that limit its and its Restricted Subsidiaries' ability, among other things, to:

•

incur additional debt;



•

pay dividends, acquire shares of capital stock, make payments on subordinated debt or make investments;

105

•

place limitations on distributions from Restricted Subsidiaries;



•

issue or sell capital stock of Restricted Subsidiaries;



•

issue guarantees;



•

sell or exchange assets;



•

enter into transactions with affiliates;



•

create liens; and



•

effect mergers.

Limitation on Incurrence of Additional Indebtedness.

(a)

KCI will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, "incur") any Indebtedness; provided, however, that if no Default or Event of Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of any such Indebtedness, KCI or any of its Restricted Subsidiaries may incur Indebtedness (including, without limitation, Acquired Indebtedness) if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of KCI and its Restricted Subsidiaries is greater than 2.0 to 1.0.

        Notwithstanding the foregoing, KCI and any Restricted Subsidiary (except as specified below) may incur each and all of the following:

(1)

Indebtedness under the Notes offered hereby and the Guarantees thereof;



(2)

Indebtedness incurred pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding not to exceed $580.0 million, less



(A)

the aggregate amount of any Indebtedness of Securitization Entities in Qualified Securitization Transactions incurred at a time that KCI is not able to incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of this clause (a), provided that KCI may elect in writing to the Trustee to have the amount of said reduction resulting from such Indebtedness incurred in connection with a Qualified Securitization Transaction to be reduced by an amount (the "Transferred Reduction Amount") up to the then remaining amount of Indebtedness that could be incurred pursuant to clause (13) below, and in the event of such election, the amount of Indebtedness that can be incurred pursuant to clause (13) below will be reduced by the Transferred Reduction Amount,



(B)

the amount of all scheduled principal payments actually made by KCI (excluding any such payment to the extent such payment is made with the proceeds of Indebtedness incurred at the time of repayment), and



(C)

the amount of all required permanent prepayments of Indebtedness under the Credit Agreement actually made with the proceeds of an Asset Sale;

        The aggregate amount of reductions under subclauses (A), (B) and (C) above at any time can be established by KCI by providing the Trustee with an officers' certificate setting forth the calculations for such amount.

(3)

Indebtedness of Foreign Subsidiaries not to exceed $40.0 million (or the equivalent amount thereof, at the time of incurrence, in other foreign currencies) at any time outstanding pursuant to this clause (3);

106

(4)

other Indebtedness of KCI and its Restricted Subsidiaries outstanding on the Issue Date reduced by the amount of any scheduled amortization payments or permanent mandatory prepayments when actually paid or permanent reductions thereon;



(5)

Interest Swap Obligations of KCI covering Indebtedness of KCI or any of its Restricted Subsidiaries and Interest Swap Obligations of any Restricted Subsidiary of KCI covering Indebtedness of such Restricted Subsidiary; provided, however, that such Interest Swap Obligations are entered into for the purpose of fixing or hedging interest rate risk with respect to any floating and/or fixed rate on Indebtedness incurred in accordance with the Indenture to the extent the notional principal amount of such Interest Swap Obligation does not exceed the principal amount of the Indebtedness to which such Interest Swap Obligation relates and not with the purpose of speculation;



(6)

Indebtedness under Currency Agreements; provided that such Currency Agreements do not increase the Indebtedness of KCI and its Restricted Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder;



(7)

Indebtedness of a Restricted Subsidiary of KCI to KCI or to a Restricted Subsidiary of KCI for so long as such Indebtedness is held by KCI or a Restricted Subsidiary of KCI, in each case subject to no Lien (other than a Lien in connection with the Credit Agreement and Permitted Liens which are not consensual) held by a Person other than KCI or a Restricted Subsidiary of KCI; provided that if as of any date any Person other than KCI or a Restricted Subsidiary of KCI owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness (other than a Lien in connection with the Credit Agreement and Permitted Liens which are not consensual), such date shall be deemed the incurrence of Indebtedness which is not allowed by this clause (7);



(8)

Indebtedness of KCI to a Restricted Subsidiary of KCI for so long as such Indebtedness is held by a Restricted Subsidiary of KCI, in each case subject to no Lien (other than a Lien in connection with the Credit Agreement and Permitted Liens which are not consensual); provided that (A) any Indebtedness of KCI to any Restricted Subsidiary of KCI (other than a Restricted Subsidiary which is a Guarantor) is unsecured and subordinated, pursuant to a written agreement, to KCI's obligations under the Indenture and the Notes and (B) if as of any date any Person other than a Restricted Subsidiary of KCI owns or holds any such Indebtedness or any Person holds a Lien in respect of such Indebtedness (other than a Lien in connection with the Credit Agreement and Permitted Liens which are not consensual), such date shall be deemed the incurrence of Indebtedness which is not allowed by this clause (8);



(9)

Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within five business days of incurrence;



(10)

Indebtedness represented by performance bonds, warranty or contractual service obligations, standby letters of credit or appeal bonds, in each case to the extent incurred in the ordinary course of business of KCI or such Restricted Subsidiary in accordance with customary industry practices, in amounts and for the purposes customary in KCI's industry;



(11)

the incurrence by a Securitization Entity of Indebtedness in a Qualified Securitization Transaction that is not recourse to KCI or any Subsidiary of KCI (except for Standard Securitization Undertakings);



(12)

Refinancing Indebtedness;

107

(13)

additional Indebtedness of KCI and its Restricted Subsidiaries in an aggregate principal amount not to exceed $100.0 million at any one time outstanding (which may be Indebtedness under the Credit Agreement in addition to that permitted by clause (2)); and



(14)

Acquired Indebtedness, and refinancings or replacements thereof, not to exceed $50.0 million at any one time outstanding pursuant to this clause (14).

(b)

For purposes of determining any particular amount of Indebtedness under this "Limitation on Incurrence of Additional Indebtedness" covenant, Indebtedness incurred under the Credit Agreement on or prior to the Issue Date shall be treated as incurred pursuant to subclause (2) of the second paragraph of section (a) of this "Limitation on Incurrence of Additional Indebtedness" covenant. For purposes of determining compliance with this "Limitation on Incurrence of Additional Indebtedness" covenant, in the event that an item of Indebtedness at any time could have been incurred (regardless of when it was actually incurred) under more than one of the types of Indebtedness described above (other than Indebtedness incurred under the Credit Agreement on or prior to the Issue Date, which shall be treated as incurred pursuant to subclause (2) of the second paragraph of clause (a) of this "Limitation on Incurrence of Additional Indebtedness" covenant), including under the first paragraph of clause (a) of this covenant, KCI, in its sole discretion, shall classify, and at any such time may reclassify, such item of Indebtedness.

Limitation on Restricted Payments.

        KCI will not and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly,

(1)

declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of KCI or warrants, options or other rights to acquire Qualified Capital Stock (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, Qualified Capital Stock)) on or in respect of shares of KCI's Capital Stock to holders of such Capital Stock,



(2)

purchase, redeem or otherwise acquire or retire for value any Capital Stock of KCI or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock,



(3)

make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of KCI that is subordinate or junior in right of payment to the Notes, or



(4)

make any Investment (other than Permitted Investments) (each of the foregoing actions set forth in clauses (1), (2), (3) and (4) being referred to as a "Restricted Payment"), if at the time of such Restricted Payment or immediately after giving effect thereto:



(A)

a Default or an Event of Default shall have occurred and be continuing,



(B)

KCI is not able to incur at least $1.00 of additional Indebtedness under the first paragraph of clause (a) of the covenant described under "Limitation on Incurrence of Additional Indebtedness," or



(C)

the aggregate amount of Restricted Payments (including such proposed Restricted Payment but excluding the Distribution) made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the fair market value of such

108

property as determined reasonably and in good faith by the Board of Directors of KCI, whose determination shall be conclusive) shall exceed the sum, without duplication, of:

(1)

50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of KCI earned during the period beginning on the first day of the fiscal quarter which includes the Issue Date and ending on the last day of the last fiscal quarter that precedes the date the Restricted Payment occurs (the "Reference Date") for which a financial statement relating to such fiscal quarter has been filed or furnished in a report with the SEC (treating such period as a single accounting period); plus



(2)

100% of the aggregate net cash proceeds received by KCI from any Person (other than a Subsidiary of KCI) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of KCI (other than the Preferred Stock to the extent that the net cash proceeds therefrom are or are expected to be used to fund the Distribution and other than proceeds of Qualified Capital Stock to the extent that they are used pursuant to clause (14) of Permitted Investments); plus



(3)

100% of the aggregate net cash proceeds received after the Issue Date by KCI from the issuance or sale (other than to a Subsidiary of KCI) of debt securities or Disqualified Capital Stock (other than the Preferred Stock to the extent that the net cash proceeds therefrom are or are expected to be used to fund the Distribution) that have been converted into or exchanged for Qualified Capital Stock of KCI, together with (without duplication) any net cash proceeds received by KCI at the time of such conversion or exchange; plus



(4)

to the extent not otherwise included in the Consolidated Net Income of KCI, an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) in Unrestricted Subsidiaries resulting from the payments in cash of interest on Indebtedness, dividends, repayments of loans or advances or other transfers of assets, in each case to KCI or a Restricted Subsidiary or from the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary; plus



(5)

to the extent not otherwise included in Consolidated Net Income, net cash proceeds from sale of Investments which were treated as Restricted Payments, but not to exceed the amounts so treated; plus



(6)

without duplication of any amounts included in clauses (C)(2) and (C)(3) above, 100% of the aggregate net cash proceeds of any equity contribution received by KCI from a holder of KCI's Capital Stock other than proceeds of a Capital Contribution to the extent that they are used pursuant to clause (14) of Permitted Investments.

        Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit:

(1)

the payment of any dividend or redemption payment within 60 days after the date of declaration of such dividend or redemption payment if the dividend or redemption payment would have been permitted on the date of declaration;



(2)

the acquisition of any shares of Capital Stock of KCI, either:



(A)

solely in exchange for shares of Qualified Capital Stock of KCI (or warrants, options or other rights to acquire Qualified Capital Stock of KCI (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, Qualified Capital Stock)), or

109

(B)

through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of KCI) of shares of Qualified Capital Stock of KCI (or warrants, options or other rights to acquire Qualified Capital Stock of KCI (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, Qualified Capital Stock));



(3)

the acquisition of any Indebtedness of KCI or of any Guarantor that is subordinate or junior in right of payment to the Notes or such Guarantor's Guarantee, as the case may be, either:



(A)

solely in exchange (i) for shares of Qualified Capital Stock of KCI (or warrants, options or other rights to acquire Qualified Capital Stock of KCI (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, Qualified Capital Stock)); or (ii) Refinancing Indebtedness; or



(B)

through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of KCI) of (i) shares of Qualified Capital Stock of KCI (or warrants, options or other rights to acquire Qualified Capital Stock of KCI (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, Qualified Capital Stock)); or (ii) Refinancing Indebtedness;



(4)

the purchase of any Subordinated Indebtedness at a purchase price not greater than 101% of the principal amount thereof in the event of a Change of Control in accordance with provisions similar to the "—Change of Control" covenant; provided that prior to such purchase KCI has made the Change of Control Offer as provided in such covenant with respect to the Notes and has purchased all Notes validly tendered for payment in connection with such Change of Control Offer and that no Default or Event of Default is in existence prior to or as a result of such purchase;



(5)

so long as no Default or Event of Default shall have occurred and be continuing, repurchases by KCI of Equity Interests of KCI from employees, consultants or directors of KCI or any of its Subsidiaries or their authorized representatives upon or within 270 days after the death, disability or termination of employment, consultancy, or directorships of such employees, consultants or directors, in an amount not to exceed (A) a cumulative amount equal to $10.0 million per fiscal year (or partial fiscal year) beginning with the fiscal year that included the Issue Date, minus (B) the aggregate amount of Restricted Payments made pursuant to this clause (5); provided, however, that the aggregate amount of Restricted Payments made pursuant to this clause (5) shall not exceed $30.0 million in the aggregate from and after the Issue Date;



(6)

the repurchase of Equity Interests deemed to occur upon the exercise of stock options if such Equity Interests represent a portion of the exercise price of such stock options;



(7)

for the avoidance of doubt only, payments pursuant to the Management Agreement;



(8)

other Restricted Payments pursuant to this clause (8) not to exceed $30.0 million in the aggregate from and after the Issue Date;



(9)

the acquisition of, or declaration or payment of dividends (other than dividends paid in Disqualified Capital Stock) on, Equity Interests of KCI in connection with the consummation of the Distribution, but excluding any dividends declared or paid on the preferred stock issued in connection with the consummation of the Distribution;



(10)

after the Holding Company Merger, payments to the Parent pursuant to this clause (10), (i) to enable the Parent to pay the Federal, state, local, or foreign tax liabilities of itself, and of KCI and its Subsidiaries for which it is liable; such payment shall be determined assuming that the Parent, KCI, and the Subsidiaries file a consolidated Federal (and where actually filed,

110

consolidated, combined, unitary or similar returns for state, local or foreign purposes) tax return with the Parent as the Parent and KCI and the Subsidiaries as members and that the Parent has no substantial assets other than the stock of KCI and any tax payments shall either be used by the Parent to pay such tax liabilities within 90 days of the Parent's receipt of such payment or refunded to the payee, and (ii) in an aggregate amount not to exceed $10 million per year in order to pay legal and accounting expenses, payroll and other compensation expenses in the ordinary course of business, and other corporate overhead expenses in the ordinary course of business; and

(11)

for the avoidance of doubt, the distribution of any Equity Interests of any Subsidiary of KCI for the purpose of establishing a holding company structure in compliance with the covenant described under "—Merger, Consolidation and Sale of Assets."

        In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (C) of the immediately preceding paragraph, amounts expended pursuant to clauses (2)(A), (3)(A), (3)(B)(ii), (6), (7), (9), (10) and (11) shall be excluded in such calculation and amounts expended pursuant to clauses (1), (2)(B), (3)(B)(i), (4), (5) and (8) shall be included in such calculation.

        Not later than (a) 5 days after making any Restricted Payment in excess of $5 million or the last Restricted Payment of a series of related Restricted Payments in excess of $5 million, or (b) 45 days after the end of any fiscal quarter in which KCI and Restricted Subsidiaries made Restricted Payments in excess of $2.5 million, KCI shall deliver to the Trustee an officers' certificate stating that such Restricted Payment (or Restricted Payments) complies with the Indenture and setting forth in reasonable detail the basis upon which the required calculations were computed, which calculations may be based upon KCI's latest available internal quarterly financial statements; provided, however, that no such officer's certificate shall be required in connection with Restricted Payments made pursuant to clauses (2)(A), (3)(A), (3)(B)(ii), (6), (9), (10) and (11) or payments pursuant to the Management Agreement pursuant to clause (7) of the immediately preceding paragraph.

Limitation on Asset Sales.

        KCI will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:

(1)

KCI or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by KCI's Board of Directors),



(2)

at least 75% of the consideration received by KCI or the Restricted Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Cash Equivalents and is received at the time of such disposition provided that for purposes of this provision, the amount of



(A)

any liabilities (as shown on the most recent balance sheet of KCI or such Restricted Subsidiary or in the notes thereto) of KCI or such Restricted Subsidiary that are assumed by the transferee of any such assets (other than liabilities that are by their terms pari passu with or subordinated to the Notes or the guarantee of the Guarantors, as applicable) and



(B)

any securities or other obligations received by KCI or any such Restricted Subsidiary from such transferee that are immediately converted by KCI or such Restricted Subsidiary into cash or Cash Equivalents (or (i) are Marketable Securities that are actually sold for cash or Cash Equivalents within 180 days of the consummation of such Asset Sale or (ii) as to which KCI or such Restricted Subsidiary has received at or prior to the consummation of the Asset Sale a commitment (which may be subject to customary conditions) from a

111

nationally recognized investment, merchant or commercial bank to convert into cash or Cash Equivalents within 180 days of the consummation of such Asset Sale and which are thereafter actually converted into cash or Cash Equivalents within such 180-day period)

will be deemed to be cash or Cash Equivalents (and shall be deemed to be Net Cash Proceeds for purposes of the following provisions as and when reduced to cash or Cash Equivalents) to the extent of the net cash or Cash Equivalents realized thereon, and

(3)

upon the consummation of an Asset Sale, KCI shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 365 days of receipt thereof either:



(A)

to repay or prepay any Senior Debt and, in the case of any Senior Debt under any revolving credit facility, effect a permanent reduction in the availability under such revolving credit facility,



(B)

to make an investment (or shall have entered into a binding commitment to make such an investment within 180 days) in properties and assets that replace the properties and assets that were the subject of such Asset Sale or in properties and assets that will be used in the business of KCI and its Subsidiaries as existing on the Issue Date or in businesses which are the same, similar or reasonably related or complementary to the businesses in which KCI and its Restricted Subsidiaries are engaged on the Issue Date ("Replacement Assets"), or



(C)

a combination of prepayment and investment permitted by the foregoing clauses (3)(A) and (3)(B).

        On the 366th day after an Asset Sale or such earlier date, if any, as the Board of Directors of KCI or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (3)(A), (3)(B) and (3)(C) of the next preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which have not been applied (or committed to the purchase of replacement assets) on or before such Net Proceeds Offer Trigger Date as permitted in clauses (3)(A), (3)(B) and (3)(C) of the next preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by KCI or such Restricted Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days following the applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest thereon, if any, to the date of purchase; provided, however, that if at any time any non-cash consideration received by KCI or any Restricted Subsidiary of KCI, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this covenant. KCI may defer the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $10.0 million resulting from one or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not just the amount in excess of $10.0 million, shall be applied as required pursuant to this paragraph).

        In the event of the transfer of substantially all (but not all) of the property and assets of KCI and its Restricted Subsidiaries as an entirety to a Person in a transaction permitted under "—Merger, Consolidation and Sale of Assets," the successor corporation shall be deemed to have sold the properties and assets of KCI and its Restricted Subsidiaries not so transferred for purposes of this covenant, and shall comply with the provisions of this covenant with respect to such deemed sale as if it were an

112

Asset Sale. In addition, the fair market value of such properties and assets of KCI or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this covenant.

        Notwithstanding the two immediately preceding paragraphs, KCI and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraphs to the extent (a) the consideration for such Asset Sale constitutes Replacement Assets and (b) such Asset Sale is for fair market value.

        Each Net Proceeds Offer will be mailed to the record Holders as shown on the register of Holders within 25 days following the Net Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply with the procedures set forth in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may elect to tender their Notes in whole or in part in integral multiples of $1,000 in exchange for cash. To the extent Holders properly tender Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering Holders will be purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer shall remain open for a period of 20 business days or such longer period as may be required by law.

        If a Net Proceeds Offer is made, there can be no assurance that KCI will have available funds sufficient to pay the Net Proceeds Offer Amount for all the Notes that might be delivered by Holders seeking to accept the Net Proceeds Offer. In the event KCI is required to purchase outstanding Notes pursuant to a Net Proceeds Offer, KCI expects that it would seek third party financing to the extent it does not have available funds to meet its purchase obligations. However, there can be no assurance that KCI would be able to obtain such financing. In addition, the terms of the instruments relating to Senior Debt of KCI or a Restricted Subsidiary of KCI may require the Net Proceeds be used to repay or prepay Senior Debt.

        KCI will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Asset Sale" provisions of the Indenture, KCI shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Asset Sale" provisions of the Indenture by virtue thereof.

Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.

        KCI will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of KCI to:

(a)

pay dividends or make any other distributions on or in respect of its Capital Stock to KCI or any of its Restricted Subsidiaries;



(b)

make loans or advances or to pay any Indebtedness or other obligation owed to KCI or any other Restricted Subsidiary of KCI; or



(c)

transfer any of its property or assets to KCI or any other Restricted Subsidiary of KCI,

        except for such encumbrances or restrictions existing under or by reason of:

(1)

applicable law;



(2)

the Indenture;



(3)

customary non-assignment provisions of any contract or any lease governing a leasehold interest of any Restricted Subsidiary of KCI;

113

(4)

any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Restricted Subsidiaries, or the properties or assets of any Restricted Subsidiaries, other than the Person or such Person's Subsidiaries or the properties or assets of the Person so acquired or such Person's Subsidiaries;



(5)

agreements existing on the Issue Date to the extent and in the manner such agreements are in effect on the Issue Date;



(6)

any agreement to sell assets or Capital Stock permitted under the Indenture to any Person pending the closing of such sale;



(7)

any instrument governing a Permitted Lien, to the extent and only to the extent such instrument restricts the transfer or other disposition of assets subject to such Permitted Lien;



(8)

restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business;



(9)

customary provisions in joint venture agreements and other similar agreements;



(10)

the documentation relating to Indebtedness of Foreign Subsidiaries incurred pursuant to the terms of the Indenture, provided that such encumbrances or restrictions are not more restrictive than those contained in the Credit Agreement;



(11)

the Credit Agreement;



(12)

the documentation relating to other Indebtedness permitted to be incurred subsequent to the Issue Date pursuant to the provisions of the covenant described under "—Limitations on Incurrence of Additional Indebtedness"; provided that such encumbrances or restrictions are not more restrictive than those contained in the Credit Agreement;



(13)

the documentation relating to Indebtedness of a Securitization Entity in connection with a Qualified Securitization Transaction; provided that such restrictions apply only to such Securitization Entity; or



(14)

an agreement governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in subclause (2), (4), (5) or (11) of this clause (c); provided, however, that the provisions relating to such encumbrance or restriction contained in any such Indebtedness are no less favorable to KCI in any material respect as determined by the Board of Directors of KCI in their reasonable and good faith judgment than the provisions relating to such encumbrance or restriction contained in agreements referred to in such subclause (2), (4), (5) or (11) of this clause (c).

        Nothing contained in this "Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries" covenant shall prevent KCI or any Subsidiary of KCI from creating, incurring, assuming or suffering to exist any Permitted Liens.

Limitation on Preferred Stock of Restricted Subsidiaries.

        KCI will not permit any of its Restricted Subsidiaries to issue any Preferred Stock (other than to KCI or to a Wholly Owned Restricted Subsidiary of KCI) or permit any Person (other than KCI or a Wholly Owned Restricted Subsidiary of KCI) to own any Preferred Stock of any Restricted Subsidiary of KCI.

114

Limitation on Liens Securing Indebtedness.

        KCI will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Liens of any kind securing any Indebtedness against or upon any property or assets of KCI or any of its Restricted Subsidiaries whether owned on the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom to secure any Indebtedness unless:

(1)

in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Notes or any Guarantee, the Notes and such Guarantee, as the case may be, are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens, and



(2)

in all other cases, the Notes and the Guarantees are equally and ratably secured, except for



(A)

Liens existing as of the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date;



(B)

Liens securing Indebtedness incurred under the Credit Agreement;



(C)

Liens securing Senior Debt and Liens securing Guarantor Senior Debt;



(D)

Liens securing the Notes and the Guarantees;



(E)

Liens of KCI or a Restricted Subsidiary of KCI on assets of any Subsidiary of KCI;



(F)

Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness which has been secured by a Lien permitted under the Indenture and which has been incurred in accordance with the provisions of the Indenture; provided, however, that such Liens



(i)

are no less favorable to the Holders and are not more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being Refinanced and



(ii)

do not extend to or cover any property or assets of KCI or any of its Restricted Subsidiaries not securing the Indebtedness so Refinanced; and



(G)

Permitted Liens.

Prohibition on Incurrence of Senior Subordinated Debt.

        KCI will not, and will not permit any Guarantor to, incur or suffer to exist Indebtedness that is senior in right of payment to the Notes or any Guarantee, as the case may be, and expressly contractually subordinate in right of payment to any other Indebtedness of KCI or such Guarantor, as the case may be.

Merger, Consolidation and Sale of Assets.

        KCI will not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of KCI to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of KCI's assets (determined on a consolidated basis for KCI and KCI's Restricted Subsidiaries) whether as an entirety or substantially as an entirety to any Person (other than KCI or any Wholly Owned Restricted Subsidiary that is a Guarantor) unless:

(1)

either

115

(A)

with respect to such a consolidation or merger, KCI shall be the surviving or continuing corporation or



(B)

the Person (if other than KCI) formed by such consolidation or into which KCI is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of KCI and of KCI's Restricted Subsidiaries substantially as an entirety (the "Surviving Entity")



(i)

shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia and



(ii)

shall expressly assume, by supplemental indenture (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if any, and interest on all of the Notes and the performance of every covenant of the Notes, the Indenture and the Registration Rights Agreement on the part of KCI to be performed or observed;



(2)

immediately after giving effect to such transaction and the assumption contemplated by clause (1)(B)(ii) above (including giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), KCI or such Surviving Entity, as the case may be, shall be able to incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of clause (a) of the covenant described above under "—Limitation on Incurrence of Additional Indebtedness";



(3)

immediately after giving effect to such transaction and the assumption contemplated by clause (1)(B)(ii) above (including, without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; and



(4)

KCI or the Surviving Entity, as the case may be, shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of the Indenture and that all conditions precedent in the Indenture relating to such transaction have been satisfied.

        For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries of KCI, the Capital Stock of which constitutes all or substantially all of the properties and assets of KCI, shall be deemed to be the transfer of all or substantially all of the properties and assets of KCI.

        The Indenture provides that upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of KCI in accordance with the foregoing, in which KCI is not the continuing corporation, the successor Person formed by such consolidation or into which KCI is merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, KCI under the Indenture and the Notes with the same effect as if such surviving entity had been named as such.

        Each Guarantor (other than any Guarantor whose Guarantee is to be released in accordance with the terms of the Guarantee and the Indenture in connection with any transaction complying with the provisions of the "—Limitation on Asset Sales" covenant) will not, and KCI will not cause or permit any

116

Guarantor to, consolidate with or merge with or into any Person other than KCI or any other Guarantor unless:

(1)

the entity formed by or surviving any such consolidation or merger (if other than the Guarantor) or to which such sale, lease, conveyance or other disposition shall have been made is a Person organized and existing under the laws of the United States or any State thereof or the District of Columbia;



(2)

such entity assumes by supplemental indenture all of the obligations of the Guarantor on the Guarantee; and



(3)

immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing.

        Any merger or consolidation of a Guarantor with and into KCI (with KCI being the surviving entity) or another Guarantor that is a Wholly Owned Restricted Subsidiary of KCI need only comply with clause (4) of the first paragraph of this covenant.

        The foregoing restrictions shall not apply to any transaction involving (A) a merger of KCI and one of its Subsidiaries for the purposes of establishing a holding company structure (the "Holding Company Merger") or (B) the merger of KCI and one of its Subsidiaries for the purpose of reincorporating into another jurisdiction. Either of the transactions described in clause (A) or clause (B) of this paragraph may be effected individually or in connection with one or more related transactions; provided that (i) such transaction or transactions (individually or taken as a whole) is not for the purposes of evading the provisions set forth in this section and (ii) clause (1) of the first paragraph of this covenant applies to such transaction or transactions.

Limitations on Transactions with Affiliates.

(a)

KCI will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an "Affiliate Transaction"), other than:

(1)

Affiliate Transactions permitted under clause (b) below; and

(2)

Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of KCI or such Restricted Subsidiary.

        All Affiliate Transactions (and each series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other property with a fair market value in excess of $1.5 million shall be approved by the Board of Directors of KCI or such Restricted Subsidiary, as the case may be, such approval to be evidenced by a Board Resolution delivered to the Trustee stating that such Board of Directors has determined that such transaction complies with the foregoing provisions. If KCI or any Restricted Subsidiary of KCI enters into an Affiliate Transaction (or a series of related Affiliate Transactions related to a common plan) that involves an aggregate fair market value of more than $20.0 million, KCI or such Restricted Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such transaction or series of related transactions to KCI or the relevant Restricted Subsidiary, as the case may be, from a financial point of view, from an Independent Financial Advisor and file the same with the Trustee.

117

(b)

The restrictions set forth in clause (a) shall not apply to:

(1)

fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees or consultants of KCI or any Restricted Subsidiary of KCI in the ordinary course of business of KCI or such Restricted Subsidiary;

(2)

transactions exclusively between or among KCI and any of its Restricted Subsidiaries or exclusively between or among such Restricted Subsidiaries, provided such transactions are not otherwise prohibited by the Indenture;

(3)

any agreement as in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date;

(4)

so long as no Default or Event of Default has occurred and is continuing, the payment of amounts owing pursuant to the Management Agreement;

(5)

issuance of employee stock options approved by the Board of Directors of KCI and the shareholders of KCI;

(6)

transactions effected as part of a Qualified Securitization Transaction;

(7)

Restricted Payments permitted by, and Permitted Investments made in accordance with, the Indenture;

(8)

any sale or issuance of Equity Interests of KCI (other than Disqualified Capital Stock) to any Affiliate of KCI and the entering into and performance of any obligations under any investors' rights agreement, any management rights agreement or other customary agreements entered into in connection with such sale or issuance;

(9)

declaration and payment of the Distribution;

(10)

the sale of the Preferred Stock, the net proceeds of which are or will be used for the Distribution, on substantially the terms described in this prospectus, and the entering into and performance of any obligations under any investors' rights agreement, any management rights agreement or other customary agreements entered into in connection therewith;

(11)

payment of bonuses to and purchases of Equity Interests from employees, directors and consultants of KCI or any Restricted Subsidiary; and

(12)

the distribution of any Equity Interests of any Subsidiary of KCI for the purpose of establishing a holding company structure in compliance with the covenant described under "—Merger, Consolidation and Sale of Assets."

Additional Subsidiary Guarantees.

        If KCI or any of its Restricted Subsidiaries transfers or causes to be transferred, in one transaction or a series of related transactions, any property to any Restricted Subsidiary (other than a Foreign Subsidiary or a Securitization Entity) that is not a Guarantor and that has total assets with a book value in excess of $500,000 after giving effect to such transfer, or if KCI or any of its Restricted Subsidiaries shall organize, acquire or otherwise invest in another Restricted Subsidiary (other than a Foreign Subsidiary or a Securitization Entity) having total assets with a book value in excess of $500,000 that is not already a Guarantor, then such transferee or acquired or other Restricted Subsidiary shall within 15 days of the end of the next succeeding fiscal quarter (unless the book value of such Restricted Subsidiary is in excess of $5.0 million in which case, contemporaneously with the

118

organization, acquisition or other investment in such Restricted Subsidiary, as the case may be) (a) execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of KCI's obligations under the Notes and the Indenture on the terms set forth in the Indenture and (b) deliver to the Trustee an opinion of counsel that such supplemental indenture has been duly authorized, executed and delivered by such Restricted Subsidiary and constitutes a legal, valid, binding and enforceable obligation of such Restricted Subsidiary. Thereafter, such Restricted Subsidiary shall be a Guarantor for all purposes of the Indenture.

Reports to Holders.

        The Indenture provides that KCI will deliver to the Trustee within 15 days after the filing of the same with the SEC, copies of the quarterly and annual reports and of the information, documents and other reports, if any, which KCI is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture further provides that, notwithstanding that KCI may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, KCI will file with the SEC, to the extent permitted, and provide the Trustee and Holders with such annual reports and such information, documents and other reports specified in Sections 13 and 15(d) of the Exchange Act. KCI will also comply with the other provisions of TIA section 314(a).

Limitation on Repurchase of Equity Interests from Employees.

        KCI will not, nor will it permit any of its Restricted Subsidiaries to, repurchase any Equity Interest issued to any officer, employee, director or consultant pursuant to the terms of the Management Equity Plan other than:

(a)

a repurchase of any Equity Interest that is made pursuant to the Distribution;



(b)

a repurchase of any Equity Interest that is made after the death or Permanent Disability of such officer, employee, director or consultant;



(c)

a repurchase of any Capital Stock which has been owned by such officer, employee, director or consultant for a period of time greater than six months;



(d)

a repurchase of any Equity Interest in connection with a Change of Control or in connection with a merger or consolidation, or sale, assignment, transfer, lease, conveyance, or disposition of all or substantially all of KCI's assets, which is permitted pursuant to the terms of the covenant described herein under the heading "—Merger, Consolidation and Sale of Assets";



(e)

a repurchase of any Equity Interest at any point in time which all options issued and outstanding under the Management Equity Plan are subject to variable plan accounting pursuant to the accounting provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB25);



(f)

a repurchase of any Equity Interest to the extent necessary or advisable pursuant to Section 10 or 13 of the Management Equity Plan; however, for purposes of clarity, KCI's call right upon a participant's termination of employment, except in the event of death or Permanent Disability, described in Section 10(a) of the Management Equity Plan shall not be considered necessary or advisable;



(g)

a repurchase of any Equity Interest to the extent used to satisfy Minimum Tax Withholding requirements associated with the exercise of such Equity Interest; or



(h)

a repurchase of any Equity Interest at any point subsequent to KCI's adoption of the accounting provisions of Financial Accounting Standards Board Issuance No. 123—"Accounting for Stock-Based Compensation" (FAS 123), or any other fair value method of

119

accounting generally accepted in the United States, such that the repurchase of such Equity Interest would not trigger liability accounting for all options under the Management Equity Plan.

        Notwithstanding the foregoing, KCI and its Restricted Subsidiaries will need to comply with the other covenants contained in the Indenture in connection with such repurchases, including the covenant described above under "—Limitation on Restricted Payments."

Events of Default

        The following events are defined in the Indenture as "Events of Default":

(a)

the failure to pay interest on any Notes when the same becomes due and payable and the default continues for a period of 30 days (whether or not such payment shall be prohibited by the subordination provisions of the Indenture);



(b)

the failure to pay the principal on any Notes, when such principal becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a payment to purchase Notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or not such payment shall be prohibited by the subordination provisions of the Indenture);



(c)

a default in the observance or performance of any other covenant or agreement contained in the Indenture which default continues for a period of 30 days after KCI receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes (except in the case of a default with respect to the "Merger, Consolidation and Sale of Assets" covenant, which will constitute an Event of Default with such notice requirement but without such passage of time requirement);



(d)

the failure to pay at final maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of KCI or any Restricted Subsidiary of KCI (other than a Securitization Entity) and such failure continues for a period of 30 days or more, or the acceleration of the final stated maturity of any such Indebtedness (which acceleration is not rescinded, annulled or otherwise cured within 30 days of receipt by KCI or such Restricted Subsidiary of notice of any such acceleration) if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final maturity or which has been accelerated, in each case with respect to which the 30-day period described above has passed, aggregates $25.0 million or more at any time;



(e)

one or more judgments which exceeds in the aggregate $25.0 million (excluding judgments to the extent covered by insurance by a reputable insurer as to which the insurer has acknowledged coverage) shall have been rendered against KCI or any of its Significant Subsidiaries that is a Restricted Subsidiary of KCI and such judgments remain undischarged, unvacated, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable;



(f)

certain events of bankruptcy affecting KCI or any of its Significant Subsidiaries; or



(g)

any of the Guarantees ceases to be in full force and effect or any of the Guarantees is declared to be null and void and unenforceable or any of the Guarantees is found to be invalid or any of the Guarantors denies its liability under its Guarantee (other than (1) by reason of release of a Guarantor in accordance with the terms of the Indenture or (2) in connection with the bankruptcy of a Guarantor, so long as the aggregate assets of such Guarantor and any other Guarantor whose Guarantee ceased or ceases to be in full force as a results of a bankruptcy are less than $25 million).

120

        If an Event of Default (other than an Event of Default specified in clause (f) above with respect to KCI) shall occur and be continuing, the Trustee or the Holders of at least 25% in principal amount of outstanding Notes may declare the principal of and accrued interest on all the Notes to be due and payable by notice in writing to KCI and the Trustee specifying the respective Event of Default and that it is a "notice of acceleration" (the "Acceleration Notice"), and the same

(a)

shall become immediately due and payable, or



(b)

if there are any amounts outstanding under the Credit Agreement, shall become immediately due and payable upon the first to occur of an acceleration under the Credit Agreement or 5 business days after receipt by KCI and the representative under the Credit Agreement of such Acceleration Notice.

        If an Event of Default specified in clause (f) above with respect to KCI occurs and is continuing, then all unpaid principal of, and premium, if any, and accrued and unpaid interest on all of the outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.

        The Indenture provides that, at any time after a declaration of acceleration with respect to the Notes as described in the preceding paragraph, the Holders of a majority in principal amount of the Notes may rescind and cancel such declaration and its consequences:

(a)

if the rescission would not conflict with any judgment or decree,



(b)

if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration,



(c)

to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid,



(d)

if KCI has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances, and



(e)

in the event of the cure or waiver of an Event of Default of the type described in clause (f) of the description above of Events of Default, the Trustee shall have received an officers' certificate and an opinion of counsel that such Event of Default has been cured or waived.

        No such rescission shall affect any subsequent Default or impair any right consequent thereto.

        The Holders of a majority in principal amount of the Notes may waive any existing Default or Event of Default under the Indenture, and its consequences, except a default in the payment of the principal of or interest on any Notes.

        Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture and under the TIA. Subject to the provisions of the Indenture relating to the duties of the Trustee, the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of any of the Holders, unless such Holders have offered to the Trustee reasonable indemnity. Subject to all provisions of the Indenture and applicable law, the Holders of a majority in aggregate principal amount of the then outstanding Notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee.

        Under the Indenture, KCI is required to provide an officers' certificate to the Trustee promptly upon any such officer obtaining knowledge of any Default or Event of Default (provided that such officers shall provide such certification at least annually whether or not they know of any Default or

121

Event of Default) that has occurred and, if applicable, describe such Default or Event of Default and the status thereof.

No Personal Liability of Incorporators, Shareholders, Officers, Directors, or Employees

        No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of KCI in the Indenture, or in any of the Notes or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator, shareholder, officer, director, employee or controlling person of KCI or of any successor Person thereof. Each Holder, by accepting the Notes, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws.

Legal Defeasance and Covenant Defeasance

        KCI may, at its option and at any time, elect to have its obligations and the obligations of the Guarantors discharged with respect to the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that KCI shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Notes, and satisfied all of their obligations with respect to the Notes, except for

(A)

the rights of Holders to receive payments from a trust established by KCI in respect of the principal of, premium, if any, and interest on the Notes when such payments are due,



(B)

KCI's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payments,



(C)

the rights, powers, trust, duties and immunities of the Trustee and KCI's obligations in connection therewith, and



(D)

the Legal Defeasance provisions of the Indenture.

        In addition, KCI may, at its option and at any time, elect to have the obligations of KCI released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, reorganization and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes.

        In order to exercise either Legal Defeasance or Covenant Defeasance,

(A)

KCI must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders cash in U.S. dollars, non-callable U.S. government obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be;



(B)

in the case of Legal Defeasance, KCI shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that



(i)

KCI has received from, or there has been published by, the Internal Revenue Service a ruling or



(ii)

since the date of the Indenture, there has been a change in the applicable U.S. federal income tax law,

122

in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(C)

in the case of Covenant Defeasance, KCI shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;



(D)

(i) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or (ii) in the case of Legal Defeasance, no Defaults or Events of Default from bankruptcy or insolvency events shall have occurred at any time in the period ending on the 123rd day after the date of deposit;



(E)

KCI shall have delivered to the Trustee an opinion of counsel to the effect that such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Indenture or any other material agreement or instrument to which KCI or any of its Restricted Subsidiaries is a party or by which KCI or any of its Restricted Subsidiaries is bound;



(F)

KCI shall have delivered to the Trustee an officers' certificate stating that the deposit was not made by KCI with the intent of preferring the Holders over any other creditors of KCI or with the intent of defeating, hindering, delaying or defrauding any other creditors of KCI or others;



(G)

KCI shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with;



(H)

KCI shall have delivered to the Trustee an opinion of counsel to the effect that creation of the defeasance trust does not violate the Investment Company Act of 1940, as amended, and, assuming that no Holder is an "insider" as that term is defined in the United States Bankruptcy Code, after the passage of 123 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law; and



(I)

certain other customary conditions precedent are satisfied.

Satisfaction and Discharge

        The Indenture will be discharged and will cease to be of further effect (except as to surviving rights of registration of transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when:

(a)

either



(1)

all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by KCI and thereafter repaid to KCI or discharged from such trust) have been delivered to the Trustee for cancellation, or

123

(2)

all Notes not theretofore delivered to the Trustee for cancellation have become due and payable or have been called for redemption in accordance with the Indenture and KCI has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit (or to the date of redemption in the case of the Notes being called for redemption) together with irrevocable instructions from KCI directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be;



(b)

KCI has paid all other sums payable under the Indenture by KCI; and



(c)

KCI has delivered to the Trustee an officers' certificate and an opinion of counsel stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with.

Modification of the Indenture

        From time to time, KCI, the Guarantors and the Trustee, without the consent of the Holders, may amend the Indenture for certain specified purposes, including:

(1)

curing ambiguities, defects or inconsistencies,



(2)

to comply with any requirements of the Commission in order to effect or maintain qualification under TIA, or



(3)

to make any change that will provide any additional benefit to the Holders or does not adversely affect rights of any Holder,

so long as such change does not, in the opinion of the Trustee, adversely affect the rights of any of the Holders in any material respect. In formulating its opinion on such matters, the Trustee will be entitled to rely on such evidence as it deems appropriate, including, without limitation, solely on an opinion of counsel.

        Other modifications and amendments of the Indenture may be made with the consent of the Holders of a majority in principal amount of the then outstanding Notes issued under the Indenture, except that, without the consent of each Holder affected thereby, no amendment may:

(1)

reduce the amount of Notes whose Holders must consent to an amendment;



(2)

reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any Notes;



(3)

reduce the principal of or change or have the effect of changing the fixed maturity of any Notes, or change the date on which any Notes may be subject to redemption or repurchase, or reduce the redemption or repurchase price therefor;



(4)

make any Notes payable in money other than that stated in the Notes;



(5)

make any change in provisions of the Indenture protecting the right of each Holder to receive payment of principal of and interest on such Note on or after the due date thereof or to bring suit to enforce such payment, or permitting Holders of a majority in principal amount of Notes to waive Defaults or Events of Default;



(6)

amend, change or modify in any material respect the obligation of KCI to make and consummate a Change of Control Offer in the event a Change of Control has occurred or make and consummate a Net Proceeds Offer with respect to any Asset Sale that has been

124

consummated, or, following the occurrence or consummation of a Change of Control or Asset Sale, modify any of the provisions or definitions with respect thereto;

(7)

modify or change any provision of the Indenture or the related definitions affecting the subordination or ranking of the Notes or any Guarantee in a manner which adversely affects the Holders;



(8)

release any Guarantor from any of its obligations under its Guarantee or the Indenture otherwise than in accordance with the terms of the Indenture; or



(9)

amend, change or modify in any material respect any provision of the Indenture relating to an offer to redeem upon an Event of Failure.

Governing Law

        The Indenture provides that it, the Notes and the Guarantees are governed by, and construed in accordance with, the laws of the State of New York.

The Trustee

        The Indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the Indenture. During the existence of an Event of Default, the Trustee will exercise such rights and powers vested in it by the Indenture, and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.

        The Indenture and the provisions of the TIA contain certain limitations on the rights of the Trustee, should it become a creditor of KCI or a Guarantor, to obtain payments of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. Subject to the TIA, the Trustee is permitted to engage in other transactions; provided that if the Trustee acquires any conflicting interest as described in the TIA, it must eliminate such conflict or resign.

Book-Entry; Delivery and Form

        The certificates representing the New Notes will be issued in fully registered form without interest coupons. Except as described below, the New Notes will be initially represented by one or more global notes in fully registered form without interest coupons. The global notes will be deposited with, or on behalf of, The Depository Trust Company, or DTC, and registered in the name of Cede & Co., as nominee of DTC, or will remain in the custody of the Trustee pursuant to the FAST Balance Certificate Agreement between DTC and the Trustee.

        Ownership of beneficial interests in a global note will be limited to persons who have accounts with DTC or persons who hold interests through participants. Ownership of beneficial interests in each global note will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants).

        Investors may hold their interests in a Regulation S global note directly through Euroclear or Clearstream, if they are participants in such systems, or indirectly through organizations that are participants in such system. However, upon issuance we intend to settle by delivering interests in the Regulation S global note solely through Euroclear or Clearstream. Euroclear and Clearstream will hold interests in the Regulation S global notes on behalf of their participants through DTC.

        So long as DTC, or its nominee, is the registered owner or holder of a global note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the New Notes

125

represented by such global note for all purposes under the Indenture and the New Notes. No beneficial owner of an interest in a global note will be able to transfer that interest except in accordance with DTC's applicable procedures, in addition to those provided for under the Indenture and, if applicable, those of Euroclear and Clearstream.

        Payments of the principal of, and interest on, a global note will be made to DTC or its nominee, as the case may be, as the registered owner thereof. Neither KCI, the Trustee nor any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a global note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

        KCI expects that DTC or its nominee, upon receipt of any payment of principal or interest in respect of a global note, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such global note as shown on the records of DTC or its nominee. KCI also expects that payments by participants to owners of beneficial interests in such global note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants.

        Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in same-day funds. Transfers between participants in Euroclear and Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures.

        KCI expects that DTC will take any action permitted to be taken by a holder of New Notes (including the presentation of New Notes for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in a global note is credited and only in respect of such portion of the aggregate principal amount of New Notes as to which such participant or participants has or have given such direction. However, if there is an Event of Default under the New Notes, DTC will exchange the applicable global note for certificated notes, which it will distribute to its participants.

        KCI understands that: DTC is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies and certain other organizations that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants").

        Although DTC, Euroclear and Clearstream are expected to follow the foregoing procedures in order to facilitate transfers of interests in a global note among participants of DTC, Euroclear and Clearstream, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither KCI nor the Trustee will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

        If DTC is at any time unwilling or unable to continue as a depositary for the global notes and a successor depositary is not appointed by KCI within 90 days, KCI will issue certificated notes in exchange for the global notes. Holders of an interest in a global note may receive certificated notes in accordance with the DTC's rules and procedures, in addition to those provided for under the Indenture.

126

Definitions

        Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms, as well as any other terms used herein for which no definition is provided.

"Acquired Indebtedness" means Indebtedness of a Person or any of its Subsidiaries (1) existing at the time such Person becomes a Restricted Subsidiary of KCI or at the time it merges or consolidates with KCI or any of its Restricted Subsidiaries or (2) which becomes Indebtedness of KCI or a Restricted Subsidiary in connection with the acquisition of assets from such Person, and in each case not incurred by such Person or its Subsidiary in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of KCI or such acquisition, merger or consolidation.

"Affiliate" means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative of the foregoing.

"Asset Acquisition" means (1) an Investment by KCI or any Restricted Subsidiary of KCI in any other Person pursuant to which such Person shall become a Restricted Subsidiary of KCI or any Restricted Subsidiary of KCI, or shall be merged with or into KCI or any Restricted Subsidiary of KCI, or (2) the acquisition by KCI or any Restricted Subsidiary of KCI of the assets of any Person (other than a Restricted Subsidiary of KCI) which constitute all or substantially all of the assets of such Person or comprises any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business.

"Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by KCI or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than KCI or a Restricted Subsidiary of KCI of:

(1)

any Capital Stock of any Restricted Subsidiary of KCI; or



(2)

any other property or assets of KCI or any Restricted Subsidiary of KCI other than in the ordinary course of business; provided, however, that Asset Sales shall not include:



(a)

a transaction or series of related transactions for which KCI or its Restricted Subsidiaries receive aggregate consideration of less than $5.0 million,



(b)

the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of KCI as permitted under the "Merger, Consolidation and Sale of Assets" covenant above or any such disposition that constitutes a Change of Control,



(c)

sales of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of "Qualified Securitization Transaction" to a Securitization Entity for the fair market value thereof, including cash in an amount at least equal to 75% of the fair market value thereof,



(d)

transfers of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of "Qualified Securitization Transaction" (or a fractional undivided interest therein) by a Securitization Entity in a Qualified Securitization Transaction,



(e)

Investments and Restricted Payments that are not prohibited by the Indenture, or

127

(f)

the distribution of any Equity Interests of any Subsidiary of KCI for the purpose of establishing a holding company structure in compliance with the covenant described under "Merger, Consolidation and Sale of Assets."

"Board of Directors" means, as to any Person, the board of directors of such Person or any duly authorized committee thereof; provided that as the term "Board of Directors" is used in the definition of "Continuing Directors" it shall refer only to the board of directors and not to any committee thereof.

"Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

"Capital Contribution" means any contribution to the equity of KCI from a direct or indirect parent of KCI for which no consideration is given.

"Capital Stock" means (1) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person and (2) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person.

"Capitalized Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP.

"Cash Equivalents" means

(1)

marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof;



(2)

marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the four highest ratings obtainable from either Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's");



(3)

commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-2 from S&P or at least P-2 from Moody's;



(4)

certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $100.0 million;



(5)

repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (1) above entered into with any bank meeting the qualifications specified in clause (4) above;



(6)

investments in money market funds which invest substantially all their assets in securities of the types described in clauses (1) through (5) above; and

128

(7)

investments made by Foreign Subsidiaries in local currencies in instruments issued by or with entities of such jurisdiction having correlative attributes to the foregoing.

"Change of Control" means the occurrence of one or more of the following events:

(1)

any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of KCI or, after a Holding Company Merger, Parent to any Person (other than to KCI or a Guarantor) or group of related Persons (other than KCI and the Guarantors) for purposes of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of the Indenture);



(2)

the approval by the holders of Capital Stock of KCI or, after a Holding Company Merger, Parent of any plan or proposal for the liquidation or dissolution of KCI or, after a Holding Company Merger, Parent (whether or not otherwise in compliance with the provisions of the Indenture);



(3)

any Person or Group (other than any of the Permitted Holder(s) or any underwriters in connection with an offering of Qualified Capital Stock registered under the Securities Act) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of KCI or, after a Holding Company Merger, Parent; or



(4)

the first day on which a majority of the members of the Board of Directors of KCI or, after a Holding Company Merger, Parent are not Continuing Directors.

"Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person's common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock.

"Comparable Treasury Issue" means the U.S. Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Notes that would be utilized at the time of selection and in accordance with customary financial practice in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes. "Independent Investment Banker" means Morgan Stanley & Co. Incorporated or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an investment banking firm of national reputation selected by KCI.

"Comparable Treasury Price" means, with respect to a redemption date, (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations for such redemption date, or (2) if KCI obtains fewer than three such Reference Security Dealer Quotations, the average of all such quotations.

"Consolidated EBITDA" means, with respect to any Person, for any period, the sum (without duplication) of:

(1)

Consolidated Net Income, and



(2)

to the extent Consolidated Net Income has been reduced thereby,



(A)

all income taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary, unusual or nonrecurring gains or losses or taxes attributable to sales or dispositions outside the ordinary course of business) and any payments to the Parent pursuant to clause (10) of the last paragraph of the covenant described above under "Limitation on Restricted Payments,"

129

(B)

Consolidated Interest Expense,



(C)

the aggregate charges for depreciation, amortization and impairment of goodwill or other intangible assets of such Person and its Restricted Subsidiaries for such period,



(D)

the unrealized foreign currency losses of such Person and its Restricted Subsidiaries for such period,



(E)

other non-cash charges of such Person and its Restricted Subsidiaries for such period, less (i) any non-cash charges increasing Consolidated Net Income during such period and (ii) the amount of all cash payments made by such Person or any of its Restricted Subsidiaries during such period, to the extent such payments relate to non-cash charges that were added back in determining Consolidated EBITDA for such period or any prior period,



(F)

for purposes of determining KCI Consolidated Fixed Charge Coverage Ratio (and the components thereof) for any Four Quarter Period that includes the Issue Date, the Transaction Expenses,



(G)

management fees paid pursuant to the Management Agreement paid within the twelve month period immediately prior to the Issue Date; provided that the obligation to pay management fees under the Management Agreement is terminated prior to August 31, 2003 and no further payments are made after August 2003, or required to be made, thereunder,



(H)

cash expenses for stock option and stock repurchase for the twelve month period immediately prior to the Issue Date and cash expenses related thereto incurred on or after the Issue Date, and



(I)

research and development expense write-offs during the twelve month period immediately prior to the Issue Date.

in each case as determined on a consolidated basis for such Person and its Restricted Subsidiaries in accordance with GAAP.

"Consolidated Fixed Charge Coverage Ratio" means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the "Four Quarter Period") ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such calculation to:

(1)

the incurrence or repayment of any Indebtedness of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period and



(2)

any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result

130

of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (provided that such Consolidated EBITDA shall be included only to the extent includable pursuant to the definition of "Consolidated Net Income") attributable to the assets which are the subject of the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period.

        If such Person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio,"

(1)

interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date;



(2)

if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four Quarter Period; and



(3)

notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements.

"Consolidated Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (1) Consolidated Interest Expense, plus (2) the product of (A) the amount of all dividend payments on any series of Preferred Stock of such Person (other than (x) dividends paid in Qualified Capital Stock and (y) dividends on the Preferred Stock, the net proceeds of which will be used for the Distribution, to the extent they are paid in kind or accrete, except to the extent they constitute Disqualified Capital Stock) paid, accrued or scheduled to be paid or accrued during such period times (B) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal.

"Consolidated Interest Expense" means, with respect to any Person for any period, the sum of, without duplication:

(1)

the aggregate of the interest expense of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including without limitation,



(A)

any amortization of debt discount,



(B)

the net costs under Interest Swap Obligations,



(C)

all capitalized interest, and

131

(D)

the interest portion of any deferred payment obligation, but excluding amortization or write-off of deferred financing costs;

but, in all cases, excluding dividends on the Preferred Stock, the net proceeds of which will be used for the Distribution, to the extent that they are paid in kind or accrete, except to the extent they constitute Disqualified Capital Stock; and

(2)

the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP.

"Consolidated Net Income" means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP minus, after the Holding Company Merger, any payments to the Parent pursuant to clause (10) of the last paragraph of the covenant described above under "Covenants—Limitation on Restricted Payments"; provided that there shall be excluded therefrom:

(1)

after-tax gains from Asset Sales or abandonments or reserves relating thereto,



(2)

after-tax items classified as extraordinary or nonrecurring gains,



(3)

the net income (but not loss) of any Restricted Subsidiary of the referent Person to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is restricted by a contract, operation of law or otherwise,



(4)

the net income of any Person in which the referent Person has an interest, other than a Restricted Subsidiary of the referent Person, except to the extent of cash dividends or distributions paid to the referent Person or to a Restricted Subsidiary of the referent Person by such Person,



(5)

any restoration to income of any contingency reserve in accordance with GAAP, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following the Issue Date,



(6)

income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued),



(7)

in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets,



(8)

after-tax gains from the installment payment due in January 2004 in connection with the antitrust litigation settlement with Hillenbrand Industries, Inc., and



(9)

tax benefits from the exercise of employee stock options to the extent proceeds from such exercise are used to fund the Distribution.

"Continuing Directors" means, as of the date of determination, any member of the Board of Directors of KCI, or, after a Holding Company Merger, Parent who (1) was a member of the Board of Directors of KCI on the date of the Indenture or (2) was nominated for election or elected to the Board of Directors of KCI, or, after a Holding Company Merger, Parent, with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election.

"Credit Agreement" means the Credit Agreement to be dated on or about the Issue Date, among KCI, the lenders party thereto in their capacities as lenders thereunder, Morgan Stanley Senior Funding Inc., as Administrative Agent, and Credit Suisse First Boston, acting through its Cayman

132

Islands branch, as Syndication Agent, together with the documents related thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented, restated or otherwise modified from time to time, including any agreement and related documents (including, without limitation, any loan agreement, note, note purchase agreement and indenture) extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder (provided that such increase in borrowings is permitted by the "Limitation on Incurrence of Additional Indebtedness" covenant above) or adding Restricted Subsidiaries of KCI as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement and related documents or any successor or replacement agreement and related documents and whether by the same or any other agent, lender, group of lenders or otherwise and whether through any credit facilities or other borrowing or lending arrangements, including through issuing senior or subordinated notes.

"Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect KCI or any Restricted Subsidiary of KCI against fluctuations in currency values.

"Default" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default.

"Designated Senior Debt" means (1) Indebtedness under or in respect of the Credit Agreement and (2) any other Indebtedness constituting Senior Debt which, at the time of determination, has an aggregate principal amount of at least $25.0 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by KCI.

"Disqualified Capital Stock" means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof on or prior to the final maturity date of the Notes; provided that any Capital Stock that would not constitute Disqualified Capital Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Capital Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in "Covenants—Limitation on Asset Sales" and "Change of Control" and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to KCI's repurchase of such Notes as are required to be repurchased pursuant to the "Covenants—Limitation on Asset Sales" and "Change of Control."

"Distribution" means one or more dividends on, or repurchases or redemptions of, Equity Interests (including the cash settlement of employee stock options or other employee incentive plans) prior to March 31, 2004 in an aggregate amount not to exceed $300.0 million plus (1) net cash proceeds from the sale of Preferred Stock completed prior to March 31, 2004, (2) the net cash proceeds (on an after tax basis) received from the installment payment due in January 2004 in connection with the antitrust litigation settlement with Hillenbrand Industries, Inc., which amount shall not exceed $47.0 million, (3) the estimated tax benefit to KCI from the recapitalization, including the exercise or repurchase of stock options in connection therewith, which amount shall not exceed $40.0 million and (4) the cash proceeds received from the exercise of stock options repurchased in connection with the recapitalization.

"Equity Interests" of a Person means Capital Stock or partnership, participation or membership interests of such Person and all warrants, options or other rights to acquire Capital Stock or

133

partnership, participation or membership interests of such Person (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock or partnership, participation or membership interests of such Person).

"Equity Offering" means any offering of Qualified Capital Stock of KCI.

"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto.

"fair market value" means, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors of KCI acting reasonably and in good faith.

"Fremont" means Fremont Partners, L.P. and its Affiliates.

"Foreign Subsidiary" means any Restricted Subsidiary of KCI which (x)(1) is not organized under the laws of the United States, any state thereof or the District of Columbia and (2) conducts substantially all of its business operations in a country other than the United States of America or (y) is a holding company whose only assets are Investments in a Person or Persons which meet the criteria specified in clause (x) of this definition and assets which are incidental to ownership of such Investment.

"GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect on the Issue Date.

"Guarantee" means the guarantee of the obligations under the Indenture and the Notes by each of the Guarantors on the terms set forth in the Indenture.

"Guarantor" means (1) each of the domestic Subsidiaries of KCI on the Issue Date that has guaranteed the Notes under the Indenture and (2) each of KCI's Restricted Subsidiaries that in the future executes a supplemental indenture in which such Restricted Subsidiary agrees to be bound by the terms of the Indenture as a Guarantor; provided that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Guarantee is released in accordance with the terms of the Indenture.

"Guarantor Senior Debt" means, with respect to any Guarantor, the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy or the commencement of any bankruptcy, insolvency, reorganization, receivership or other similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) and fees and expenses (including costs of collection), indemnity obligations on, and all other amounts and obligations owing in respect of, any Indebtedness (other than guarantees of the Previously Existing Notes) of a Guarantor, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Guarantee of such Guarantor. Without limiting the generality of the foregoing, "Guarantor Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy or the commencement of any bankruptcy, insolvency, reorganization, receivership or other similar proceeding at the rate provided for in the documentation with respect

134

thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of,

(1)

all monetary obligations of every nature of KCI or such Guarantor under the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, commissions, expenses and indemnities,



(2)

all Interest Swap Obligations of such Guarantor, and



(3)

all obligations of such Guarantor under Currency Agreements,

in each case whether outstanding on the Issue Date or thereafter incurred.

        Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include:

(1)

any Indebtedness of such Guarantor to a Subsidiary of such Guarantor or any Affiliate of such Guarantor or any of such Affiliate's Subsidiaries,



(2)

Indebtedness of such Guarantor to, or guaranteed by such Guarantor on behalf of, any shareholder, director, officer or employee of such Guarantor or any Restricted Subsidiary of such Guarantor (including, without limitation, amounts owed for compensation),



(3)

Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services,



(4)

Indebtedness represented by Disqualified Capital Stock,



(5)

any liability for federal, state, local or other taxes owed or owing by such Guarantor,



(6)

Indebtedness incurred in violation of the Indenture provisions set forth under the "Limitation on Incurrence of Additional Indebtedness" covenant (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (vi) if the holder(s) of such Indebtedness or their representative and the Trustee shall have received an officers' certificate of KCI to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit Indebtedness or other Indebtedness available to be borrowed under the Credit Agreement after the date of the initial borrowing thereunder, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of the Indenture),



(7)

Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to KCI or any Guarantor and



(8)

any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of such Guarantor.

"Holder" means any holder of Notes.

"Indebtedness" means with respect to any Person, without duplication,

(1)

all Obligations of such Person for borrowed money,



(2)

all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments,



(3)

all Capitalized Lease Obligations of such Person,



(4)

all Obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not overdue by 90 days or more or are being contested in good faith by appropriate proceedings),

135

(5)

all Obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction,



(6)

guarantees and other contingent obligations in respect of Indebtedness of other Persons of the type referred to in clauses (1) through (5) above and clause (8) below,



(7)

all Obligations of any other Person of the type referred to in clauses (1) through (6) which are secured by any Lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the Obligation so secured,



(8)

all Obligations under Currency Agreements and Interest Swap Obligations of such Person, and



(9)

all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock.

        For purposes of this prospectus, the amount of any Indebtedness referred to in clause (8) of the preceding paragraph shall be the net amounts (including by offset of amounts payable thereunder), including any net termination payments, required to be paid to a counterparty rather than any notional amount with regard to which payments may be calculated.

"Independent Financial Advisor" means a firm (1) which does not, and whose directors, officers and employees or Affiliates do not, have a direct or indirect material financial interest in KCI and (2) which, in the judgment of the Board of Directors of KCI, is otherwise independent and qualified to perform the task for which it is to be engaged, and may include a commercial or investment banking, appraisal or accounting firm.

"Interest Swap Obligations" means the obligations of any Person pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements.

"Investment" means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person. "Investment" shall exclude extensions of trade credit by KCI and its Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of KCI or such Restricted Subsidiary, as the case may be. For the purposes of the "Limitation on Restricted Payments" covenant,

(1)

"Investment" shall include and be valued at the fair market value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary (proportionate to KCI's equity interest in such Subsidiary) and shall exclude, and

136

the aggregate amount of all Restricted Payments made as Investments since the Issue Date shall exclude and be reduced by, the fair market value of the net assets of any Unrestricted Subsidiary (proportionate to KCI's equity interest in such Subsidiary) at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary, such exclusion and reduction not to exceed the amount of Investments previously made by the referent person and its Restricted Subsidiaries and treated as Restricted Payments, and

(2)

the amount of any Investment shall be the original cost of such Investment, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment, reduced by the payment of dividends or distributions in connection with such Investment or any other amounts received in respect of such Investment; provided that no such payment of dividends or distributions or receipt of any such other amounts shall reduce the amount of any Investment if such payment of dividends or distributions or receipt of any such amounts would be included in Consolidated Net Income. If KCI or any Restricted Subsidiary of KCI sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of KCI such that, after giving effect to any such sale or disposition, it ceases to be a Subsidiary of KCI, KCI shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Capital Stock of such Restricted Subsidiary not sold or disposed of.

"Issue Date" means the date of original issuance of the Old Notes.

"Lien" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest).

"Make-Whole Premium" means, with respect to a Note, the sum of the present values of the remaining scheduled payments of interest, principal and premium thereon (not including any portion of such payments of interest accrued as of the date of redemption) as if the Notes were redeemed on May 15, 2008 pursuant to the first paragraph under "—Optional Redemption" on such date, discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points.

"Management Agreement" means the management agreement among KCI, Fremont and RCBA, in effect on the Issue Date and includes the amendment expected to be entered into as described in this prospectus, and which provides for the payment or accrual of not more than $2,000,000 of compensation annually beginning on November 1 and ending on October 31 of the following year.

"Management Equity Plan" means KCI's Management Equity Plan in effect on the Issue Date, as the same may be amended from time to time, or any successor stock option plan which governs the terms of stock options which were initially granted under the Management Equity Plan.

"Marketable Securities" means any security listed for trading on any U.S. national securities exchange or listed for quotation on the NASDAQ National Market.

"Minimum Tax Withholding" means the amount which KCI or any of its Restricted Subsidiaries is required to withhold in connection with employer's minimum statutory withholding of taxes, including without limitation, federal and state withholding requirements, and FICA and Medicare taxes.

"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents, including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest), received by KCI or any of its Restricted Subsidiaries from such Asset Sale net of:

(1)

reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions),

137

(2)

taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements,



(3)

repayment of Indebtedness that is required to be repaid in connection with such Asset Sale, and



(4)

appropriate amounts (determined by KCI in good faith) to be provided by KCI or any Restricted Subsidiary, as the case may be, as a reserve, against any post closing adjustments or liabilities associated with such Asset Sale and retained by KCI or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale.

"Non-Recourse Indebtedness" means Indebtedness secured only by an asset and which is expressly stated to be without recourse to KCI or its Restricted Subsidiaries from the date of incurrence of such Indebtedness.

"Obligations" means all obligations for principal, premium, interest, penalties, fees, commissions, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

"Parent" means, after the Holding Company Merger, any Person that, directly or indirectly, holds all or substantially all of the Qualified Capital Stock of KCI.

"Permanent Disability", (i) with respect to any person who is an employee of KCI or any of its Restricted Subsidiaries, shall mean, and is defined in the same manner as, such term or similar term is defined in an employment agreement applicable to the employee or, (ii) in the case of a person who does not have an employment agreement that defines such term or a similar term, shall mean that the person is unable to perform substantially all of his or her duties as an employee of KCI or any of its Restricted Subsidiaries by reason of illness or incapacity for a period of more than six consecutive months, or six months in the aggregate during any 12-month period, established by medical evidence reasonably satisfactory to KCI or any of its Restricted Subsidiaries.

"Permitted Holder(s)" means RCBA, Fremont, James R. Leininger, M.D., and his Affiliates and, after the Holding Company Merger, any Parent.

"Permitted Investments" means:

(1)

Investments by KCI or any Restricted Subsidiary of KCI in any Person that is or will become immediately after such Investment a Restricted Subsidiary of KCI or that will merge or consolidate into KCI or a Restricted Subsidiary of KCI;



(2)

Investments in KCI by any Restricted Subsidiary of KCI; provided that any Indebtedness evidencing such Investment is unsecured and subordinated, pursuant to a written agreement, to KCI's obligations under the Notes and the Indenture;



(3)

investments in cash and Cash Equivalents;



(4)

loans and advances to employees and officers of KCI and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of $10.0 million at any one time outstanding pursuant to this clause (4);



(5)

Currency Agreements and Interest Swap Obligations entered into in the ordinary course of KCI's or its Restricted Subsidiaries' businesses and otherwise in compliance with the Indenture;



(6)

Investments in Unrestricted Subsidiaries not to exceed $10.0 million at any one time outstanding pursuant to this clause (6);

138

(7)

Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers;



(8)

Investments made by KCI or its Restricted Subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with the "Limitation on Asset Sales" covenant;



(9)

Investments existing on the date of the Indenture;



(10)

accounts receivable, advances, loans, guarantees or extensions of credit created or acquired in the ordinary course of business, consistent with past or industry practice;



(11)

any Investment by KCI or a Wholly Owned Restricted Subsidiary of KCI in a Securitization Entity or any Investment by a Securitization Entity in any other Person in connection with a Qualified Securitization Transaction; provided that any Investment in a Securitization Entity is in the form of a Purchase Money Note or an equity interest;



(12)

Investments committed to by KCI or its Restricted Subsidiaries on the Issue Date not to exceed $1.5 million in the aggregate pursuant to this clause (12);



(13)

Investments in Strategic Joint Ventures not to exceed $20.0 million outstanding at any one time pursuant to this clause (13); and



(14)

any Investment in any Person solely in exchange for Qualified Capital Stock or, after the Holding Company Merger, Capital Stock of the Parent, or from a Capital Contribution or the net cash proceeds of any substantially concurrent sale of KCI's Qualified Capital Stock.

"Permitted Liens" means the following types of Liens:

(1)

Liens for taxes, assessments or governmental charges or claims either (A) not delinquent or (B) contested in good faith by appropriate proceedings and as to which KCI or its Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP;



(2)

statutory, contractual and common law Liens of landlords to secure rent payments and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof;



(3)

Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money);



(4)

judgment Liens securing judgments not giving rise to an Event of Default;



(5)

easements, rights-of-way, zoning restrictions, restrictive covenants, minor imperfections in title and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of KCI or any of its Restricted Subsidiaries;

139

(6)

any interest or title of a lessor under any Capitalized Lease Obligation; provided that such Liens do not extend to any property or assets which is not leased property subject to such Capitalized Lease Obligation;



(7)

purchase money Liens to finance property or assets (including the cost of construction) of KCI or any Restricted Subsidiary of KCI acquired in the ordinary course of business; provided, however, that (A) the related purchase money Indebtedness shall not exceed the cost of such property or assets and shall not be secured by any property or assets of KCI or any Restricted Subsidiary of KCI other than the property and assets so acquired or constructed and (B) the Lien securing such Indebtedness shall be created within 180 days of such acquisition or construction;



(8)

Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;



(9)

Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof;



(10)

Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of KCI or any of its Restricted Subsidiaries, including, without limitation, liability to insurance carriers under insurance or self-insurance arrangements, including rights of offset and set-off;



(11)

Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under the Indenture;



(12)

Liens securing Indebtedness under Currency Agreements;



(13)

Liens securing Acquired Indebtedness incurred in accordance with the "Limitation on Incurrence of Additional Indebtedness" covenant; provided that (A) such Liens secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by KCI or a Restricted Subsidiary of KCI and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by KCI or a Restricted Subsidiary of KCI and (B) such Liens do not extend to or cover any property or assets of KCI or of any of its Restricted Subsidiaries other than the property or assets (or the proceeds thereof) that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of KCI or a Restricted Subsidiary of KCI and are no more favorable to the lienholders than those securing the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by KCI or a Restricted Subsidiary of KCI;



(14)

Liens arising under the Indenture;



(15)

leases or subleases granted to others that do not materially interfere with the business of KCI and its Restricted Subsidiaries;



(16)

Liens in connection with any filing of Uniform Commercial Code financing statements regarding leases;



(17)

Liens securing Non-Recourse Indebtedness incurred pursuant to the Indenture;



(18)

Liens arising from a bank or financial institution honoring a check or draft inadvertently drawn against insufficient funds in the ordinary course of business; and



(19)

Liens on assets transferred to a Securitization Entity or on assets of a Securitization Entity, in either case incurred in connection with a Qualified Securitization Transaction.

140

"Person" means an individual, partnership, corporation, unincorporated organization, limited liability company, trust or joint venture, or a governmental agency or political subdivision thereof.

"Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation.

"Previously Existing Credit Agreement" means the Credit Agreement dated November 3, 1997, among KCI, certain subsidiary borrowers thereto and the financial institutions named therein, as amended from time to time.

"Previously Existing Notes" means KCI's existing 9⁵/8% Senior Subordinated Notes due 2007, Series A and the 9⁵/8% Senior Subordinated Notes due 2007, Series B and the related guarantees, which were redeemed as part of the recapitalization.

"Purchase Money Note" means a promissory note of a Securitization Entity evidencing a line of credit, which may be irrevocable, from KCI or any Subsidiary of KCI in connection with a Qualified Securitization Transaction to a Securitization Entity, which note shall be repaid from cash available to the Securitization Entity, other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest, principal and other amounts owing to such investors, amounts paid in connection with the purchase of newly generated receivables or newly acquired equipment and amounts paid for administrative costs in the ordinary course of business.

"Qualified Capital Stock" means any Capital Stock that is not Disqualified Capital Stock.

"Qualified Securitization Transaction" means any transaction or series of transactions that may be entered into by KCI or any of its Subsidiaries pursuant to which KCI or any of its Subsidiaries may sell, convey or otherwise transfer to (1) a Securitization Entity (in the case of a transfer by KCI or any of its Subsidiaries) and (2) any other Person (in the case of a transfer by a Securitization Entity), or may grant a security interest in, any accounts receivable or equipment (whether now existing or arising or acquired in the future) of KCI or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable and equipment, all contracts and contract rights and all guarantees or other obligations in respect of such accounts receivable and equipment, proceeds of such accounts receivable and equipment and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable and equipment.

"RCBA" means Blum Capital Partners, L.P. and its Affiliates.

"Reference Treasury Dealer" means (1) Morgan Stanley & Co. Incorporated and its successors; provided, however, that if the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), KCI is required to substitute therefor another Primary Treasury Dealer, and (2) any other Primary Treasury Dealer selected by KCI.

"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by the Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption date.

"Refinance" means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have correlative meanings.

141

"Refinancing Indebtedness" means any Indebtedness that is the result of any Refinancing by KCI or any Restricted Subsidiary of KCI of Indebtedness incurred in accordance with the "Limitation on Incurrence of Additional Indebtedness" covenant (other than pursuant to clause (2), (3), (5), (6), (7), (8), (9), (10), (11), (13), (14) or, with respect to the Previously Existing Notes and Indebtedness under the Previously Existing Credit Agreement, clause (4), of subsection (a) of such covenant), in each case that does not:

(1)

result in an increase in the aggregate principal amount of Indebtedness of such Person as of the date of such proposed Refinancing (other than increases from capitalized interest, any premium required to be paid under the terms of the instrument governing such Indebtedness or the amount of any premium reasonably determined to be necessary to accomplish such refinancing and the amount of reasonable expenses incurred by KCI and any Restricted Subsidiary in connection with such Refinancing, all of which are included in the term "Refinancing Indebtedness"), or



(2)

create Indebtedness with



(A)

a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced or



(B)

a final maturity earlier than the final maturity of the Indebtedness being Refinanced; provided that



(i)

if such Indebtedness being Refinanced is Indebtedness solely of KCI or any Restricted Subsidiary or is Indebtedness solely of KCI and any Restricted Subsidiary or Restricted Subsidiaries, then such Refinancing Indebtedness shall be Indebtedness solely of KCI or such Restricted Subsidiary or KCI and such Restricted Subsidiary or Restricted Subsidiaries, as the case may be, and



(ii)

if such Indebtedness being Refinanced is subordinate or junior to the Notes, then such Refinancing Indebtedness shall be subordinate to the Notes at least to the same extent and in the same manner as the Indebtedness being Refinanced.

"Representative" means the indenture trustee or other trustee, agent or representative in respect of any Designated Senior Debt; provided that (1) if, and for so long as, any Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt in respect of any Designated Senior Debt and (2) the administrative agent (or any successor thereto) shall be a Representative of the lenders under the Credit Agreement.

"Restricted Subsidiary" of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary.

"Sale and Leaseback Transaction" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to KCI or a Restricted Subsidiary of any property, whether owned by KCI or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by KCI or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such Property.

"SEC" means the Securities and Exchange Commission.

"Securitization Entity" means a Wholly Owned Restricted Subsidiary of KCI (or another Person in which KCI or any Subsidiary of KCI makes an Investment and to which KCI or any Subsidiary of KCI transfers accounts receivable or equipment and related assets) which engages in no activities other than

142

in connection with the financing of accounts receivable or equipment and which is designated by the Board of Directors of KCI (as provided below) as a Securitization Entity

(1)

no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which



(A)

is guaranteed by KCI or any Subsidiary of KCI (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings),



(B)

is recourse to or obligates KCI or any Subsidiary of KCI in any way other than pursuant to Standard Securitization Undertakings or



(C)

subjects any property or asset of KCI or any Subsidiary of KCI, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings,



(2)

with which neither KCI nor any Subsidiary of KCI has any material contract, agreement, arrangement or understanding other than on terms no less favorable to KCI or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of KCI, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity, and



(3)

to which neither KCI nor any Subsidiary of KCI has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of KCI shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors of KCI giving effect to such designation and an officer's certificate certifying that such designation complied with the foregoing conditions.

"Senior Debt" means the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy or the commencement of any bankruptcy, insolvency, reorganization, receivership or other similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) and fees and expenses (including costs of collection), indemnity obligations on, and all other amounts and obligations owing in respect of, any Indebtedness (other than the Previously Existing Notes) of KCI, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Without limiting the generality of the foregoing, "Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy or the commencement of any bankruptcy, insolvency, reorganization, receivership or other similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of,

(1)

all monetary obligations of every nature of KCI under the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, guaranteed obligations, fees, commissions, expenses and indemnities,



(2)

all Interest Swap Obligations and



(3)

all obligations under Currency Agreements,

in each case whether outstanding on the Issue Date or thereafter incurred.

        Notwithstanding the foregoing, "Senior Debt" shall not include

143

(1)

any Indebtedness of KCI to a Subsidiary of KCI or any Affiliate of KCI or any of such Affiliate's Subsidiaries,



(2)

Indebtedness of KCI to, or guaranteed by KCI on behalf of, any shareholder, director, officer or employee of KCI or any Subsidiary of KCI (including, without limitation, amounts owed for compensation),



(3)

Indebtedness to trade creditors and other trade payables incurred in connection with obtaining goods, materials or services,



(4)

Indebtedness represented by Disqualified Capital Stock,



(5)

any liability for federal, state, local or other taxes owed or owing by KCI,



(6)

Indebtedness incurred in violation of the Indenture provisions set forth under "Covenants—Limitation on Incurrence of Additional Indebtedness" (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such Indebtedness or their representative and the Trustee shall have received an officers' certificate of KCI to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit Indebtedness or other Indebtedness available to be borrowed under the Credit Agreement after the date of the initial borrowing thereunder, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of the Indenture),



(7)

Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to KCI and



(8)

any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of KCI.

"Significant Subsidiary" shall mean a Restricted Subsidiary or a group of Restricted Subsidiaries that would be considered a "significant subsidiary" of KCI pursuant to Rule 1.02(w) of Regulation S-X under the Securities Act, as in effect on the Issue Date.

"Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by KCI or any Subsidiary of KCI which are reasonably customary in an accounts receivable or equipment securitization transaction.

"Stated Maturity" means, (1) with respect to any debt security, the date specified in such debt security as the fixed date on which the final installment of principal of such debt security is due and payable and (2) with respect to any scheduled installment of principal of or interest on any debt security, the date specified in such debt security as the fixed date on which such installment is due and payable.

"Strategic Joint Venture" means a corporation, partnership or other entity engaged in a business which is related to that of KCI or any of its Restricted Subsidiaries or which provides services, products or intellectual property to KCI or any of its Restricted Subsidiaries or uses the products, services or intellectual property of KCI or any of its Restricted Subsidiaries.

"Subsidiary," with respect to any Person, means (1) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person or (2) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person.

"Transaction Expenses" means the expenses relating to the offering of the Notes, execution and initial borrowings under the Credit Agreement, the redemption of the Previously Existing Notes, the

144

sale of the Preferred Stock the net proceeds of which are used in connection with the Distribution, the Distribution and the interest expense on the Previously Existing Notes after the Issue Date.

"Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semiannual yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

"U.S. Government Obligations" means securities that are (1) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof at any time prior to the Stated Maturity of the Notes and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt.

"Unrestricted Subsidiary" of any Person means:

(1)

any Subsidiary of such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below and



(2)

any Subsidiary of an Unrestricted Subsidiary.

        The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, KCI or any Restricted Subsidiary of KCI that is not a Subsidiary of the Subsidiary to be so designated; provided that

(1)

KCI certifies to the Trustee that such designation complies with the "Limitation on Restricted Payments" covenant and



(2)

each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of KCI or any of its Restricted Subsidiaries (other than the assets of such Restricted Subsidiary to be designated an Unrestricted Subsidiary and its Subsidiaries).

        In the event that any Restricted Subsidiary is designated an Unrestricted Subsidiary in accordance with the above provisions, the Guarantee of such Subsidiary will be released.

        The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if:

(1)

immediately after giving effect to such designation, KCI is able to incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of clause (a) of the "Limitation on Incurrence of Additional Indebtedness" covenant, unless such designated Subsidiary shall, at the time of designation, have no Indebtedness outstanding other than Indebtedness pursuant to

145

the second paragraph of clause (a) of the "Limitation on Incurrence of Additional Indebtedness" covenant, and

(2)

immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the foregoing provisions.

        Notwithstanding the foregoing, to the extent Federal Express Trust No. 1991-B and Federal Express Trust No. 1991-A are Subsidiaries of KCI, each such entity will be an Unrestricted Subsidiary of KCI unless and until the Board of Directors of KCI designates it to be a Restricted Subsidiary in accordance with the foregoing provisions.

"Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (1) the then outstanding aggregate principal amount of such Indebtedness into (2) the sum of the total of the products obtained by multiplying (A) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (B) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment; provided that the final maturity for purposes of any security which is puttable to the issuer by the holder thereof upon a date certain without need for the occurrence of a contingent event (e.g., a change of control) shall be the next such put date.

"Wholly Owned Restricted Subsidiary" of any Person means any Restricted Subsidiary of such Person of which all the outstanding voting securities (other than, in the case of a foreign Restricted Subsidiary, directors' qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Restricted Subsidiary of such Person.

146

DESCRIPTION OF THE NEW SENIOR CREDIT FACILITY

        Concurrent with the issuance of the old notes, we entered into a new senior credit facility consisting of a $100.0 million revolving credit facility and a $480.0 million term loan facility. Our obligations under the new senior credit facility are guaranteed by each of our direct and indirect wholly-owned subsidiaries (other than any entity that is a controlled foreign corporation (a "CFC") within the definition of Section 957 of the Internal Revenue Code or a holding company whose only assets are investments in a CFC).

        At closing under the new senior credit facility on August 11, 2003, we drew $480.0 million under the new term loan facility and had $88.7 million available under the new revolving credit facility.

        Morgan Stanley Senior Funding, Inc. or one of its affiliates is acting as administrative agent and collateral agent under the new senior credit facility, Credit Suisse First Boston, acting through its Cayman Islands Branch, is acting as syndication agent and Morgan Stanley Senior Funding, Inc. and Credit Suisse First Boston, acting through its Cayman Islands Branch, are acting as joint lead arrangers for the new senior credit facility.

        Loans.    The new senior credit facility consists of $480.0 million under the new term loan facility and $100.0 million under the new revolving credit line. Up to $30.0 million of the new revolving credit facility is available for letters of credit. As of August 11, 2003, $480 million was drawn under the new term loan facility, and $11.3 million was drawn under the new revolving credit line in the form of letters of credit.

        Interest.    The new senior credit facility provides for an interest rate equal to the base rate (defined as the higher of Citibank, N.A.'s prime rate or ¹/2 of 1% in excess of the federal funds rate) or the Eurodollar rate (the reserve-adjusted LIBOR rate), in each case plus an applicable margin. The applicable margin is equal to (i) with respect to the new revolving credit facility, 2.50% in the case of loans based on the Eurodollar rate and 1.50% in the case of loans based on the base rate and (ii) with respect to the new term loan facility, (x) at any time that the leverage ratio is greater than 3.00 to 1.00, 2.75% in the case of loans based on the Eurodollar rate and 1.75% in the case of loans based on the base rate and (y) at any other time, 2.50% in the case of loans based on the Eurodollar rate and 1.50% in the case of loans based on the base rate.

        We may choose base rate or Eurodollar pricing and may elect interest periods of 1, 2, 3 or 6 months for the Eurodollar borrowings. Interest on base rate borrowings are payable quarterly in arrears. Interest on Eurodollar borrowings will be at the end of each applicable interest period or every three months in the case of interest periods in excess of three months. Interest on all past due amounts will accrue at 2.00% over the applicable rate. The new senior credit facility requires that we fix the base-borrowing rate applicable to at least 50% of the outstanding amount of the term loan under the new senior credit facility for a minimum of two years.

        Collateral.    The new senior credit facility is secured by a first priority lien and security interest in (i) substantially all shares of capital stock and intercompany debt of each of our present and future subsidiaries (limited in the case of certain foreign subsidiaries to 65% of the voting stock of such entity), (ii) substantially all of our present and future real property (with a value in excess of $5 million individually) and assets and the present and future personal property and assets of our subsidiaries that will be guarantors under the senior credit facility and (iii) all proceeds and products of the property and assets described in (i) and (ii) above. The security interest is subject to certain exceptions and permitted liens.

        Repayments.    Borrowings under the new revolving credit facility are available for borrowing and re-borrowing until maturity. No amounts repaid under the new term loan facility may be reborrowed.

147

        Maturity.    The new term loan facility provides for a final maturity on the seventh anniversary of the closing date. The new revolving credit facility provides for a final maturity on the sixth anniversary of the closing date.

        Prepayments.    We may prepay, in full or in part, borrowings under the new senior credit facility without premium or penalty, subject to minimum prepayment amount and increment limitations. We are required to prepay borrowings under the senior credit facility from certain asset dispositions, debt issuances and equity issuances and a percentage of excess cash flow, subject to customary exceptions.

        Covenants.    The new senior credit facility contains affirmative and negative covenants customary for similar facilities and transactions, including, but not limited to, quarterly and annual financial reporting and limitations on other debt, other liens or guaranties, mergers or consolidations, asset sales, certain investments, distributions to shareholders or share repurchases, early retirement of subordinated debt, capital expenditures, changes in the nature of the business, changes in organizational documents and documents evidencing or related to indebtedness that are materially adverse to the interests of the lenders under the new senior credit facilities and changes in accounting policies or reporting practices.

        In addition, the new senior credit facility contains financial covenants requiring us to meet certain leverage and interest coverage ratios and maintain minimum levels of EBITDA. Specifically, we are obligated not to permit:

•

for any period of four consecutive quarters ending at the end of any fiscal quarter beginning with the fiscal quarter ending December 31, 2003, the ratio of EBITDA, as defined in the new senior credit facility, to consolidated cash interest expense to be less than certain specified ratios ranging from 4.30 to 1.00 for the fiscal quarter ending December 31, 2003 to 5.50 to 1.00 for the fiscal quarter ending December 31, 2006 and each fiscal quarter following that quarter;



•

as of the last day of any fiscal quarter beginning with the fiscal quarter ending December 31, 2003, the leverage ratio to be greater than certain specified leverage ratios ranging from 4.30 to 1.00 for the fiscal quarter ending December 31, 2003 to 2.50 to 1.00 for the fiscal quarter ending December 31, 2006 and each fiscal quarter following that quarter; or



•

for any period of four consecutive fiscal quarters ending at the end of any fiscal quarter beginning with the fiscal quarter ending December 31, 2003, EBITDA to be less than certain amounts ranging from $156.4 million for the fiscal quarter ending December 31, 2003 to $240.0 million for the fiscal quarter ending December 31, 2006 and each fiscal quarter following that quarter.

        Events of Default.    The new senior credit facility contains events of default including, but not limited to, failure to pay principal or interest, breaches of representations and warranties, violations of affirmative or negative covenants, cross-defaults to other indebtedness, a bankruptcy or similar proceeding being instituted by or against us, rendering of certain monetary judgments against us, impairments of loan documentation or security, changes of ownership or operating control and defaults with respect to certain ERISA obligations.

148

MATERIAL UNITED STATES FEDERAL TAX CONSIDERATIONS

        The following is a summary of the anticipated material United States federal income tax consequences to a holder of old notes relating to the exchange of old notes for new notes. This summary is based upon existing United States federal income tax law, which is subject to change, possibly with retroactive effect. This summary does not discuss all aspects of United States federal income taxation which may be important to particular investors in light of their individual investment circumstances, such as notes held by investors subject to special tax rules (e.g., financial institutions, insurance companies, broker-dealers and foreign or domestic tax-exempt organizations (including private foundations)), or to persons that hold the old notes as part of a straddle, hedge, conversion, constructive sale or other integrated security transaction for United States federal income tax purposes or that have a functional currency other than the United States dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this summary does not address any state, local or non-United States tax considerations. Each prospective investor is urged to consult his tax advisor regarding the United States federal, state, local and non-United States income and other tax considerations of the acquisition, ownership and disposition of the new notes.

Exchange of Old Notes for New Notes

        An exchange of old notes for new notes pursuant to the exchange offer will be ignored for United States federal income tax purposes. Consequently, a holder of old notes will not recognize gain or loss, for United Stated federal income tax purposes, as a result of exchanging old notes for new notes pursuant to the exchange offer. The holding period of the new notes will be the same as the holding period of the old notes and the tax basis in the new notes will be the same as the adjusted tax basis in the old notes as determined immediately before the exchange.

149

PLAN OF DISTRIBUTION

        Each broker-dealer that receives new notes for its own account in the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of these new notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where the old notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration of the exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any resale.

        We will not receive any proceeds from any sale of new notes by broker-dealers. New notes received by broker-dealers for their own account in the exchange offer may be sold from time to time in one or more transactions:

•

in the over-the-counter market;



•

in negotiated transactions;



•

through the writing of options on the new notes; or



•

a combination of methods of resale, at market prices prevailing at the time of resale, at prices related to the prevailing market prices or at negotiated prices.

        Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any broker-dealer or the purchasers of any new notes. Any broker-dealer that resells new notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of new notes may be considered an underwriter within the meaning of the Securities Act and any profit of any resale of new notes and any commissions or concessions received by any person may be deemed to be underwriting compensation under the Securities Act. Any broker-dealer that resells new notes that were received by it for its own account in the exchange offer and any broker-dealer that participates in a distribution of those new notes may be considered an underwriter within the meaning of the Securities Act and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, including the delivery of a prospectus that contains information with respect to any selling holder required by the Securities Act in connection with any resale of the new notes. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act.

        Furthermore, any broker-dealer that acquired any of the old notes directly from us:

•

may not rely on the applicable interpretation of the staff of the SEC's position contained in Exxon Capital Holdings Corp., SEC no-action letter (April 13, 1988), Morgan, Stanley Co. Inc., SEC no-action letter (June 5, 1991) and Shearman & Sterling, SEC no-action letter (July 2, 1993); and



•

must also be named as a selling noteholder in connection with the registration and be subject to the prospectus delivery requirements of the Securities Act relating to any resale transaction.

        For a period of 180 days after the expiration of the exchange offer, we will send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests them. We have agreed to pay all expenses incident to the exchange offer other than commissions or concessions of any broker-dealer and will indemnify the holders of the old notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

150

LEGAL MATTERS

        Certain legal matters regarding the new notes and the guarantees will be passed upon for us by Skadden, Arps, Slate, Meagher & Flom LLP, Palo Alto, California and Cox & Smith Incorporated, San Antonio, Texas.

INDEPENDENT AUDITORS

        The consolidated financial statements of Kinetic Concepts, Inc. and subsidiaries at December 31, 2002 and 2001, and for each of the three years in the period ended December 31, 2002 appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

        This prospectus is part of a registration statement on Form S-4 that we have filed with the SEC under the Securities Act. This prospectus does not contain all of the information set forth in the registration statement. For further information about us and the new notes, you should refer to the registration statement. This prospectus summarizes material provisions of contracts and other documents to which we refer you. Since this prospectus may not contain all of the information that you may find important, you should review the full text of these documents. We have filed these documents as exhibits to our registration statement.

        We are not currently subject to the periodic reporting and other informational requirements of the Exchange Act. The indenture governing the notes requires that we file reports under the Exchange Act with the SEC and furnish information to the trustee and holders of the notes. See "Description of the New Notes—Covenants—Reports to Holders." Information may be obtained by sending correspondence to 8023 Vantage Drive, San Antonio, Texas 78230, Attention: Chief Financial Officer. To ensure timely delivery, please make your request as soon as practicable and, in any event, no later than five business days prior to the expiration of the exchange offer.

        Upon the effectiveness of the registration statement, we will become subject to the information and periodic reporting requirements of the Exchange Act and, accordingly, will file periodic reports and other information with the SEC. Such periodic reports and other information will be available for inspection and copying at the SEC's public reference room and through the SEC's Internet site at http://www.sec.gov.

        You may read and copy any document we file with the SEC at the following SEC public reference room: Public Reference Room, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330.

151

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Audited Consolidated Financial Statements of Kinetic Concepts, Inc. and Subsidiaries:
	Report of Ernst & Young LLP, Independent Auditors
	Consolidated Balance Sheets as of December 31, 2002 and December 31, 2001
	Consolidated Statements of Earnings for the Years Ended December 31, 2002, December 31, 2001 and December 31, 2000
	Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, December 31, 2001 and December 31, 2000
	Consolidated Statements of Shareholders' Deficit for the Three Years Ended December 31, 2002
	Notes to Consolidated Financial Statements
	Schedule II—Valuation and Qualifying Accounts for the Three Years Ended December 31, 2002
Unaudited Condensed Consolidated Financial Statements of Kinetic Concepts, Inc. and Subsidiaries:
	Condensed Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002
	Condensed Consolidated Statements of Earnings for the Three and Six Months Ended June 30, 2003 and June 30, 2002
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and June 30, 2002
	Notes to Condensed Consolidated Financial Statements

F-1

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Kinetic Concepts, Inc.

        We have audited the accompanying consolidated balance sheets of Kinetic Concepts, Inc. and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of earnings, cash flows, and shareholders' deficit for each of the three years in the period ended December 31, 2002. Our audits also included the financial statement schedule listed in the index at Item 15(a). These consolidated financial statements and schedule are the responsibility of KCI's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Kinetic Concepts, Inc. and subsidiaries at December 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

        As discussed in Note 5 to the consolidated financial statements, in 2002, KCI adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets".

/s/  ERNST & YOUNG LLP Ernst & Young LLP

San Antonio, Texas
February 7, 2003

F-2

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

			December 31,
			2002			2001
ASSETS:
Current assets:
	Cash and cash equivalents		$	54,485		$	199
	Accounts receivable, net			152,896			121,364
	Accounts receivable—other (Note 16)			175,000			—
	Inventories, net			37,934			40,166
	Prepaid expenses and other current assets			9,760			9,337
		Total current assets		430,075			171,066
Net property, plant and equipment				105,549			89,981
Loan issuance cost, less accumulated amortization of $11,949 in 2002 and $9,634 in 2001				6,287			8,602
Goodwill				46,357			43,035
Other assets, less accumulated amortization of $6,840 in 2002 and $5,562 in 2001				29,791			30,509
			$	618,059		$	343,193
LIABILITIES AND SHAREHOLDERS' DEFICIT:
Current liabilities:
	Accounts payable		$	11,156		$	8,429
	Accrued expenses			61,556			48,108
	Current installments of long-term obligations			30,550			2,750
	Current installments of capital lease obligations			157			171
	Derivative financial instruments			1,341			2,512
	Income taxes payable			14,615			8,761
	Current deferred income taxes (Note 16)			66,838			—
		Total current liabilities		186,213			70,731
Long-term obligations, net of current installments				491,300			503,875
Capital lease obligations, net of current installments				95			232
Deferred income taxes, net				9,501			4,363
Deferred gain, sale of headquarters facility				10,023			—
Other noncurrent deferred, net				1,363			317
				698,495			579,518
Shareholders' deficit:
	Common stock; issued and outstanding 70,928 in 2002 and 70,925 in 2001			71			71
	Retained deficit			(76,216	)		(226,381	)
	Accumulated other comprehensive loss			(4,291	)		(10,015	)
				(80,436	)		(236,325	)
			$	618,059		$	343,193

See accompanying notes to consolidated financial statements.

F-3

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands, except per share data)

			Year Ended December 31,
			2002			2001			2000
Revenue:
	Rental and service		$	453,060		$	361,634		$	274,331
	Sales and other			125,902			94,313			77,701
		Total revenue		578,962			455,947			352,032
Rental expenses				276,125			220,485			176,392
Cost of goods sold				51,824			32,952			29,645
		Gross profit		251,013			202,510			145,995
Selling, general and administrative expenses				141,594			114,828			80,294
Unusual item-litigation settlement				(173,250	)		—			—
		Operating earnings		282,669			87,682			65,701
Interest income				496			280			897
Interest expense				(40,943	)		(45,116	)		(48,635	)
Foreign currency income (loss)				3,935			(1,638	)		(2,358	)
		Earnings before income taxes		246,157			41,208			15,605
Income taxes				96,001			17,307			6,476
		Net earnings	$	150,156		$	23,901		$	9,129
		Basic earnings per common share	$	2.12		$	0.34		$	0.13
		Diluted earnings per common share	$	1.93		$	0.32		$	0.12
		Average common shares:
		Basic (weighted average outstanding shares)		70,927			70,917			70,915
		Diluted (weighted average outstanding shares)		77,662			73,996			73,219

See accompanying notes to consolidated financial statements.

F-4

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

				Year Ended December 31,
				2002			2001			2000
Cash flows from operating activities:
	Net earnings			$	150,156		$	23,901		$	9,129
	Adjustments to reconcile net earnings to net cash provided by operating activities:
		Depreciation			33,404			29,530			28,277
		Amortization			3,594			7,685			6,505
		Provision for uncollectible accounts receivable			7,623			8,932			6,466
		Amortization of deferred loss on interest rate swap			—			843			—
		Amortization of deferred gain on sale/leaseback of headquarters facility			(426	)		—			—
		Noncash gain on litigation settlement			(173,250	)		—			—
	Change in assets and liabilities net of effects from purchase of subsidiaries and unusual items:
		Increase in accounts receivable, net			(38,217	)		(39,571	)		(18,488	)
		Decrease (increase) in inventories			2,612			(16,664	)		(2,021	)
		Decrease (increase) in prepaid expenses and other current assets			(423	)		681			124
		Increase in accounts payable			2,568			2,069			3,368
		Increase in accrued expenses			11,864			6,835			5,994
		Increase in income taxes payable			5,732			4,467			1,864
		Increase in current deferred income taxes			66,838			—			—
		Increase (decrease) in deferred income taxes, net			4,179			1,187			(1,067	)
			Net cash provided by operating activities		76,254			29,895			40,151
Cash flows from investing activities:
		Additions to property, plant and equipment			(54,546	)		(43,997	)		(31,718	)
		Increase in inventory to be converted into equipment for short-term rental			(300	)		(2,700	)		(300	)
		Dispositions of property, plant and equipment			1,703			2,744			1,737
		Proceeds from sale of headquarters facility			18,232			—			—
		Business acquisitions, net of cash acquired			(3,596	)		(80	)		(427	)
		Increase in other assets			(520	)		(4,292	)		(1,304	)
			Net cash used by investing activities		(39,027	)		(48,325	)		(32,012	)
Cash flows from financing activities:
		Proceeds from (repayments of) notes payable, long-term, capital lease and other obligations			16,091			16,805			(12,715	)
		Proceeds from the exercise of stock options			9			24			—
			Net cash provided (used) by financing activities		16,100			16,829			(12,715	)
Effect of exchange rate changes on cash and cash equivalents					959			(339	)		(647	)
Net increase (decrease) in cash and cash equivalents					54,286			(1,940	)		(5,223	)
Cash and cash equivalents, beginning of year					199			2,139			7,362
Cash and cash equivalents, end of year				$	54,485		$	199		$	2,139

See accompanying notes to consolidated financial statements.

F-5

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT

Three Years Ended December 31, 2002

(in thousands)

	Common Stock		Retained Earnings Deficit			Accumulated Other Comprehensive Loss			Total Shareholders' Deficit
Balances at December 31, 1999	$	71	$	(259,435	)	$	(5,371	)	$	(264,735	)
Net earnings		—		9,129			—			9,129
Foreign currency translation adjustment		—		—			(2,347	)		(2,347	)
Total comprehensive income										6,782
Balances at December 31, 2000	$	71	$	(250,306	)	$	(7,718	)	$	(257,953	)
Net earnings		—		23,901			—			23,901
Foreign currency translation adjustment		—		—			(1,213	)		(1,213	)
Net derivative loss, net of taxes of $1,592		—		—			(2,956	)		(2,956	)
Reclassification adjustment for losses included in income, net of taxes of $713		—		—			1,323			1,323
Reclassification adjustment for loss recognized on termination of interest rate swap, net of taxes of $372		—		—			691			691
Reclassification adjustment for amortization of loss recognized on termination of interest rate swap, net of tax benefit of $76		—		—			(142	)		(142	)
Total comprehensive income										21,604
Exercise of stock options		—		24			—			24
Balances at December 31, 2001	$	71	$	(226,381	)	$	(10,015	)	$	(236,325	)
Net earnings		—		150,156			—			150,156
Foreign currency translation adjustment		—		—			5,511			5,511
Net derivative loss, net of taxes of $562		—		—			(1,045	)		(1,045	)
Reclassification adjustment for losses included in income, net of taxes of $972		—		—			1,807			1,807
Reclassification adjustment for loss recognized on termination of interest rate swap, net of tax benefit of $305		—		—			(549	)		(549	)
Total comprehensive income										155,880
Exercise of stock options		—		9			—			9
Balances at December 31, 2002	$	71	$	(76,216	)	$	(4,291	)	$	(80,436	)

See accompanying notes to consolidated financial statements.

F-6

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.    Summary of Significant Accounting Policies

(a) Principles of Consolidation

        The consolidated financial statements include the accounts of Kinetic Concepts, Inc., together with our consolidated subsidiaries, ("KCI"). All significant inter-company balances and transactions have been eliminated in consolidation. Certain reclassifications of amounts related to prior years have been made to conform with the 2002 presentation. Due to improvements in financial systems and processes, we began reporting international results on a current-month basis effective December 2000. Prior to 2000, we had presented international results using a one-month delay. As a result of this change, the 2000 fiscal year included a 13th monthly period for the international segment (the "international 13th month") which increased reported revenue and operating earnings by approximately $8.0 million and $1.1 million, respectively. Unless otherwise noted, the results reported herein include the international 13th month for fiscal 2000.

(b) Nature of Operations and Customer Concentration

        We design, manufacture, market and distribute therapeutic products, primarily medical devices that promote wound healing and therapeutic systems including specialty hospital beds and mattress overlays that treat and prevent the complications of immobility. The principal markets for our products are domestic and international health care providers, predominantly hospitals and extended care facilities throughout the United States, Canada and Europe and home care patients in the U.S. Receivables from these customers are unsecured.

        We contract with both proprietary hospital groups and voluntary group purchasing organizations ("GPOs"). Proprietary hospital groups own all of the hospitals which they represent and, as a result, can ensure complete compliance with an executed national agreement. Voluntary GPOs negotiate contracts on behalf of member hospital organizations but cannot ensure that their members will comply with the terms of an executed national agreement. Approximately 36% of our revenue during 2002 was generated under national agreements with GPOs.

        We have experienced dramatic growth in V.A.C. device and related disposables revenue since October 2000 when the Medicare Part B program initiated payments for V.A.C. home placements. V.A.C. platforms and related disposable revenue in 2002 of $313.4 million increased 65.0% from the prior year and now accounts for approximately 54.1% of total revenue.

        During 2002, KCI International had direct operations in 15 foreign countries including Germany, Austria, the United Kingdom, Canada, France, the Netherlands, Switzerland, Australia, Italy, Denmark, Sweden, Ireland, Belgium, South Africa and Spain. (See Note 13.)

(c) Revenue Recognition

        We recognize revenue in accordance with Staff Accounting Bulletin No. 101 when each of the following four criteria are met:

1)

A contract or sales arrangement exists.



2)

Products have been shipped and title has transferred or services have been rendered.



3)

The price of the products or services is fixed or determinable.



4)

Collectibility is reasonably assured.

F-7

        Rental and service revenue are recognized as services are rendered. Sales and other revenue are recognized when products are shipped.

(d) Cash and Cash Equivalents

        We consider all highly liquid investments with an original maturity of ninety days or less to be cash equivalents.

(e) Fair Value of Financial Instruments

        The carrying amount reported in the balance sheet for cash, accounts receivable, long-term securities, accounts payable and long-term obligations approximates their fair value. We estimate the fair value of long-term obligations by discounting the future cash flows of the respective instrument, using our incremental rate of borrowing for a similar instrument.

(f) Accounts Receivable

        Accounts receivable consist of amounts due directly from facilities (hospitals, extended care facilities, etc.), third-party payers (both governmental and non-governmental) and patient pay accounts.

        Significant concentrations of accounts receivable include:

	2002		2001
Facilities / dealers	63	%	61	%
TPP—Managed care and commercial	26	%	26	%
TPP—Governmental	9	%	11	%
Other	2	%	2	%

        The third-party payer reimbursement process requires extensive documentation which has had the short-term effect of slowing both the billing and cash collection cycles relative to the rest of the business, and therefore, increasing total accounts receivable.

        We evaluate the collectibility of accounts receivable based on a combination of factors. For unbilled receivables, items that remain unbilled for more than 90 days, or beyond an established billing window, are reversed out of revenue and receivables. For billed receivables, we generally recognize reserves for bad debt based on the length of time that the receivables are past due. The reserves range in value from 0% for current amounts to 100% for amounts over 180 days for certain payer groups. The reserve rates vary by payer group and historical experience on a weighted average basis. In addition, we have recorded specific reserves for bad debt when we become aware of a customer's inability to satisfy its debt obligations, for example bankruptcy filings. If circumstances change, such as higher than expected denials, payment defaults or an unexpected material adverse change in a major customer's or payer's ability to meet its obligations, our estimates of the realizability of amounts due from trade receivables could be reduced by a material amount.

F-8

(g) Inventories

        Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value). Costs include material, labor and manufacturing overhead costs. Inventory expected to be converted into equipment for short-term rental has been reclassified to property, plant and equipment.

        We have a three-year contract effective October 1, 2002 with one supplier to supply the majority of our inventory generating V.A.C. sales revenue.

(h) Property, Plant and Equipment

        Property, plant and equipment are stated at cost. Betterments, which extend the useful life of the equipment, are capitalized.

(i) Depreciation

        Depreciation on property, plant and equipment is calculated on the straight-line method over the estimated useful lives (thirty to forty years for buildings and between two and five years for most of our other property and equipment) of the assets.

(j) Goodwill and Business Combinations

        Goodwill represents the excess purchase price over the fair value of net assets acquired. Prior to 2002, goodwill was amortized over three to twenty-five years from the date of acquisition using the straight-line method. Effective January 1, 2002, we have applied the provisions of Statement of Financial Accounting Standards No. 142, ("SFAS 142"), Goodwill and Other Intangible Assets in our accounting for goodwill. SFAS 142 requires that goodwill and other intangible assets that have indefinite lives not be amortized but instead be tested at least annually for impairment, or more frequently when event or changes in circumstances indicate that the asset might be impaired. For indefinite lived intangible assets, impairment is tested by comparing the carrying value of the asset to the fair value of the reporting unit to which they are assigned.

        Goodwill has been tested for impairment during the first and fourth quarters of 2002 and will be tested for impairment at least annually, in the fourth quarter, using a two-step process. The first step is a comparison of an estimation of the fair value of a reporting unit with the reporting unit's carrying value. We have determined that our reporting units are our two operating segments—USA and International. If the fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered impaired, and as a result, the second step of the impairment test is not required. If required, the second step compares the fair value of reporting unit goodwill with the carrying amount of that goodwill. If we determine that reporting unit goodwill is impaired, the fair value of reporting unit goodwill would be measured by comparing the discounted expected future cash flows of the reporting unit with the carrying value of reporting unit goodwill. Any excess in the carrying value of reporting unit goodwill to the estimated fair value would be recognized as an expense at the time of the measurement. We recorded no impairments to our reporting units as a result of the implementation of SFAS 142 during 2002.

        The goodwill of a reporting unit will be tested annually or if an event occurs or circumstances change that would likely reduce the fair value of a reporting unit below its carrying amount. Examples

F-9

of such events or circumstances include, but are not limited to: a significant adverse change in legal factors or business climate, an adverse regulatory action or unanticipated competition.

(k) Other Assets

        Other assets consist principally of patents, trademarks, long-term investments and the estimated residual value of assets subject to leveraged leases. Patents and trademarks are amortized over the estimated useful life of the respective asset using the straight-line method.

(l) Income Taxes

        We recognize certain transactions in different time periods for financial reporting and income tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The provision for deferred income taxes represents the change in deferred income tax accounts during the year.

(m) Earnings Per Share

        Basic earnings per share ("EPS") is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings.

(n) Licensing Fees

        We pay licensing fees for the right to market our V.A.C. devices. Licensing fee expenses are based on V.A.C. revenue and recognized in the period that the related revenue is earned.

(o) Use of Estimates

        The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(p) Insurance Programs

        We established the KCI Employee Benefits Trust (the "Trust") as a self-insurer for certain risks related to our U.S. employee health plan and certain other benefits. We fund the Trust based on the value of expected future payments, including claims incurred but not reported. We have also purchased insurance, which limits the Trust's liability under the benefit plans.

(q) Foreign Currency Translation

        The functional currency for the majority of our foreign operations is the applicable local currency. The translation of the applicable foreign currencies into U.S. dollars is performed for balance sheet

F-10

accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period.

(r) Stock Options

        We use the intrinsic value method in accounting for our stock option plans. In 2002, compensation costs of approximately $800,000, net of estimated taxes, have been recognized in the financial statements related to these plans. No compensation costs were recognized in 2001 and 2000 related to these plans. Had compensation cost for our stock-based employee compensation plans been determined based upon a fair value method consistent with SFAS No. 123, our net earnings and earnings per share would have been decreased to the pro forma amounts indicated below.

        For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. Our pro forma information follows (dollars in thousands, except for earnings per share information):

		2002		2001		2000
Net earnings as reported		$	150,156	$	23,901	$	9,129
Pro forma net earnings		$	148,751	$	22,526	$	7,023
Earnings per share as reported
	Basic earnings per common share	$	2.12	$	0.34	$	0.13
	Diluted earnings per common share	$	1.93	$	0.32	$	0.12
Pro forma earnings per share
	Basic earnings per common share	$	2.10	$	0.32	$	0.10
	Diluted earnings per common share	$	1.92	$	0.30	$	0.10

        We are not required to apply the method of accounting prescribed by Statement 123 to stock options granted prior to January 1, 1995. Moreover, the pro forma compensation cost reflected above may not be representative of future results.

(s) Research and Development

        The focus of our research and development program has been to develop new products and make technological improvements to existing products. Expenditures for research and development are expensed as incurred and represented approximately 3%, 3% and 2% of our total operating expenditures in each of the years ended December 31, 2002, 2001 and 2000, respectively.

(t) Interest Rate Protection Agreements

        Periodically, we enter into interest rate protection agreements to modify the interest characteristics of our outstanding debt. Each interest rate swap is designated with all or a portion of the principal balance and term of a specific debt obligation. These agreements involve the exchange of amounts based on variable interest rates for amounts based on fixed interest rates over the life of the agreement without an exchange of the notional amount upon which the payments are based. The differential to be paid or received, as interest rates change, is accrued and recognized as an adjustment to interest expense related to the debt. (See Notes 4 and 14.)

F-11

(u) Shipping and Handling

        We include shipping and handling costs in rental expense. Shipping and handling cost recovered from customers is also included in rental expense. The amount of shipping and handling costs and costs recovered are less than 2% of our total revenue for all periods presented.

(v) Advertising Expenses

        Advertising costs are expensed as incurred. Advertising expense was less than 1% of our total revenue in each of the years ended December 31, 2002, 2001 and 2000.

(w) Other Pending Pronouncements

        In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations," effective for fiscal years beginning after June 15, 2002. This Standard addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Standard requires us to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and to adjust its present value in each subsequent period. In addition, we must capitalize an amount equal to the adjustment by increasing the carrying amount of the related long-lived asset, which is depreciated over the remaining useful life of the related asset. We will adopt SFAS No. 143 during the first quarter of fiscal year 2003 and have not yet determined what effect this statement will have on our earnings or financial position. We believe the adoption of this statement will not have a significant effect on our financial position or results of operations.

        In November 2002, the FASB issued Interpretation (FIN) No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN 45 elaborates on the existing disclosure requirements for most guarantees, including residual value guarantees issued in conjunction with operating lease agreements. It also clarifies that at the time a company issues a guarantee, we must recognize an initial liability for the fair value of the obligation it assumes under that guarantee and must disclose that information in its interim and annual financial statements. The initial recognition and measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. We have adopted FIN 45 and have determined that it will not have a material impact on our financial position or results of operations.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternate methods of transition for an entity that changes to the fair-value method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure provisions of SFAS No. 123 to require expanded and more prominent disclosure of the effects of an entity's accounting policy in the summary of significant accounting policies section with respect to stock-based employee compensation. The amendment of the annual disclosure requirements of SFAS No. 123 is effective for fiscal years ending after December 15, 2002. We have included the amended disclosure requirement of SFAS No. 148 in the above discussion of "Stock Options."

F-12

NOTE 2.    Acquisitions and Dispositions

        In 1996, we acquired a 26% interest in the capital stock of Polymedics N.V., ("Polymedics"), a Belgium manufacturer of foam used in certain V.A.C. dressings which was accounted for on a cost basis. During the first quarter of 2002, we acquired the remaining 74% of Polymedics stock for approximately $3.6 million in cash at which time the financial position and results of operations were reflected on a consolidated basis. Polymedics' operating results did not have a material impact on our results of operations for 2002, 2001 or 2000.

        In August 2002, we sold our corporate headquarters facility and adjacent land and buildings under a 10-year sale/leaseback arrangement. The properties were sold for $17.9 million, net of selling costs, resulting in a deferred gain of approximately $10.4 million. The deferred gain is being amortized over the term of the lease. Approximately $425,000 of amortization was recognized in income in 2002. The initial lease term is 10 years and requires minimum annual lease payments ranging from $3.2 million to $3.8 million. We have two options to renew the lease for a term of three or five years each. Rental expense of $1.5 million was recognized in 2002.

        The following table indicates the estimated future cash lease payments, inclusive of executory costs, for the years set forth below (dollars in thousands):

Year Ended December 31,	Estimated Cash Lease Payments
2003	$	3,232
2004		3,311
2005		3,390
2006		3,470
2007		3,549
2008 and thereafter		17,075
	$	34,027

F-13

NOTE 3.    Supplemental Balance Sheet Data

        Accounts receivable consist of the following (dollars in thousands):

			December 31, 2002			December 31, 2001
Trade accounts receivable:
	Facilities/dealers		$	92,359		$	73,088
	Third-party payers:
		Medicare/Medicaid		31,118			22,006
		Managed care commercial and other		53,229			40,375
				176,706			135,469
Medicare V.A.C. receivables prior to October 1, 2000				14,351			14,351
Employee and other receivables				2,410			2,075
				193,467			151,895
Less: Allowance for doubtful accounts				(26,220	)		(16,180	)
	Allowance for Medicare V.A.C. receivables prior to October 1, 2000			(14,351	)		(14,351	)
			$	152,896		$	121,364

        Inventories consist of the following (dollars in thousands):

		December 31, 2002			December 31, 2001
Finished goods		$	16,411		$	11,244
Work in process			2,411			3,540
Raw materials, supplies and parts			31,825			37,081
			50,647			51,865
Less: Amounts expected to be converted into equipment for short-term rental			(11,100	)		(10,800	)
	Reserve for excess and obsolete inventory		(1,613	)		(899	)
		$	37,934		$	40,166

F-14

        Net property, plant and equipment consist of the following (dollars in thousands):

	December 31, 2002			December 31, 2001
Land	$	549		$	1,439
Buildings		10,528			18,732
Equipment for short-term rental		178,022			149,347
Machinery, equipment and furniture		89,742			74,442
Leasehold improvements		3,209			1,804
Inventory to be converted to equipment		11,100			10,800
		293,150			256,564
Less accumulated depreciation		(187,601	)		(166,583	)
	$	105,549		$	89,981

        Accrued expenses consist of the following (dollars in thousands):

	December 31, 2002		December 31, 2001
Payroll, commissions and related taxes	$	26,363	$	19,484
Interest expense		4,017		4,307
Insurance accruals		2,758		1,987
Other accrued expenses		28,418		22,330
	$	61,556	$	48,108

F-15

NOTE 4.    Long-Term Obligations

        Long-term obligations consist of the following (dollars in thousands):

			December 31, 2002			December 31, 2001
Senior Credit Facility:
	Revolving bank credit facility		$			$	11,800
	Term loans:
		Tranche A due 2003		27,500			27,500
		Tranche B due 2004		85,500			86,400
		Tranche C due 2005		85,500			86,400
		Tranche D due 2006		93,575			94,525
		Tranche E due 2005		29,775			—
				321,850			306,625
95/8% Senior Subordinated Notes Due 2007				200,000			200,000
				521,850			506,625
Less current installments				(30,550	)		(2,750	)
			$	491,300		$	503,875

        The senior credit facility originally totaled $400.0 million and consisted of (i) a $50.0 million six-year revolving credit facility, (ii) a $50.0 million six-year Acquisition Facility, (iii) a $120.0 million six-year amortizing Term Loan A, (iv) a $90.0 million seven-year amortizing Term Loan B and (v) a $90.0 million eight-year amortizing Term Loan C (collectively, the "Term Loans"). On February 17, 2000, we, entered into a third amendment to our $400.0 million senior credit agreement (the "Amendment"). The Amendment established revised financial covenant levels for Interest Coverage, Leverage Ratio and Minimum EBITDA. On June 15, 2001, we entered into an Amended and Restated Credit and Guarantee Agreement, which funded a $95 million Tranche D Term Loan as part of a refinancing of our senior secured credit facility. Proceeds from the Tranche D Term Loan were used to pay down existing indebtedness, including $60 million outstanding under the Tranche A Term Loan, approximately $8 million outstanding under the acquisition facility and $26 million under the revolving credit facility with the remaining proceeds used to pay fees and expenses associated with this transaction. On April 4, 2002, we entered into a Second Amended and Restated Credit and Guarantee Agreement (the "Amended Credit Agreement"). The Amended Credit Agreement funded a $30 million Tranche E Term Loan as part of a refinancing of our senior secured credit facility. Proceeds from the Tranche E Term Loan were used to pay down existing indebtedness of $29.6 million under the revolving credit facility with the remaining proceeds used to pay fees and expenses associated with the transaction. As of December 31, 2002, we had no revolving loans outstanding. However, we had four letters of credit in the amount of $8.7 million outstanding and the aggregate availability under the revolving credit facility of $41.3 million.

Senior Credit Facility

        As of December 31, 2002, indebtedness under the senior credit facility, including the revolving credit facility (other than certain loans under the revolving credit facility designated in foreign

F-16

currency) and the term loans, bears interest at rates determined under either of the following alternative methods, at our option:

Method 1

        The base rate, which is the higher of:

—

the rate of interest publicly announced by Bank of America as its "referenced rate"; or

—

the federal funds effective rate from time to time plus 0.50%;

PLUS

The percentage set forth below for the applicable loan/facility:

—

0.75% in respect of Tranche A term loans and loans under our revolving credit facility;

—

1.50% in respect of Tranche B term loans;

—

1.75% in respect of Tranche C and Tranche E term loans; and

—

1.625% in respect of Tranche D term loans, or

Method 2

        The Eurodollar Rate (as defined in our senior credit facility agreement) for one, two, three or six months;

PLUS

The percentage set forth below for the applicable loan/facility:

—

1.75% in respect of Tranche A term loans and loans under our revolving credit facility;

—

2.50% in respect of Tranche B term loans;

—

2.75% in respect of Tranche C and Tranche E term loans; and

—

2.625% in respect to Tranche D term loans.

        Revolving loans designated in foreign currency bear interest at a rate based upon the cost of funds for such loans plus 1.75%.

        The term loans, other than Tranches D and E, are subject to quarterly amortization payments, which began on March 31, 1998. The Tranche D term loan amortizes at 1% per year beginning September 30, 2001 through December 31, 2005 with a final payment of $90.7 million due March 31, 2006. The Tranche E term loan amortizes at 1% per year beginning September 30, 2002 with a final payment of $29.0 million due December 31, 2005. We may borrow additional funds under the revolving credit facility at any time up to the borrowing limits thereunder. As of December 31, 2002, we had no revolving loans outstanding under the revolving credit facility, however, we had four letters of credit in the amount of $8.7 million and the aggregate availability under the revolving credit facility was $41.3 million.

        Our indebtedness under the senior credit facility is guaranteed by certain of our subsidiaries and is secured by (i) a first priority security interest in all of our tangible and intangible assets and those of

F-17

our domestic subsidiaries (subject to certain customary exceptions), including, without limitation, intellectual property and real estate owned by us and our subsidiaries, (ii) a first priority perfected pledge of all our capital stock and the capital stock of our domestic subsidiaries and (iii) a first priority perfected pledge of up to 65% of the capital stock of foreign subsidiaries owned directly by us or our domestic subsidiaries.

        Our senior credit agreement requires us to meet certain financial tests, including minimum levels of EBITDA, minimum interest coverage, maximum leverage ratio and capital expenditures. The senior credit agreement also contains covenants which, among other things, limit our ability to: incur additional indebtedness, make investments, announce or pay dividends, make loans and advances, make capital expenditures, enter into transactions with affiliates, dispose of our assets, enter into acquisitions, mergers or consolidation transactions, make prepayments on other indebtedness, create or permit to be created any liens on any of our properties, or undertake certain other matters customarily restricted in such agreements. As of December 31, 2002, we were in compliance with all applicable covenants.

        Our senior credit agreement also contains customary events of default, including payment defaults, any breach of representations and warranties, covenant defaults, cross-defaults to certain other indebtedness, certain events of bankruptcy and insolvency, failures under ERISA plans, judgment defaults, any change in our company's control and failure of any guaranty, security document, security interest or subordination provision under the senior credit agreement. In addition, the senior credit agreement provides for mandatory repayments, subject to certain exceptions, of the term loans and the revolving credit facility based on certain net asset sales outside the ordinary course of our business and our subsidiaries' business, the net proceeds of certain debt and equity issuances and excess cash flows.

Interest Rate Protection

        The following chart summarizes interest rate hedge transactions effective during 2002 (dollars in thousands):

Accounting Method	Effective Dates	Nominal Amount		Fixed Interest Rate		Status
Hypothetical(1)	10/01/01-12/31/02	$	150,000	3.570	%	Matured 12/31/02
Shortcut	10/01/01-12/31/02	$	100,000	2.990	%	Matured 12/31/02
Shortcut(2)	12/31/02-12/31/03	$	100,000	1.745	%	Outstanding
Shortcut(2)	12/31/02-12/31/04	$	100,000	2.375	%	Outstanding

(1)

On October 1, 2001, we entered into a $150 million interest rate swap agreement to take advantage of lower interest rates. Although no cash was exchanged, the $150.0 million swap did not qualify for the shortcut method because the fair value of the swap was not zero at inception (it had a negative value). We elected to use the "hypothetical derivative" method to measure effectiveness, which allowed us to use the change in the fair value of a "hypothetical derivative" (one which had no fair value at inception with terms mirroring the actual derivative that would be assumed to be perfectly effective) as a proxy for the change in the expected fair value of the hedged transactions. As of December 31, 2002, the $150 million swap agreement had matured. Hedge ineffectiveness, of approximately $27,000, in 2002 was immaterial and recognized as an increase of interest expense.

F-18

(2)

As of December 31, 2002, these two $100 million interest rate swap agreements effectively fix the base-borrowing rate on 62% of our variable rate debt. The fair value of these swaps at inception was zero. However, due to subsequent movements in interest rates, as of December 31, 2002, the fair value of the one-year, 1.7450% swap and the two-year, 2.3750% swap agreements were in an unfavorable position and were adjusted to a liability of approximately $330,000 and $1.0 million, respectively.

        We have designated our interest rate protection agreements as cash flow hedge instruments. As a result of these agreements during 2002 and 2001, we recorded additional interest expense of approximately $2.8 million and $2.1 million, respectively. Interest expense for 2001 includes a write-off of $1.1 million, the fair value of a prior $150 million swap upon termination. (See Notes 10, 14 and 17.)

Senior Subordinated Notes

        In November 1997, we issued $200.0 million of 9⁵/8% Senior Subordinated Notes due 2007. The notes are unsecured obligations, ranking subordinate in right of payment to all of our senior debt and will mature on November 1, 2007. Interest on the notes accrues at the rate of 9⁵/8% per annum and is payable semiannually in cash on each May 1 and November 1, commencing on May 1, 1998, to the persons who are registered Holders at the close of business on April 15 and October 15, respectively, immediately preceding the applicable interest payment date. Interest on the notes accrues from and includes the most recent date to which interest has been paid or, if no interest has been paid, from and including the date of issuance. As of December 31, 2002, the entire $200.0 million of our Notes were issued and outstanding.

        Our notes are not entitled to the benefit of any mandatory sinking fund. The notes are redeemable, at our option, in whole at any time or in part from time to time, on and after November 1, 2002, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on November 1 of the year set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption.

Year	Percentage
2002	104.813	%
2003	103.208	%
2004	101.604	%
2005 and thereafter	100.000	%

        At any time, or from time to time, we may acquire a portion of the notes through open-market purchases. In order to affect the foregoing redemption with the proceeds of any equity offering, we would make such redemption not more than 120 days after the consummation of any such equity offering.

Interest and Future Maturities

        Interest paid during 2002, 2001 and 2000 was approximately $39.0 million, $42.9 million and $45.6 million, respectively.

F-19

        As a result of the senior credit refinancing, future maturities of long-term debt at December 31, 2002 are as follows (dollars in thousands):

Year	Amount
2003	$	30,550
2004	$	86,750
2005	$	113,825
2006	$	90,725
2007	$	200,000

F-20

NOTE 5.    Accounting for Goodwill and Other Noncurrent Assets

        Goodwill represents the excess purchase price over the fair value of net assets acquired. Prior to 2002, goodwill was amortized over three to twenty-five years from the date of acquisition using the straight-line method. Effective January 1, 2002, we have applied the provisions of Statement of Financial Accounting Standards No. 142, ("SFAS 142"), Goodwill and Other Intangible Assets in our accounting for goodwill. Under SFAS 142, goodwill and intangible assets that have indefinite useful lives are no longer subject to amortization over their estimated useful life. Rather, goodwill and intangible assets that have indefinite useful lives are and will be tested at least annually for impairment. SFAS 142 provides specific guidance for testing goodwill for impairment. Intangible assets with finite useful lives will continue to be amortized over their useful lives. Goodwill has been tested for impairment during the first and fourth quarters of 2002 and will be tested for impairment at least annually.

        Goodwill was $46.4 million at December 31, 2002, compared to $43.0 million at December 31, 2001. This increase relates to our acquisition of Polymedics in the first quarter of 2002. (See Note 2.) Goodwill represented 7.5% and 12.5% of total assets at December 31, 2002 and December 31, 2001, respectively.

        The following table shows the effect of the adoption of SFAS 142 on our net income as if the adoption had occurred on January 1, 2000 (dollars in thousands, except per share data):

	Pro Forma Year Ended December 31,
	2001		2000
Net earnings—as reported	$	23,901	$	9,129
Amortization adjustment		3,372		3,494
Adjusted net earnings	$	27,273	$	12,623
Basic earnings per common share—as reported	$	0.34	$	0.13
Amortization adjustment		0.04		0.05
Adjusted basic earnings per common share	$	0.38	$	0.18
Dilutive earnings per common share—as reported	$	0.32	$	0.12
Amortization adjustment		0.05		0.05
Adjusted dilutive earnings per common share	$	0.37	$	0.17

F-21

        We have recorded amortizable intangible assets, which are included in Other Assets on our consolidated balance sheets. Other assets include the following (dollars in thousands):

	December 31, 2002			December 31, 2001
Patents, trademarks and other	$	10,868		$	10,083
Accumulated amortization		(6,840	)		(5,562	)
		4,028			4,521
Investment in assets subject to leveraged leases		16,445			16,445
Deposits and other		9,318			9,543
Other tangible, noncurrent assets, net		25,763			25,988
Total other assets, net	$	29,791		$	30,509

        We acquired beneficial ownership of two Grantor Trusts in December 1996 and December 1994. The assets held by each Trust consist of a McDonnell Douglas DC-10 aircraft and three engines. In connection with the acquisitions, KCI paid cash equity of $7.2 million and $7.6 million, respectively, and assumed non-recourse debt of $48.4 million and $51.8 million, respectively. The DC-10 aircraft are leased to the Federal Express Corporation through June 2012 and January 2012, respectively. Federal Express pays monthly rent to a third party who, in turn, pays the entire amount to the holders of the non-recourse indebtedness, which is secured by the aircraft. The holder's recourse in the event of a default is limited to the Trust assets.

        Amortization expense, related to finite-lived intangibles, was approximately $1.3 million, $1.9 million, and $573,000 for 2002, 2001, and 2000, respectively. We amortize these intangible assets over 5 to 17 years, depending on the estimated economic life of the individual asset. The following table shows the estimated amortization expense, in total for all finite-lived intangible assets, to be incurred over the next five years (dollars in thousands):

Year Ended December 31,	Estimated Amortization Expense
2003	$	488
2004	$	434
2005	$	385
2006	$	265
2007	$	225

NOTE 6.    Leasing Obligations

        We are obligated for equipment under various capital leases, which expire at various dates during the next two years. At December 31, 2002, the gross amount of equipment under capital leases totaled approximately $900,000 and related accumulated depreciation was approximately $800,000.

        We lease our headquarters facility, computer and telecommunications equipment, service vehicles, office space, various storage spaces and manufacturing facilities under non-cancelable operating leases, which expire at various dates over the next ten years. Total rental expense for operating leases was

F-22

$17.7 million, $13.0 million and $13.9 million for the years ended December 31, 2002, 2001 and 2000, respectively.

        Future minimum lease payments under capital and non-cancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2002 are as follows (dollars in thousands):

	Capital Leases		Operating Leases
2003	$	196	$	16,805
2004		95		13,850
2005		—		11,473
2006		—		9,790
2007		—		7,633
Later years		—		16,350
Total minimum lease payments		291	$	75,901
Less amount representing interest		39
Present value of net minimum capital lease payments		252
Less current portion		157
Obligations under capital leases, excluding current installments	$	95

NOTE 7.    Income Taxes

        Earnings before income taxes consists of the following (dollars in thousands):

	Year Ended December 31,
	2002		2001		2000
Domestic	$	229,270	$	28,824	$	133
Foreign		16,887		12,384		15,472
	$	246,157	$	41,208	$	15,605

        Income tax expense attributable to income from continuing operations consists of the following (dollars in thousands):

	Year Ended December 31, 2002
	Current		Deferred			Total
Federal	$	15,195	$	68,256		$	83,451
State		1,318		4,204			5,522
International		7,922		(894	)		7,028
	$	24,435	$	71,566		$	96,001

F-23

	Year Ended December 31, 2001
	Current		Deferred			Total
Federal	$	9,371	$	1,818		$	11,189
State		2,283		(433	)		1,850
International		4,467		(199	)		4,268
	$	16,121	$	1,186		$	17,307

	Year Ended December 31, 2000
	Current		Deferred			Total
Federal	$	1,070	$	99		$	1,169
State		435		(343	)		92
International		6,038		(823	)		5,215
	$	7,543	$	(1,067	)	$	6,476

        Income tax expense attributable to earnings before income taxes differed from the amounts computed by applying the statutory tax rate of 35 percent to pre-tax earnings from continuing operations as a result of the following (dollars in thousands):

	Year Ended December 31,
	2002			2001			2000
Computed "expected" tax expense	$	86,155		$	14,423		$	5,462
Goodwill		—			324			509
State income taxes, net of federal benefit		3,590			1,202			60
Tax-exempt interest from municipal bonds		(32	)		—			—
Foreign income taxed at other than U.S. rates		(441	)		(419	)		(657	)
Utilization of foreign net operating loss		(47	)		(48	)		—
Non-consolidated foreign net operating loss		1,606			401			457
Foreign, other		3,817			1,693			—
Other, net		1,353			(269	)		645
	$	96,001		$	17,307		$	6,476

F-24

        The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2002 and 2001 are presented below (dollars in thousands):

	2002			2001
Deferred Tax Assets:
Accounts receivable, principally due to allowance for doubtful accounts	$	7,553		$	10,851
Intangible assets, deducted for book purposes but capitalized and amortized for tax purposes		1,099			1,616
Foreign net operating loss carry forwards		1,606			663
Inventories, principally due to additional costs capitalized for tax purposes pursuant to the Tax Reform Act of 1986		981			356
Deferred gain on sale of headquarters facility		3,401			—
Derivative tax adjustments		469			879
Accrued liabilities		1,948			1,956
Deferred foreign tax asset		1,453			559
Other		5,561			6,181
Total gross deferred tax assets		24,071			23,061
Less: valuation allowance		(1,606	)		(663	)
Net deferred tax assets		22,465			22,398
Deferred Tax Liabilities:
Plant and equipment, principally due to differences in depreciation and basis		(29,360	)		(25,243	)
Deferred Revenue		(61,250	)		—
Deferred state tax liability		(4,737	)		(534	)
Intangible assets, deducted for book purposes over a longer life than for tax purposes		(1,956	)		(984	)
Other		(1,501	)		—
Total gross deferred tax liabilities		(98,804	)		(26,761	)
Net deferred tax liability		(76,339	)		(4,363	)
Less: current portion		66,838			—
	$	(9,501	)	$	(4,363	)

        At December 31, 2002, we had $1.6 million of foreign operating loss carryforwards available to reduce future taxable income. These loss carryforwards must be utilized within the applicable carryforward periods. A valuation allowance has been provided for the deferred tax assets related the foreign loss carryforwards. Carryforwards of approximately $1.2 million can be used indefinitely and the remainder expire from 2007 through 2021.

        We anticipate that the reversal of existing taxable temporary differences and future income will provide sufficient taxable income to realize the tax benefit of the remaining deferred tax assets.

        Income taxes paid during 2002, 2001 and 2000 were $24.6 million, $12.0 million and $7.2 million, respectively.

F-25

NOTE 8.    Shareholders' Equity and Employee Benefit Plans

Common Stock:

        We are authorized to issue 100.0 million shares of Common Stock, $0.001 par value (the "Common Stock"). The number of shares of Common Stock issued and outstanding at the end of 2002 and 2001 was 70,928,040 and 70,925,000, respectively.

Preferred Stock:

        We are authorized to issue up to 20.0 million shares of Preferred Stock, par value $0.001 per share, in one or more series. As of December 31, 2002 and December 31, 2001, none were issued.

Investment Plan:

        We have an Investment Plan intended to qualify as a deferred compensation plan under Section 401(k) of the Internal Revenue Code of 1986. The Investment Plan is available to all domestic employees and we match employee contributions up to a specified limit. In 2002, 2001 and 2000, we made matching contributions and charged to expense approximately $2.0 million, $1.4 million and $1.2 million, respectively.

NOTE 9.    Stock Option Plans

        In October 1995, the Financial Accounting Standards Board ("FASB") issued Statement No. 123, "Accounting and Disclosure of Stock-Based Compensation." While the accounting standard encouraged the adoption of a new fair-value method for expense recognition, Statement 123 allows companies to continue accounting for stock options and other stock-based awards as provided in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). We have elected to follow the provisions of APB 25 and related interpretations in accounting for our stock options plans because, as discussed below, the alternative fair-value method prescribed by FASB Statement No. 123 requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of our employee stock options generally equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.

        In December 1997, our Board of Directors approved the 1997 Management Equity Plan. The maximum aggregate number of shares of Common Stock that may be issued in connection with grants under the Management Equity Plan, as amended, is approximately 13.9 million shares, subject to adjustment as provided for in the plan. The Management Equity Plan is administered, and grants determined, by a committee of the Board of Directors. The exercise price and term of options granted under the Management Equity Plan shall be determined by the committee, however, in no event shall the term of any option granted under the Management Equity Plan exceed ten (10) years. The Management Equity Plan supersedes all other stock option plans. During the 1997 recapitalization transaction, 60 employees rolled stock options covering an additional 5.5 million shares of our common stock into the 1997 Management Equity Plan.

        Pro forma information regarding net income and earnings per share is required by Statement 123 and has been calculated based on the assumption that we had accounted for our employee stock options under the fair-value method of that statement. The fair value for options granted during the three fiscal years ended December 31, 2002, 2001 and 2000, respectively, was estimated using a Black-

F-26

Scholes option pricing model with the following weighted average assumptions: risk-free interest rates of 4.2%, 4.5% and 4.7%, dividend yields of 0.4%, 0.4% and 0.7%, volatility factors of the expected market price of our common stock of .22, .24 and .33 and a weighted-average expected option life of 6.2 years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. Other option valuation models also require the input of highly subjective assumptions including the expected stock price volatility. Because our employee stock options have characteristics significantly different from those of traded options, and because changes in the underlying assumptions can materially affect the fair value estimate, in management's opinion, Black-Scholes and other models do not necessarily provide a reliable measure of the fair value of our employee stock options.

        For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. Our pro forma information follows (dollars in thousands, except for earnings per share information):

		2002		2001		2000
Net earnings as reported		$	150,156	$	23,901	$	9,129
Pro forma net earnings		$	148,751	$	22,526	$	7,023
Earnings per share as reported
	Basic earnings per common share	$	2.12	$	0.34	$	0.13
	Diluted earnings per common share	$	1.93	$	0.32	$	0.12
Pro forma earnings per share
	Basic earnings per common share	$	2.10	$	0.32	$	0.10
	Diluted earnings per common share	$	1.92	$	0.30	$	0.10

        We are not required to apply the method of accounting prescribed by Statement 123 to stock options granted prior to January 1, 1995. Moreover, the pro forma compensation cost reflected above may not be representative of future results.

        The following table summarizes information about stock options outstanding at December 31, 2002 (options in thousands):

Range of Exercise Prices	Options Outstanding at 12/31/02	Weighted Average Remaining Contract Life (years)	Weighted Average Exercise Price		Options Exercisable at 12/31/02	Weighted Average Exercise Price
$0.91 to $1.13	1,175	1.6	$	1.07	1,175	$	1.07
$1.25 to $2.28	513	1.9	$	1.72	513	$	1.72
$2.78 to $4.81	14,854	4.1	$	4.58	9,855	$	4.46
$4.82 to $7.00	503	7.6	$	7.00	32	$	7.00
	17,045	3.9	$	4.32	11,575	$	4.00

F-27

        A summary of our stock option activity, and related information, for years ended December 31, 2002, 2001 and 2000 follows (options in thousands):

	2002				2001				2000
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Options outstanding—beginning of year	17,542		$	4.28	16,985		$	4.18	9,617		$	3.65
Granted	293		$	7.00	1,677		$	5.09	7,921		$	4.81
Exercised	(121	)	$	3.69	(734	)	$	3.67	(319	)	$	3.10
Forfeited	(669	)	$	4.42	(386	)	$	4.81	(234	)	$	4.81
Options outstanding—end of year	17,045		$	4.32	17,542		$	4.28	16,985		$	4.18
Exercisable at end of year	11,575		$	4.00	9,540		$	3.78	8,113		$	3.50
Weighted average fair value of options granted during the year			$	2.15			$	1.84			$	1.83

NOTE 10.    Other Comprehensive Income

        Our other comprehensive income is comprised of net earnings, foreign currency translation adjustment and adjustments to derivative financial instruments.

        The earnings associated with certain of our foreign affiliates are considered to be permanently invested and no provision for U.S. Federal and State income taxes on these earnings or translation adjustments has been made.

        As of December 31, 2002, derivative financial instruments valued at a liability of approximately $1.3 million were recorded as a result of our adoption of FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." This liability is based upon the valuation of our interest rate protection agreements associated with our Senior Credit Facilities. (See Notes 4, 14 and 17.)

NOTE 11.    Earnings Per Share

        The following table sets forth the reconciliation from basic to diluted average common shares and the calculations of net earnings per common share. Net earnings for basic and diluted calculations do not differ (dollars in thousands, except per share):

		2002		2001		2000
Net earnings		$	150,156	$	23,901	$	9,129
Average common shares:
	Basic (weighted-average outstanding shares)		70,927		70,917		70,915
	Dilutive potential common shares from stock options		6,735		3,079		2,304
	Diluted (weighted-average outstanding shares)		77,662		73,996		73,219
Basic earnings per common share		$	2.12	$	0.34	$	0.13
Diluted earnings per common share		$	1.93	$	0.32	$	0.12

F-28

NOTE 12.    Commitments and Contingencies

        On August 16, 1995, we filed a civil antitrust lawsuit against Hillenbrand Industries, Inc. and one of its subsidiaries, Hill-Rom Company (together "Hillenbrand"). On September 27, 2002, a jury found in KCI's favor. The jury found that Hillenbrand had wrongfully attempted to monopolize the specialty hospital bed market. The jury awarded us $173.6 million, which was subject to trebling under the federal antitrust laws, pending an anticipated appeal. On December 31, 2002, we settled our antitrust lawsuit with Hillenbrand. Under the settlement, Hillenbrand agreed to pay KCI $250 million. The parties released each other from all claims relating to the litigation and all claims between the parties as of the settlement date. On January 2, 2003, the United States District Court for the Western District of Texas, San Antonio Division approved the settlement and dismissed the case. Upon dismissal of the lawsuit, Hillenbrand paid KCI $175 million. Pursuant to the terms of the settlement, Hillenbrand will pay to KCI an additional $75 million in January 2004, subject to certain conditions.

        On February 21, 1992, Novamedix Limited ("Novamedix") filed a lawsuit against us in the United States District Court for the Western District of Texas. Novamedix manufactures the principal product which directly competes with the PlexiPulse products. The suit alleges that the PlexiPulse products infringe several patents held by Novamedix, that we breached a confidential relationship with Novamedix and a variety of ancillary claims. Novamedix seeks injunctive relief and monetary damages. A judicial stay which has been in effect with respect to all patent claims in this case has been lifted. Although it is not possible to reliably predict the outcome of this litigation or the damages, which could be awarded, we believe that our defenses to these claims are meritorious and that the litigation will not have a material adverse effect on our business, financial condition or results of operations.

        On January 7, 1998, Mondomed N.V. filed an opposition in the European Patent Office (the "Opposition") to a European patent owned by Wake Forest University and licensed by KCI for our V.A.C. They were joined in this Opposition by Paul Hartmann A.G. on December 16, 1998. On February 13, 2002, the Opposition Division of the European Patent Office issued a non-binding Preliminary Opinion in favor of KCI. The opposing parties will have additional opportunities to assert their arguments in relation to an oral hearing that will be held prior to the issuance of a Final Opinion. A final date for the oral hearing has not been set. Although it is not possible to reliably predict the outcome of the Opposition, we believe that the patent will be upheld.

        We are a party to several lawsuits arising in the ordinary course of our business. Provisions have been made in our financial statements for estimated exposures related to these lawsuits. In the opinion of management, the disposition of these matters will not have a material adverse effect on our business, financial condition or results of operations.

        The manufacturing and marketing of medical products necessarily entails an inherent risk of product liability claims. We currently have certain product liability claims pending for which provision has been made in our financial statements. Management believes that resolution of these claims will not have a material adverse effect on our business, financial condition or results of operations. We have not experienced any significant losses due to product liability claims and management believes that we currently maintain adequate liability insurance coverage.

        Other than commitments for new product inventory, including disposable "for sale" products of $12.5 million, we have no material long-term capital commitments and can adjust our level of capital expenditures as circumstances dictate.

        See discussion of our self-insurance program at Note 1 and leases at Note 6.

F-29

NOTE 13.    Segment and Geographic Information

        We are principally engaged in the rental and sale of innovative therapeutic devices and systems throughout the United States and in 15 primary countries internationally.

        We define our business segments based on geographic management responsibility. We have two reportable segments: USA, which includes operations in the United States, and International, which includes operations for all international units. We measure segment profit as operating earnings, which is defined as income before interest income or expense, foreign currency gains and losses, income taxes and minority interest. All intercompany transactions are eliminated in computing revenues, operating earnings and assets. Prior years have been made to conform with the 2002 presentation. Information on segments and a reconciliation of consolidated totals are as follows (dollars in thousands):

				Year Ended December 31,
				2002			2001			2000
Revenue:
	USA			$	446,786		$	354,123		$	256,582
	International				132,176			101,824			95,450
				$	578,962		$	455,947		$	352,032
Operating earnings:
	USA			$	145,541		$	109,471		$	82,114
	International				18,348			19,124			19,450
	Other(1):
		Executive			(12,272	)		(13,060	)		(9,496	)
		Finance			(17,175	)		(13,040	)		(14,060	)
		Manufacturing/engineering			(6,695	)		(4,394	)		(2,921	)
		Administration			(18,328	)		(10,419	)		(9,386	)
	Unusual item-litigation settlement				173,250			—			—
			Total other		118,780			(40,913	)		(35,863	)
				$	282,669		$	87,682		$	65,701
Depreciation and amortization:
	USA			$	18,865		$	19,902		$	19,464
	International				9,302			8,296			7,945
	Other(1):
		Executive			484			2,123			1,357
		Finance			3,553			2,780			2,333
		Manufacturing/engineering			1,983			1,632			1,478
		Administration			2,811			2,482			2,205
			Total other		8,831			9,017			7,373
				$	36,998		$	37,215		$	34,782

F-30

Total Assets:
	USA			$	280,870	$	222,433	$	182,442
	International				114,192		74,015		64,667
	Other:
		Executive			8,834		14,869		14,750
		Finance			12,270		7,234		5,000
		Manufacturing/engineering			13,605		13,046		11,470
		Administration			188,288		11,596		9,762
			Total other		222,997		46,745		40,982
				$	618,059	$	343,193	$	288,091
Gross capital expenditures:
	USA			$	24,263	$	24,771	$	13,948
	International				15,703		8,097		7,205
	Other:
		Executive			—		—		—
		Finance			13,477		10,901		8,131
		Manufacturing/engineering			1,403		2,928		2,734
		Administration			—		—		—
			Total other		14,880		13,829		10,865
				$	54,846	$	46,697	$	32,018

(1)

Other includes general headquarter expenses which are not allocated to the individual segments and are included in selling, general and administrative expenses within our Consolidated Statements of Earnings.

        The following is other selected geographic financial information of KCI (dollars in thousands):

			Year Ended December 31,
			2002		2001		2000
Geographic location of long-lived assets:
	Domestic		$	150,133	$	149,689	$	141,281
	Foreign			37,851		22,438		19,994
		Total long-lived assets	$	187,984	$	172,127	$	161,275

NOTE 14.    Derivative Financial Instruments

        We adopted Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," and its amendments, Statements 137 and 138, on January 1, 2001. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at fair value. In accordance with the transition provisions of SFAS 133, no cumulative effect of an

F-31

accounting change was necessary. We have designated our interest rate swap agreements as cash flow hedge instruments. The swap agreements are used to manage exposure to interest rate movement by effectively changing the variable interest rate to a fixed rate. Changes in the effective portion of the fair value of the interest rate swap agreement will be recognized in other comprehensive income, net of tax effects, until the hedged item is recognized into earnings, whereas the ineffective portion is recognized into income as incurred. To qualify for the shortcut method of accounting, the critical terms of the interest rate swap agreements and the interest-bearing debt associated with the swap agreements must be the same.

        The following chart summarizes the cash flow hedge transactions for the period of 2002 and 2001 (dollars in thousands):

Accounting Method	Effective Dates	Nominal		Fixed Interest Rate		Status
Shortcut	01/05/01-12/31/01	$	150,000	5.360	%	Terminated 10/01/01
Hypothetical(1)	10/01/01-12/31/02		150,000	3.570		Matured 12/31/02
Shortcut	10/01/01-12/31/02		100,000	2.990		Matured 12/31/02
Shortcut(2)	12/31/02-12/31/03		100,000	1.745		Outstanding
Shortcut(2)	12/31/02-12/31/04		100,000	2.375		Outstanding

(1)

On October 1, 2001, we terminated our $150.0 million, 5.36% interest rate swap and entered into an agreement to take advantage of lower interest rates. The amount included in other comprehensive income as of September 30, 2001 continued to be recognized over the original date through which interest payments were hedged, December 31, 2002, because the hedged item (interest payments) continued to exist. In addition, accumulated other comprehensive loss was reduced by approximately $550,000 as a loss on termination of interest rate swap during 2001 and increased by approximately $550,000 during 2002.

Although no cash was exchanged, the $150.0 million swap did not qualify for the shortcut method because the fair value of the swap was not zero at inception (it had a negative value). We elected to use the "hypothetical derivative" method to measure effectiveness, which allowed us to use the change in the fair value of a "hypothetical derivative" (one which had no fair value at inception with terms mirroring the actual derivative that would be assumed to be perfectly effective) as a proxy for the change in the expected fair value of the hedged transactions. As of December 31, 2002, the $150 million swap agreement had matured. Hedge ineffectiveness, of approximately $27,000, in 2002 was immaterial and recognized as an increase of interest expense.

(2)

As of December 31, 2002 these agreements effectively fix the base-borrowing rate on 62% of our variable rate debt. The fair value of these swaps at inception was zero. However, due to subsequent movements in interest rates, as of December 31, 2002 the fair value of the one-year, 1.7450% swap and two-year, 2.3750% swap agreements were in an unfavorable position and were adjusted to a liability of approximately $330,000 and $1.0 million, respectively.

As a result of interest rate protection agreements during 2002 and 2001, we recorded additional interest expense of approximately $2.8 million and $2.1 million, respectively. The expense for 2001 includes a fourth quarter write-off of $1.1 million, the fair value of the old $150 million swap upon termination. (See Consolidated Statement of Shareholders' Deficit and Notes 4, 10 and 17.)

F-32

NOTE 15.    Quarterly Financial Data (unaudited)

        The unaudited consolidated results of operations by quarter are summarized below (dollars in thousands, except per share data):

		Year Ended December 31, 2002
		First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Revenue		$	127,141	$	137,108	$	150,488	$	164,225
Unusual item-litigation settlement			—		—		—	$	173,250
Operating earnings		$	24,554	$	26,148	$	26,398	$	205,569
Net earnings		$	8,433	$	11,596	$	9,103	$	121,024
Per share:
	Basic earnings per common share	$	0.12	$	0.16	$	0.13	$	1.71
	Dilutive earnings per common share	$	0.11	$	0.15	$	0.12	$	1.56
Average common shares:
	Basic (weighted average outstanding shares)		70,925		70,926		70,928		70,928
	Diluted (weighted average outstanding shares)		77,721		77,683		77,664		77,643

		Year Ended December 31, 2001
		First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Revenue		$	103,237	$	108,623	$	117,435	$	126,652
Operating earnings		$	20,257	$	20,755	$	23,527	$	23,143
Net earnings		$	4,314	$	5,350	$	6,817	$	7,420
Per share:
	Basic earnings per common share	$	0.06	$	0.08	$	0.10	$	0.10
	Dilutive earnings per common share	$	0.06	$	0.07	$	0.09	$	0.10
Average common shares:
	Basic (weighted average outstanding shares)		70,915		70,915		70,917		70,920
	Diluted (weighted average outstanding shares)		73,077		73,056		74,255		75,130

        Earnings per share for the full year may differ from the total of the quarterly earnings per share due to rounding differences.

NOTE 16.    Unusual Item—Litigation Settlement

        During the fourth quarter of 2002, we recorded a gain from the settlement of an antitrust lawsuit with Hillenbrand Industries, Inc. and Hill-Rom Company, Inc., a wholly-owned subsidiary of Hillenbrand (together, "Hillenbrand"). On December 31, 2002, under the settlement, Hillenbrand agreed to pay KCI $250.0 million. The initial payment was $175.0 million, payable upon dismissal of the lawsuit by the court. Net of legal fees and expenses, this transaction added $173.3 million of pretax income and $106.4 million of net income to the 2002 results. We recorded a $66.8 million current deferred tax liability related to this gain. This settlement also provides that Hillenbrand will pay to KCI an additional $75.0 million in January 2004, subject to certain conditions, such as the occurrence of a bankruptcy or change in control. No accrual has been made related to this payment. We received the initial payment of $175.0 million on January 2, 2003. (See Note 12 of Notes to Consolidated Financial Statements.)

F-33

NOTE 17.    Subsequent Events (unaudited)

        On January 2, 2003, we received $175 million pursuant to the settlement of the antitrust lawsuit with Hillenbrand upon dismissal of the lawsuit by the court. The cash received was used to pay down $107 million of indebtedness on the senior credit facility. In addition, a current deferred tax payable of $66.8 million was recorded for estimated tax liabilities related to the gain. After the paydown, our long-term obligations were (dollars in thousands):

			December 31, 2002			Paydown			Subsequent to Paydown
Senior credit facilities
	Term loans:
		Tranche A due 2003	$	27,500		$	9,867		$	17,633
		Tranche B due 2004		85,500			28,217			57,283
		Tranche C due 2005		85,500			28,217			57,283
		Tranche D due 2006		93,575			30,876			62,699
		Tranche E due 2007		29,775			9,823			19,952
				321,850			107,000			214,850
95/8% Senior Subordinated Notes due 2007				200,000			—			200,000
				521,850			107,000			414,850
Less current installments				(30,550	)		(11,382	)		(19,168	)
			$	491,300		$	95,618		$	395,682

        After giving effect to the paydown of the senior credit facility, future maturities of long-term debt as of December 31, 2002 are as follows (dollars in thousands):

	December 31, 2002		Paydown		Subsequent to Paydown
2003	$	30,550	$	11,382	$	19,168
2004		86,750		28,475		58,275
2005		113,825		37,363		76,462
2006		90,725		29,780		60,945
2007		200,000		—		200,000
	$	521,850	$	107,000	$	414,850

        On January 31, 2003, we sold $20 million of our $100 million, 1.7450% interest rate swap to be effective March 31, 2003 resulting in an expense of $73,500 which will be recorded in the first quarter of 2003. Subsequent to the paydown of $107.0 million of debt, the remaining interest rate swap agreements effectively fix the base-borrowing rate on 83.8% of our variable rate debt. (See Notes 4, 10 and 14.)

NOTE 18.    Guarantor Condensed Consolidating Financial Statements

        Kinetic Concepts, Inc. issued $200 million in subordinated debt securities to finance a tender offer to purchase certain of our common shares outstanding. In connection with the issuance of these securities, certain of our wholly owned subsidiaries (the "guarantor subsidiaries") act as guarantors. Certain other subsidiaries (the "non-guarantor subsidiaries") do not guarantee such debt. The

F-34

guarantor subsidiaries are wholly owned by KCI and the guarantees are full, unconditional, and joint and several. We have not presented separate financial statements and other disclosures concerning the Subsidiary Guarantors because management has determined that such information is not material to investors.

        Our indebtedness under the senior credit agreement is guaranteed by certain of the subsidiaries of KCI and is secured by (i) a first priority security interest in all, subject to certain customary exceptions, of the tangible and intangible assets of KCI and our domestic subsidiaries, including, without limitation, intellectual property and real estate owned by KCI and our subsidiaries, (ii) a first priority perfected pledge of all capital stock of KCI's domestic subsidiaries and (iii) a first priority perfected pledge of up to 65% of the capital stock of foreign subsidiaries owned directly by KCI or our domestic subsidiaries. The senior credit agreement contains covenants which, among other things, limit the incurrence of additional indebtedness, investments, dividends, loans and advances, capital expenditures, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, prepayments of other indebtedness, liens and encumbrances and other matters customarily restricted in such agreements. The net assets of the guarantor subsidiaries are detailed on the following tables.

        The following tables present the condensed consolidating balance sheets of Kinetic Concepts, Inc. as a parent company, our guarantor subsidiaries and our non-guarantor subsidiaries as of December 31, 2002 and 2001 and the related condensed consolidating statements of earnings and cash flows for each year in the three-year period ended December 31, 2002.

F-35

CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY BALANCE SHEET

December 31, 2002
(in thousands)

			Kinetic Concepts, Inc. Parent Company Borrower			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Reclassifications and Eliminations			Kinetic Concepts, Inc. and Subsidiaries
ASSETS:
Current assets:
	Cash and cash equivalents		$	—		$	41,185		$	13,300	$	—		$	54,485
	Accounts receivable, net			—			125,106			35,612		(7,822	)		152,896
	Accounts receivable—other			175,000			—			—		—			175,000
	Inventories, net			—			20,113			17,821		—			37,934
	Prepaid expenses and other current assets			—			6,377			3,383		—			9,760
		Total current assets		175,000			192,781			70,116		(7,822	)		430,075
	Net property, plant and equipment			—			96,458			23,516		(14,425	)		105,549
	Loan issuance cost, net			—			6,287			—		—			6,287
	Goodwill, net			—			38,724			7,633		—			46,357
	Other assets, net			—			31,044			20,247		(21,500	)		29,791
	Intercompany investments and advances			(187,076	)		508,045			23,447		(344,416	)		—
			$	(12,076	)	$	873,339		$	144,959	$	(388,163	)	$	618,059
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT):
Accounts payable			$	—		$	4,632		$	6,524	$	—		$	11,156
Accrued expenses				1,522			46,058			13,976		—			61,556
Current installments of long-term obligations				—			30,550			—		—			30,550
Current installments of capital lease obligations				—			157			—		—			157
Intercompany payables				—			22,497			—		(22,497	)		—
Derivative financial instruments				—			1,341			—		—			1,341
Income taxes payable				—			8,615			6,000		—			14,615
Current deferred income taxes				66,838			—			—		—			66,838
		Total current liabilities		68,360			113,850			26,500		(22,497	)		186,213
Long-term obligations, net of current installments				—			491,300			—		—			491,300
Capital lease obligations, net of current installments				—			75			20		—			95
Intercompany payables, noncurrent				—			(21,500	)		21,500		—			—
Deferred income taxes, net				—			9,251			—		250			9,501
Deferred gain, sale of headquarters facility				—			10,023			—		—			10,023
Other noncurrent deferred, net				—			22,863			—		(21,500	)		1,363
				68,360			625,862			48,020		(43,747	)		698,495
Shareholders' equity (deficit)				(80,436	)		247,477			96,939		(344,416	)		(80,436	)
			$	(12,076	)	$	873,339		$	144,959	$	(388,163	)	$	618,059

F-36

CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY BALANCE SHEET

December 31, 2001
(in thousands)

			Kinetic Concepts, Inc. Parent Company Borrower			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Reclassifications and Eliminations			Kinetic Concepts, Inc. and Subsidiaries
ASSETS:
Current assets:
	Cash and cash equivalents		$	—		$	—		$	5,301	$	(5,102	)	$	199
	Accounts receivable, net			—			115,368			25,092		(19,096	)		121,364
	Inventories, net			—			22,432			17,734		—			40,166
	Prepaid expenses and other current assets			—			4,550			4,787		—			9,337
		Total current assets		—			142,350			52,914		(24,198	)		171,066
Net property, plant and equipment				—			93,893			9,184		(13,096	)		89,981
Loan issuance cost, net				—			8,602			—		—			8,602
Goodwill, net				—			39,381			3,654		—			43,035
Other assets, net				—			29,227			22,782		(21,500	)		30,509
Intercompany investments and advances				(236,325	)		500,348			24,291		(288,314	)		—
			$	(236,325	)	$	813,801		$	112,825	$	(347,108	)	$	343,193
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT):
Accounts payable			$	—		$	10,213		$	3,318	$	(5,102	)	$	8,429
Accrued expenses				—			35,471			12,637		—			48,108
Current installments of long-term obligations				—			2,750			—		—			2,750
Current installments of capital lease obligations				—			171			—		—			171
Intercompany payables				—			39,584			—		(39,584	)		—
Derivative financial instruments				—			2,512			—		—			2,512
Income taxes payable				—			7,227			1,534		—			8,761
		Total current liabilities		—			97,928			17,489		(44,686	)		70,731
Long-term obligations, net of current installments				—			503,875			—		—			503,875
Capital lease obligations, net of current installments				—			232			—		—			232
Intercompany payables, noncurrent				—			(21,500	)		21,500		—			—
Deferred income taxes, net				—			15,186			—		(10,823	)		4,363
Other noncurrent deferred, net				—			21,817			—		(21,500	)		317
				—			617,538			38,989		(77,009	)		579,518
Shareholders' equity (deficit)				(236,325	)		196,263			73,836		(270,099	)		(236,325	)
			$	(236,325	)	$	813,801		$	112,825	$	(347,108	)	$	343,193

F-37

CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF EARNINGS

For the year ended December 31, 2002
(in thousands)

			Kinetic Concepts, Inc. Parent Company Borrower			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Reclassifications and Eliminations			Kinetic Concepts, Inc. and Subsidiaries
Revenue:
	Rental and service		$	—		$	365,781		$	87,279	$	—		$	453,060
	Sales and other			—			105,695			44,828		(24,621	)		125,902
		Total revenue		—			471,476			132,107		(24,621	)		578,962
Rental expenses				—			198,477			77,648		—			276,125
Cost of goods sold				—			49,387			16,514		(14,077	)		51,824
		Gross profit		—			223,612			37,945		(10,544	)		251,013
Selling, general and administrative expenses				—			128,411			13,183		—			141,594
Unusual item—litigation settlement				(173,250	)		—			—		—			(173,250	)
		Operating earnings		173,250			95,201			24,762		(10,544	)		282,669
Interest income				—			294			202		—			496
Interest expense				—			(40,943	)		1,702		(1,702	)		(40,943	)
Foreign currency income				—			3,555			380		—			3,935
		Earnings before income taxes and equity in earnings of subsidiaries		173,250			58,107			27,046		(12,246	)		246,157
Income taxes				66,838			22,682			11,257		(4,776	)		96,001
		Earnings before equity in earnings of subsidiaries		106,412			35,425			15,789		(7,470	)		150,156
Equity in earnings of subsidiaries				43,744			15,790			—		(59,534	)		—
		Net earnings	$	150,156		$	51,215		$	15,789	$	(67,004	)	$	150,156

F-38

CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF EARNINGS

For the year ended December 31, 2001
(in thousands)

			Kinetic Concepts, Inc. Parent Company Borrower		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Reclassifications and Eliminations			Kinetic Concepts, Inc. and Subsidiaries
Revenue:
	Rental and service		$	—	$	291,145		$	70,489		$	—		$	361,634
	Sales and other			—		74,564			27,608			(7,859	)		94,313
		Total revenue		—		365,709			98,097			(7,859	)		455,947
Rental expenses				—		165,618			54,867			—			220,485
Cost of goods sold				—		31,859			8,202			(7,109	)		32,952
		Gross profit		—		168,232			35,028			(750	)		202,510
Selling, general and administrative expenses				—		105,460			9,368			—			114,828
		Operating earnings		—		62,772			25,660			(750	)		87,682
Interest income				—		174			106			—			280
Interest expense				—		(45,116	)		—			—			(45,116	)
Foreign currency loss				—		(1,322	)		(316	)		—			(1,638	)
		Earnings before income taxes and equity in earnings of subsidiaries		—		16,508			25,450			(750	)		41,208
Income taxes				—		8,852			8,770			(315	)		17,307
		Earnings before equity in earnings of subsidiaries		—		7,656			16,680			(435	)		23,901
Equity in earnings of subsidiaries				23,901		16,680			—			(40,581	)		—
		Net earnings	$	23,901	$	24,336		$	16,680		$	(41,016	)	$	23,901

F-39

CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF EARNINGS

For the year ended December 31, 2000
(in thousands)

			Kinetic Concepts, Inc. Parent Company Borrower		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Reclassifications and Eliminations			Kinetic Concepts, Inc. and Subsidiaries
Revenue:
	Rental and service		$	—	$	209,210		$	65,121		$	—		$	274,331
	Sales and other			—		62,225			27,173			(11,697	)		77,701
		Total revenue		—		271,435			92,294			(11,697	)		352,032
Rental expenses				—		124,685			51,707			—			176,392
Cost of goods sold				—		27,469			10,454			(8,278	)		29,645
		Gross profit		—		119,281			30,133			(3,419	)		145,995
Selling, general and administrative expenses				—		74,391			5,903			—			80,294
		Operating earnings		—		44,890			24,230			(3,419	)		65,701
Interest income				—		621			276			—			897
Interest expense				—		(48,635	)		—			—			(48,635	)
Foreign currency loss				—		(1,788	)		(570	)		—			(2,358	)
		Earnings (loss) before income taxes and equity in earnings of subsidiary		—		(4,912	)		23,936			(3,419	)		15,605
Income taxes				—		(174	)		8,069			(1,419	)		6,476
		Earnings (loss) before equity in earnings of subsidiaries		—		(4,738	)		15,867			(2,000	)		9,129
Equity in earnings of subsidiaries				9,129		15,867			—			(24,996	)		—
		Net earnings	$	9,129	$	11,129		$	15,867		$	(26,996	)	$	9,129

F-40

CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF CASH FLOWS

For the year ended December 31, 2002
(in thousands)

	Kinetic Concepts, Inc. Parent Company Borrower			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Reclassifications and Eliminations			Kinetic Concepts, Inc. and Subsidiaries
Cash flows from operating activities:
Net earnings	$	150,156		$	51,215		$	15,789		$	(67,004	)	$	150,156
Noncash gain on litigation settlement		(173,250	)		—			—			—			(173,250	)
Adjustments to reconcile net earnings to net cash provided by operating activities		22,866			3,991			8,638			63,853			99,348
Net cash provided (used) by operating activities		(228	)		55,206			24,427			(3,151	)		76,254
Cash flows from investing activities:
Additions to property, plant and equipment		—			(31,957	)		(24,499	)		1,910			(54,546	)
Increase in inventory to be converted into equipment for short-term rental		—			(300	)		—			—			(300	)
Dispositions of property, plant and equipment		—			365			1,338			—			1,703
Proceeds from sale of headquarters facility		—			18,232			—			—			18,232
Business acquisitions, net of cash acquired		—			—			(3,596	)		—			(3,596	)
Decrease (increase) in other assets		—			(2,672	)		2,152			—			(520	)
Net cash used by investing activities		—			(16,332	)		(24,605	)		1,910			(39,027	)
Cash flows from financing activities:
Proceeds from notes payable, long-term, capital lease and other obligations		—			16,071			20			—			16,091
Proceeds from the exercise of stock options		9			—			—			—			9
Proceeds (payments) on intercompany investments and advances		(5,506	)		(8,994	)		872			13,628			—
Other		5,725			(4,766	)		7,285			(8,244	)		—
Net cash provided by financing activities:		228			2,311			8,177			5,384			16,100
Effect of exchange rate changes on cash and cash equivalents		—			—			—			959			959
Net increase in cash and cash equivalents		—			41,185			7,999			5,102			54,286
Cash and cash equivalents, beginning of year		—			—			5,301			(5,102	)		199
Cash and cash equivalents, end of year	$	—		$	41,185		$	13,300		$	—		$	54,485

F-41

CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF CASH FLOWS

For the year ended December 31, 2001
(in thousands)

	Kinetic Concepts, Inc. Parent Company Borrower			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Reclassifications and Eliminations			Kinetic Concepts, Inc. and Subsidiaries
Cash flows from operating activities:
Net earnings	$	23,901		$	24,336		$	16,680		$	(41,016	)	$	23,901
Adjustments to reconcile net earnings to net cash provided by operating activities		(23,901	)		(18,699	)		(4,465	)		53,059			5,994
Net cash provided by operating activities		—			5,637			12,215			12,043			29,895
Cash flows from investing activities:
Additions to property, plant and equipment		—			(39,651	)		(6,424	)		2,078			(43,997	)
Increase in inventory to be converted into equipment for short-term rental		—			(2,700	)		—			—			(2,700	)
Dispositions of property, plant and equipment		—			1,392			1,352			—			2,744
Business acquisitions, net of cash acquired		—			—			(80	)		—			(80	)
Increase in other assets		—			(4,069	)		(223	)		—			(4,292	)
Net cash used by investing activities		—			(45,028	)		(5,375	)		2,078			(48,325	)
Cash flows from financing activities:
Proceeds from notes payable, long-term, capital lease and other obligations		—			16,805			—			—			16,805
Proceeds from the exercise of stock options		24			—			—			—			24
Proceeds (payments) on intercompany investments and advances		275			22,626			(2,319	)		(20,582	)		—
Other		(299	)		(40	)		(5,376	)		5,715			—
Net cash provided (used) by financing activities		—			39,391			(7,695	)		(14,867	)		16,829
Effect of exchange rate changes on cash and cash equivalents		—			—			—			(339	)		(339	)
Net decrease in cash and cash equivalents		—			—			(855	)		(1,085	)		(1,940	)
Cash and cash equivalents, beginning of year		—			—			6,156			(4,017	)		2,139
Cash and cash equivalents, end of year	$	—		$	—		$	5,301		$	(5,102	)	$	199

F-42

CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF CASH FLOWS

For the year ended December 31, 2000
(in thousands)

	Kinetic Concepts, Inc. Parent Company Borrower			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Reclassifications and Eliminations			Kinetic Concepts, Inc. and Subsidiaries
Cash flows from operating activities:
Net earnings	$	9,129		$	11,129		$	15,867		$	(26,996	)	$	9,129
Adjustments to reconcile net earnings to net cash provided by operating activities		(9,129	)		17,172			5,441			17,538			31,022
Net cash provided by operating activities		—			28,301			21,308			(9,458	)		40,151
Cash flows from investing activities:
Additions to property, plant and equipment		—			(29,592	)		(8,342	)		6,216			(31,718	)
Increase in inventory to be converted into equipment for short-term rental		—			(300	)		—			—			(300	)
Dispositions of property, plant and equipment		—			487			1,250			—			1,737
Business acquisitions, net of cash acquired		—			(1	)		(426	)		—			(427	)
Increase in other assets		—			(1,002	)		(302	)		—			(1,304	)
Net cash used by investing activities		—			(30,408	)		(7,820	)		6,216			(32,012	)
Cash flows from financing activities:
Repayments of notes payable, long-term, capital lease and other obligations		—			(12,714	)		(1	)		—			(12,715	)
Proceeds (payments) on intercompany investments and advances		350			15,118			(17,027	)		1,559			—
Other		(350	)		(297	)		(183	)		830			—
Net cash provided (used) by financing activities		—			2,107			(17,211	)		2,389			(12,715	)
Effect of exchange rate changes on cash and cash equivalents		—			—			—			(647	)		(647	)
Net decrease in cash and cash equivalents		—			—			(3,723	)		(1,500	)		(5,223	)
Cash and cash equivalents, beginning of year		—			—			9,879			(2,517	)		7,362
Cash and cash equivalents, end of year	$	—		$	—		$	6,156		$	(4,017	)	$	2,139

F-43

Schedule II

KINETIC CONCEPTS, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS

(in thousands)
Three years ended December 31, 2002

Description	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Additions Charged to Other Accounts		Deductions		12/31/00 Balance at End of Period
Allowance for doubtful accounts	$	21,284	$	6,466	$	23	$	7,048	$	20,725
Inventory reserve	$	1,528	$	542	$	—	$	1,306	$	764
Deferred tax asset valuation allowance	$	842	$	—	$	354	$	520	$	676

Description	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Additions Charged to Other Accounts		Deductions		12/31/01 Balance at End of Period
Allowance for doubtful accounts	$	20,725	$	8,932	$	5,031	$	4,157	$	30,531
Inventory reserve	$	764	$	1,612	$	—	$	1,477	$	899
Deferred tax asset valuation allowance	$	676	$	—	$	401	$	414	$	663

Description	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Additions Charged to Other Accounts		Deductions		12/31/02 Balance at End of Period
Allowance for doubtful accounts	$	30,531	$	7,623	$	11,677	$	9,260	$	40,571
Inventory reserve	$	899	$	2,150	$	—	$	1,436	$	1,613
Deferred tax asset valuation allowance	$	663	$	—	$	990	$	47	$	1,606

F-44

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

			June 30, 2003			December 31, 2002
			(unaudited)
ASSETS:
Current assets:
	Cash and cash equivalents		$	102,973		$	54,485
	Accounts receivable, net			159,695			152,896
	Accounts receivable—other			—			175,000
	Inventories, net			33,771			37,934
	Prepaid expenses and other current assets			11,745			9,760
		Total current assets		308,184			430,075
Net property, plant and equipment				123,995			105,549
Loan issuance cost, less accumulated amortization of $13,107 in 2003 and $11,949 in 2002				4,753			5,911
Goodwill				48,796			46,357
Other assets, less accumulated amortization of $7,145 in 2003 and $6,840 in 2002				30,287			30,167
			$	516,015		$	618,059
LIABILITIES AND SHAREHOLDERS' DEFICIT:
Current liabilities:
	Accounts payable		$	12,377		$	11,156
	Accrued expenses			79,732			61,556
	Current installments of long-term obligations			13,939			30,550
	Current installments of capital lease obligations			151			157
	Derivative financial instruments			1,914			1,341
	Income taxes payable			34,897			14,615
	Current deferred income taxes			—			66,838
		Total current liabilities		143,010			186,213
Long-term obligations, net of current installments				394,737			491,300
Capital lease obligations, net of current installments				19			95
Deferred income taxes, net				7,475			9,501
Deferred gain, sale of headquarters facility				9,503			10,023
Other noncurrent liabilities				213			1,363
				554,957			698,495
Shareholders' deficit:
	Common stock; issued and outstanding 71,123 in 2003 and 70,928 in 2002			71			71
	Retained deficit			(39,425	)		(76,216	)
	Accumulated other comprehensive income (loss)			412			(4,291	)
				(38,942	)		(80,436	)
			$	516,015		$	618,059

See accompanying notes to condensed consolidated financial statements.

F-45

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
(unaudited)

				Three Months Ended June 30,						Six Months Ended June 30,
				2003			2002			2003			2002
Revenue:
	Rental and service			$	140,854		$	107,595		$	270,296		$	209,010
	Sales and other				41,611			29,513			78,753			55,239
		Total revenue			182,465			137,108			349,049			264,249
Rental expenses					87,499			66,625			166,459			128,415
Cost of goods sold					14,713			11,764			28,358			21,369
		Gross profit			80,253			58,719			154,232			114,465
Selling, general and administrative expenses					44,489			32,571			85,395			63,763
		Operating earnings			35,764			26,148			68,837			50,702
Interest income					347			99			747			109
Interest expense					(8,050	)		(10,384	)		(16,228	)		(20,692	)
Foreign currency gain					2,368			2,992			4,156			2,448
		Earnings before income taxes			30,429			18,855			57,512			32,567
Income taxes					11,411			7,259			21,567			12,538
		Net earnings		$	19,018		$	11,596		$	35,945		$	20,029
		Basic earnings per common share		$	0.27		$	0.16		$	0.51		$	0.28
		Diluted earnings per common share		$	0.25		$	0.15		$	0.47		$	0.26
		Average common shares:
			Basic (weighted average outstanding shares)		71,070			70,926			71,032			70,926
			Diluted (weighted average outstanding shares)		77,236			77,683			76,904			77,688

See accompanying notes to condensed consolidated financial statements.

F-46

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

				Six Months Ended June 30,
				2003			2002
Cash flows from operating activities:
	Net earnings			$	35,945		$	20,029
	Adjustments to reconcile net earnings to net cash provided by operating activities:
		Depreciation			20,529			15,486
		Amortization			1,462			2,177
		Provision for uncollectible accounts receivable			3,527			4,861
		Amortization of deferred gain on sale/leaseback of headquarters facility			(521	)		—
	Change in assets and liabilities net of effects from purchase of subsidiaries and unusual items:
		Increase in accounts receivable, net			(10,342	)		(20,580	)
		Decrease in other accounts receivable			175,000			—
		Decrease (increase) in inventories			4,148			(498	)
		Increase in prepaid expenses and other current assets			(1,979	)		(851	)
		Increase in accounts payable			1,218			1,039
		Increase (decrease) in accrued expenses			18,100			(4,331	)
		Increase in income taxes payable			20,282			7,952
		Decrease in current deferred income taxes			(66,838	)		—
		Decrease in deferred income taxes, net			(1,826	)		(1,357	)
			Net cash provided by operating activities		198,705			23,927
Cash flows from investing activities:
	Additions to property, plant and equipment				(34,381	)		(30,500	)
	Decrease (increase) in inventory to be converted into equipment for short-term rental				(1,300	)		1,100
	Dispositions of property, plant and equipment				634			1,799
	Business acquisitions, net of cash acquired				(2,224	)		(3,596	)
	Increase in other assets				(425	)		(1,172	)
			Net cash used by investing activities		(37,696	)		(32,369	)
Cash flows from financing activities:
	Proceeds from (repayment of) notes payable, long term capital lease and other obligations				(114,856	)		17,088
	Proceeds from exercise of stock options				846			8
		Net cash provided (used) by financing activities			(114,010	)		17,096
Effect of exchange rate changes on cash and cash equivalents					1,489			515
Net increase in cash and cash equivalents					48,488			9,169
Cash and cash equivalents, beginning of period					54,485			199
Cash and cash equivalents, end of period				$	102,973		$	9,368
Supplemental disclosure of cash flow information:
	Cash paid during the first six months for:
		Interest		$	14,903		$	19,526
		Income taxes		$	69,392		$	9,756

See accompanying notes to condensed consolidated financial statements.

F-47

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

        The financial statements presented herein include the accounts of Kinetic Concepts, Inc., together with our consolidated subsidiaries ("KCI"). The unaudited condensed consolidated financial statements appearing in this quarterly report on Form 10-Q should be read in conjunction with the financial statements and notes thereto included in KCI's latest annual report on Form 10-K. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information necessary for a fair presentation of results of operations, financial position and cash flows in conformity with accounting principles generally accepted in the United States. Operating results from interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. In our opinion, the consolidated financial statements reflect all adjustments considered necessary for a fair presentation of our results for the periods presented. Certain reclassifications of amounts related to the prior year have been made to conform with the 2003 presentation.

(b) Stock Options

        We use the intrinsic value method in accounting for our stock option plan. In the first six months of 2003 and 2002, compensation costs of approximately $1.7 million and $340,000, respectively, net of estimated taxes, have been recognized in the financial statements related to this plan. If the compensation cost for our stock-based employee compensation plan had been determined based upon a fair value method consistent with Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation," our net earnings and earnings per share would have been decreased to the pro forma amounts indicated below. For purposes of pro forma disclosures, the estimated fair value of the options is recognized as an expense over the options' respective vesting periods. Our pro forma calculations are as follows (dollars in thousands, except for earnings per share information):

		Three Months Ended June 30,				Six Months Ended June 30,
		2003		2002		2003		2002
Net earnings as reported		$	19,018	$	11,596	$	35,945	$	20,029
Pro forma net earnings		$	18,617	$	11,225	$	35,170	$	19,295
Earnings per share as reported
	Basic earnings per common share	$	0.27	$	0.16	$	0.51	$	0.28
	Diluted earnings per common share	$	0.25	$	0.15	$	0.47	$	0.26
Pro forma earnings per share
	Basic earnings per common share	$	0.26	$	0.16	$	0.50	$	0.27
	Diluted earnings per common share	$	0.24	$	0.14	$	0.46	$	0.25

        We are not required to apply, and have not applied, the method of accounting prescribed by SFAS 123 to stock options granted prior to January 1, 1995. Moreover, the pro forma compensation cost reflected above may not be representative of future expense.

F-48

(c) Other New Accounting Pronouncements

        In June 2001, the Financial Accounting Standards Board, or ("FASB") issued SFAS 143, "Accounting for Asset Retirement Obligations," effective for fiscal years beginning after June 15, 2002. This standard addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The standard requires us to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and to adjust its present value in each subsequent period. In addition, we must capitalize an amount equal to the adjustment by increasing the carrying amount of the related long-lived asset, which is depreciated over the remaining useful life of the related asset. We adopted SFAS 143 during the first quarter of 2003 and it did not have a significant effect on our financial position or results of operations.

        In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities," effective for fiscal years or interim periods beginning after June 15, 2003. FIN 46 addresses accounting for, and disclosure of, variable interest entities. FIN 46 requires the disclosure of the nature, purpose and exposure of any loss related to our involvement with variable interest entities. We adopted the provisions of FIN 46 for post January 31, 2003 variable interest entities during the first quarter of 2003 and it did not have a significant effect on our financial position or results of operations. We continue to evaluate the potential effects of the consolidation provisions of FIN 46 that will be adopted during the quarter ended September 30, 2003.

        Specifically, we are evaluating the beneficial ownership of two Grantor Trusts which we acquired in December 1996 and December 1994. The assets held by each Trust consist of a McDonnell Douglas DC-10 aircraft and three engines. In connection with the acquisitions, KCI paid cash of $7.2 million and $7.6 million, respectively. The Trusts held debt of $48.4 million and $51.8 million, respectively, which is non-recourse to KCI. The DC-10 aircraft are leased to the Federal Express Corporation through June 2012 and January 2012, respectively. Federal Express pays monthly rent to a third party who, in turn, pays the entire amount to the holders of the non-recourse indebtedness, which is secured by the aircraft. The holder's recourse in event of a default is limited to the Trusts assets.

        In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149 ("SFAS 149"), "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This statement amends SFAS 133 to provide clarification on the financial accounting and reporting of derivative instruments and hedging activities and requires contracts with similar characteristics to be accounted for on a comparable basis. We do not expect the adoption of SFAS 149, which will be effective for contracts entered into or modified after June 30, 2003, to have a material effect on our financial condition or results of operations.

        On May 15, 2003, the FASB issued SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." The statement established standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. SFAS 150 must be applied immediately to instruments entered into or modified after May 31, 2003. We have adopted SFAS 150 and have determined it will not have a material impact on our financial position or results of operations.

F-49

(d) Other Significant Accounting Policies

        For further information, see Note 1 to the consolidated financial statements included in KCI's Annual Report on Form 10-K for the year ended December 31, 2002.

(2)    ACQUISITIONS

        On May 23, 2003, we acquired all of the outstanding capital stock of MedClaim Inc., a North Carolina corporation, for approximately $2.2 million in cash, net of cash acquired, and other consideration of $450,000. MedClaim Inc. processed Medicare Part B insurance claims for us and continues to act in that capacity. The operating results of MedClaim Inc. did not have a material impact, and we do not anticipate that the acquisition will have a material impact, on KCI's results of operations.

(3)    ACCOUNTS RECEIVABLE COMPONENTS

        Accounts receivable consist of the following (dollars in thousands):

			June 30, 2003			December 31, 2002
Trade accounts receivable:
	Facilities/dealers		$	98,464		$	91,756
	Third party payers:
		Medicare/Medicaid		34,103			31,721
		Managed care, insurance and other		57,647			53,229
				190,214			176,706
Medicare V.A.C. receivables prior to October 1, 2000				14,191			14,351
Employee and other receivables				1,784			2,410
				206,189			193,467
Less: Allowance for doubtful accounts				(32,303	)		(26,220	)
	Allowance for Medicare V.A.C. receivables prior to October 1, 2000			(14,191	)		(14,351	)
			$	159,695		$	152,896

F-50

(4)    INVENTORY COMPONENTS

        Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value). Inventories are comprised of the following (dollars in thousands):

		June 30, 2003			December 31, 2002
Finished goods		$	14,400		$	16,411
Work in process			2,792			2,411
Raw materials, supplies and parts			31,598			31,825
			48,790			50,647
Less: Amounts expected to be converted into equipment for short-term rental			(12,400	)		(11,100	)
	Reserve for excess and obsolete inventory		(2,619	)		(1,613	)
		$	33,771		$	37,934

(5)    LONG-TERM OBLIGATIONS AND DERIVATIVE FINANCIAL INSTRUMENTS

        Long-term obligations consist of the following (dollars in thousands):

			June 30, 2003			December 31, 2002
Senior Credit Facility:
	Term loans:
		Tranche A due 2003	$	11,742		$	27,500
		Tranche B due 2004		57,068			85,500
		Tranche C due 2005		57,068			85,500
		Tranche D due 2006		62,470			93,575
		Tranche E due 2005		19,878			29,775
	Revolving bank credit facility			—			—
				208,226			321,850
95/8% Senior Subordinated Notes due 2007				200,000			200,000
MedClaims note payable				450			—
				408,676			521,850
Less current installments				(13,939	)		(30,550	)
			$	394,737		$	491,300

        In January 2003, we received $175 million pursuant to the settlement of our antitrust lawsuit with Hillenbrand Industries (see Note 9 for additional discussion). The cash received, net of approximately $66 million of income taxes and approximately $2 million of fees and expenses, was used to pay down $107 million of indebtedness on the senior credit facility.

        As of June 30, 2003, we had no revolving loans outstanding. However, we had outstanding five letters of credit in the aggregate amount of $11.3 million. The resulting availability under the revolving credit facility was $38.7 million at the end of the quarter.

F-51

Interest Rate Protection

        We follow SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," and its amendments, SFAS 137 and 138, in accounting for our derivative instruments. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at fair value. We have designated our interest rate swap agreements as cash flow hedge instruments. The swap agreements are used to manage exposure to interest rate movement by effectively changing the variable interest rate to a fixed rate. The critical terms of the interest rate swap agreements and the interest-bearing debt associated with the swap agreements must be the same to qualify for the shortcut method of accounting. Changes in the effective portion of the fair value of the interest rate swap agreement will be recognized in other comprehensive income, net of tax effects, until the hedged item is recognized into earnings.

        The following chart summarizes interest rate hedge transactions effective during the first six months of 2003 (dollars in thousands):

Accounting Method	Effective Dates	Nominal Amount		Fixed Interest Rate		Status
Shortcut	12/31/02-12/31/03	$	80,000	1.745	%	Outstanding
Shortcut	12/31/02-12/31/04	$	100,000	2.375	%	Outstanding

        As of December 31, 2002, two $100 million interest rate swap agreements were in effect to take advantage of low interest rates. On January 31, 2003, we sold $20 million of our $100 million, 1.7450% interest rate swap effective March 31, 2003 which resulted in an expense of approximately $74,000 which was recorded in the first quarter of 2003. As of June 30, 2003, the current interest rate swap agreements effectively fix the base-borrowing rate on 86% of our variable rate debt. The fair value of these swaps at inception was zero. Due to subsequent movements in interest rates, as of June 30, 2003, the fair values of the $80 million and $100 million swap agreements were negative and were adjusted to reflect a liability of approximately $300,000 and $1.6 million, respectively. As a result of interest rate protection agreements in effect during the first six months of 2003 and 2002, we recorded interest expense of approximately $770,000 and $1.3 million, respectively. (See Note 8.)

F-52

(6)    EARNINGS PER SHARE

        The following table sets forth the reconciliation from basic to diluted average common shares and the calculations of net earnings per common share. Net earnings for basic and diluted calculations do not differ (dollars in thousands, except per share data): (See Note 1 (b).)

		Three Months Ended June 30,				Six Months Ended June 30,
		2003		2002		2003		2002
Net earnings		$	19,018	$	11,596	$	35,945	$	20,029
Average common shares:
	Basic (weighted-average outstanding shares)		71,070		70,926		71,032		70,926
	Dilutive potential common shares from stock options		6,166		6,757		5,872		6,762
	Diluted (weighted-average outstanding shares)		77,236		77,683		76,904		77,688
Basic earnings per common share		$	0.27	$	0.16	$	0.51	$	0.28
Diluted earnings per common share		$	0.25	$	0.15	$	0.47	$	0.26

(7)    STOCK PLANS

        In May 2003, our Board of Directors approved the 2003 Non-Employee Directors Stock Plan (the "Directors Stock Plan"). Grants under this plan shall be made to non-employee directors of the company. The maximum aggregate number of shares of Common Stock that may be issued in connection with grants under the Directors Stock Plan is 400,000 shares, subject to adjustment as provided for in the plan. The exercise price of options granted under this plan is determined as the fair market value, as determined by our Board of Directors, of the shares of the Company's common stock on the date that such option is granted. The options granted will vest and become exercisable incrementally over a period of three years. The right to exercise an option shall terminate seven years after the grant date, unless sooner as provided for in the plan. The Directors Stock Plan is administered by a committee of the Board of Directors.

F-53

(8)    OTHER COMPREHENSIVE INCOME

        The components of other comprehensive income are as follows (dollars in thousands):

	Three Months Ended June 30,
	2003			2002
Net earnings	$	19,018		$	11,596
Foreign currency translation adjustment		3,747			4,238
Net derivative loss, net of taxes of $206 in 2003 and $394 in 2002		(383	)		(732	)
Reclassification adjustment for losses included in income, net of taxes of $129 in 2003 and $206 in 2002		238			383
Reclassification adjustment for loss recognized on termination of interest rate swap, net of taxes of $70 in 2002		—			(130	)
Other comprehensive income	$	22,620		$	15,355
	Six Months Ended June 30,
	2003			2002
Net earnings	$	35,945		$	20,029
Foreign currency translation adjustment		5,076			3,492
Net derivative loss, net of taxes of $470 in 2003 and $194 in 2002		(874	)		(361	)
Reclassification adjustment for losses included in income, net of taxes of $270 in 2003 and $438 in 2002		501			813
Reclassification adjustment for loss recognized on termination of interest rate swap, net of taxes of $148 in 2002		—			(258	)
Other comprehensive income	$	40,648		$	23,715

        The earnings associated with certain of our foreign affiliates are considered to be permanently invested and no provision for U.S. federal and state income taxes on these earnings or translation adjustments has been made.

        As of June 30, 2003, derivative financial instruments valued at a liability of $1.9 million were recorded as a result of our adoption of SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." This liability is based upon the valuation of our interest rate protection agreements associated with our Senior Credit Facility. (See Note 5.)

(9)    COMMITMENTS AND CONTINGENCIES

        During the fourth quarter of 2002, we recorded a gain from the settlement of an antitrust lawsuit with Hillenbrand Industries, Inc. and Hill-Rom Company, Inc., a wholly-owned subsidiary of Hillenbrand (together, "Hillenbrand"). Under the settlement, Hillenbrand agreed to pay KCI $250 million in two payments. In January 2003, we received the first installment of $175 million pursuant to the settlement. Net of fees and expenses of $1.7 million, this transaction added $173.3 million of pretax income and $106.4 million of net income to the 2002 fourth quarter results. The cash received, net of approximately $66 million of income taxes and approximately $2 million in

F-54

fees and expenses, was used to pay down $107 million of indebtedness on the senior credit facility. Hillenbrand will pay to KCI an additional $75 million in January 2004, subject to certain conditions. No accrual has been made related to this payment.

        Other than commitments for new product inventory, including disposable "for sale" products of $16.9 million, we have no material long-term capital commitments.

(10)    SEGMENT AND GEOGRAPHIC INFORMATION

        We are principally engaged in the rental and sale of innovative therapeutic devices and systems throughout the United States and in 15 primary countries internationally.

        We define our business segments based on geographic management responsibility. We have two reportable segments: USA, which includes operations in the United States, and International, which includes operations for all international units. We measure segment profit as operating earnings, which is defined as income before interest income or expense, foreign currency gains and losses and income taxes. All intercompany transactions are eliminated in computing revenue, operating earnings and assets. The prior years have been made to conform with the 2003 presentation. Information on segments and a reconciliation of consolidated totals are as follows (dollars in thousands):

					Three Months Ended June 30,						Six Months Ended June 30,
					2003			2002			2003			2002
Revenue:
	USA				$	137,631		$	106,022		$	264,840		$	205,377
	International					44,834			31,086			84,209			58,872
		Revenue			$	182,465		$	137,108		$	349,049		$	264,249
Operating Earnings:
	USA				$	47,213		$	33,056		$	91,735		$	65,139
	International					6,657			4,572			11,104			8,648
	Other(1):
		Executive				(5,316	)		(3,151	)		(9,339	)		(4,958	)
		Finance				(5,051	)		(3,907	)		(9,924	)		(7,578	)
		Manufacturing/Engineering				(1,102	)		(1,570	)		(2,259	)		(3,659	)
		Administration				(6,637	)		(2,852	)		(12,480	)		(6,890	)
			Total Other			(18,106	)		(11,480	)		(34,002	)		(23,085	)
				Operating earnings	$	35,764		$	26,148		$	68,837		$	50,702

(1)

Other includes general headquarter expenses which are not allocated to the individual segments and are included in selling, general and administrative expenses within our Condensed Consolidated Statements of Earnings.

F-55

(11)    SUBSEQUENT EVENT

        On July 11, 2003, we announced that we entered into a commitment letter with Morgan Stanley Senior Funding, Inc. and Credit Suisse First Boston for a new senior secured credit facility. The new facility would be composed of a $480 million term loan and a $100 million revolving credit facility. We expect to borrow $480 million under the new term loan facility and to use the proceeds from the new credit facility as part of a recapitalization of KCI, which is expected to result in the redemption of all of our outstanding 9?% Senior Subordinated Notes Due 2007 and the repayment of outstanding indebtedness under our existing credit facility. The closing of the new credit facility is expected to occur in mid-August 2003, but is subject to a number of important conditions. There can be no assurance that these conditions will be satisfied or that the terms described above will not change.

(12)    GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

        In November of 1997, Kinetic Concepts, Inc. issued $200 million in subordinated debt securities to finance a tender offer to purchase certain of our common shares outstanding. In connection with the issuance of these securities, certain of our wholly owned subsidiaries (the "guarantor subsidiaries") act as guarantors. Certain other subsidiaries (the "non-guarantor subsidiaries") do not guarantee the debt. The guarantor subsidiaries are wholly owned by KCI and the guarantees are full, unconditional, joint and several. We have not presented separate financial statements and other disclosures concerning the Subsidiary Guarantors because management has determined that such information is not material to investors.

        Our indebtedness under the existing senior credit facility is guaranteed by certain of our subsidiaries and is secured by a first priority security interest in (1) all of our tangible and intangible assets and those of our domestic subsidiaries (subject to certain customary exceptions), including, without limitation, intellectual property and real estate owned by us and our subsidiaries, and (2) substantially all shares of capital stock and intercompany debt of each of our present and future subsidiaries (limited in the case of certain foreign subsidiaries to 65% of the voting stock of such entity). The senior credit facility contains covenants which, among other things, limit the incurrence of additional indebtedness, investments, dividends, loans and advances, capital expenditures, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, prepayments of other indebtedness, liens and encumbrances and other matters customarily restricted in such agreements. The net assets of the guarantor subsidiaries are detailed on the following tables.

        The following tables present the condensed consolidating balance sheets of Kinetic Concepts, Inc. as a parent company, our guarantor subsidiaries and our non-guarantor subsidiaries as of June 30, 2003 and December 31, 2002 and the related condensed consolidating statements of earnings for the three-and six-month periods ended June 30, 2003 and 2002, and the condensed consolidating statements of cash flows for the six-month periods ended June 30, 2003 and 2002, respectively.

F-56

			Kinetic Concepts, Inc. Parent Company Borrower			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Reclassifications and Eliminations			Kinetic Concepts, Inc. and Subsidiaries
ASSETS:
Current assets:
	Cash and cash equivalents		$	—		$	81,676		$	21,297	$	—		$	102,973
	Accounts receivable, net			—			129,682			40,097		(10,084	)		159,695
	Inventories, net			—			16,813			16,958		—			33,771
	Prepaid expenses and other current assets			—			5,929			5,816		—			11,745
		Total current assets		—			234,100			84,168		(10,084	)		308,184
	Net property, plant and equipment			—			107,042			30,779		(13,826	)		123,995
	Loan issuance cost, net			—			4,753			—		—			4,753
	Goodwill			—			41,205			7,591		—			48,796
	Other assets, net			—			31,527			20,260		(21,500	)		30,287
	Intercompany investments and advances			(38,195	)		423,847			8,038		(393,690	)		—
			$	(38,195	)	$	842,474		$	150,836	$	(439,100	)	$	516,015
LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT):
Current liabilities:
	Accounts payable		$	—		$	7,894		$	4,483	$	—		$	12,377
	Accrued expenses			747			63,092			15,893		—			79,732
	Current installments of long-term obligations			—			13,939			—		—			13,939
	Current installments of capital lease obligations			—			151			—		—			151
	Intercompany payables			—			23,788			—		(23,788	)		—
	Derivative financial instruments			—			1,914			—		—			1,914
	Income taxes payable			—			32,301			2,596		—			34,897
		Total current liabilities		747			143,079			22,972		(23,788	)		143,010
Long-term obligations, net of current installments				—			394,737			—		—			394,737
Capital lease obligations, net of current installments				—			3			16		—			19
Intercompany payables, non current				—			(21,500	)		21,500		—			—
Deferred income taxes, net				—			7,596			—		(121	)		7,475
Deferred gain, sale of headquarters facility				—			9,503			—		—			9,503
Other noncurrent liabilities				—			21,713			—		(21,500	)		213
				747			555,131			44,488		(45,409	)		554,957
Shareholders' equity (deficit)				(38,942	)		287,343			106,348		(393,691	)		(38,942	)
			$	(38,195	)	$	842,474		$	150,836	$	(439,100	)	$	516,015

F-57

			Kinetic Concepts, Inc. Parent Company Borrower			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Reclassifications and Eliminations			Kinetic Concepts, Inc. and Subsidiaries
ASSETS:
Current assets:
	Cash and cash equivalents		$	—		$	41,185		$	13,300	$	—		$	54,485
	Accounts receivable, net			—			125,106			35,612		(7,822	)		152,896
	Accounts receivable—other			175,000			—			—		—			175,000
	Inventories, net			—			20,113			17,821		—			37,934
	Prepaid expenses and other current assets			—			6,377			3,383		—			9,760
		Total current assets		175,000			192,781			70,116		(7,822	)		430,075
Net property, plant and equipment				—			96,458			23,516		(14,425	)		105,549
Loan issuance cost, net				—			5,911			—		—			5,911
Goodwill				—			38,724			7,633		—			46,357
Other assets, net				—			31,420			20,247		(21,500	)		30,167
Intercompany investments and advances				(187,076	)		508,045			23,447		(344,416	)		—
			$	(12,076	)	$	873,339		$	144,959	$	(388,163	)	$	618,059
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT):
Current liabilities:
	Accounts payable		$	—		$	4,632		$	6,524	$	—		$	11,156
	Accrued expenses			1,522			46,058			13,976		—			61,556
	Current installments of long-term obligations			—			30,550			—		—			30,550
	Current installments of capital lease obligations			—			157			—		—			157
	Intercompany payables			—			22,497			—		(22,497	)		—
	Derivative financial instruments			—			1,341			—		—			1,341
	Income taxes payable			—			8,615			6,000		—			14,615
	Current deferred income taxes			66,838			—			—		—			66,838
		Total current liabilities		68,360			113,850			26,500		(22,497	)		186,213
Long-term obligations, net of current installments				—			491,300			—		—			491,300
Capital lease obligations, net of current installments				—			75			20		—			95
Intercompany payables, noncurrent				—			(21,500	)		21,500		—			—
Deferred income taxes, net				—			9,251			—		250			9,501
Deferred gain, sale of headquarters facility				—			10,023			—		—			10,023
Other noncurrent liabilities				—			22,863			—		(21,500	)		1,363
				68,360			625,862			48,020		(43,747	)		698,495
Shareholders' equity (deficit)				(80,436	)		247,477			96,939		(344,416	)		(80,436	)
			$	(12,076	)	$	873,339		$	144,959	$	(388,163	)	$	618,059

F-58

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF EARNINGS

For the Three Months Ended June 30, 2003
(in thousands)
(unaudited)

			Kinetic Concepts, Inc. Parent Company Borrower		Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Reclassifications and Eliminations			Historical Kinetic Concepts, Inc. and Subsidiaries
Revenue:
	Rental and service		$	—	$	110,928		$	29,926	$	—		$	140,854
	Sales and other			—		32,994			14,890		(6,273	)		41,611
		Total revenue		—		143,922			44,816		(6,273	)		182,465
Rental expenses				—		59,894			27,605		—			87,499
Cost of goods sold				—		12,820			5,099		(3,206	)		14,713
		Gross profit		—		71,208			12,112		(3,067	)		80,253
Selling, general and administrative expenses				—		40,366			4,123		—			44,489
		Operating earnings		—		30,842			7,989		(3,067	)		35,764
Interest income				—		331			16		—			347
Interest expense				—		(8,050	)		—		—			(8,050	)
Foreign currency gain				—		2,022			346		—			2,368
	Earnings before income taxes and equity in earnings of subsidiaries			—		25,145			8,351		(3,067	)		30,429
Income taxes				—		10,312			2,248		(1,149	)		11,411
	Earnings before equity in earnings of subsidiaries			—		14,833			6,103		(1,918	)		19,018
	Equity in earnings of subsidiaries			19,018		6,102			—		(25,120	)		—
	Net earnings		$	19,018	$	20,935		$	6,103	$	(27,038	)	$	19,018

F-59

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF EARNINGS

For the Three Months Ended June 30, 2002
(in thousands)
(unaudited)

			Kinetic Concepts, Inc. Parent Company Borrower		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Reclassifications and Eliminations			Historical Kinetic Concepts, Inc. and Subsidiaries
Revenue:
	Rental and service		$	—	$	86,757		$	20,838		$	—		$	107,595
	Sales and other			—		25,068			10,456			(6,011	)		29,513
		Total revenue		—		111,825			31,294			(6,011	)		137,108
Rental expenses				—		47,810			18,815			—			66,625
Cost of goods sold				—		11,736			3,950			(3,922	)		11,764
		Gross profit		—		52,279			8,529			(2,089	)		58,719
Selling, general and administrative expenses				—		29,584			2,987			—			32,571
		Operating earnings		—		22,695			5,542			(2,089	)		26,148
Interest income				—		19			80			—			99
Interest expense				—		(10,384	)		—			—			(10,384	)
Foreign currency gain (loss)				—		3,024			(32	)		—			2,992
	Earnings before income taxes and equity in earnings of subsidiaries			—		15,354			5,590			(2,089	)		18,855
Income taxes				—		6,075			1,988			(804	)		7,259
	Earnings before equity in earnings of subsidiaries			—		9,279			3,602			(1,285	)		11,596
	Equity in earnings of subsidiaries			11,596		3,602			—			(15,198	)		—
	Net earnings		$	11,596	$	12,881		$	3,602		$	(16,483	)	$	11,596

F-60

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF EARNINGS

For the Six Months Ended June 30, 2003
(in thousands)
(unaudited)

			Kinetic Concepts, Inc. Parent Company Borrower		Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Reclassifications and Eliminations			Historical Kinetic Concepts, Inc. and Subsidiaries
Revenue:
	Rental and service		$	—	$	214,078		$	56,218	$	—		$	270,296
	Sales and other			—		64,311			27,941		(13,499	)		78,753
		Total revenue		—		278,389			84,159		(13,499	)		349,049
Rental expenses				—		114,151			52,308		—			166,459
Cost of goods sold				—		25,958			9,626		(7,226	)		28,358
		Gross profit		—		138,280			22,225		(6,273	)		154,232
Selling, general and administrative expenses				—		76,621			8,774		—			85,395
		Operating earnings		—		61,659			13,451		(6,273	)		68,837
Interest income				—		670			77		—			747
Interest expense				—		(16,228	)		—		—			(16,228	)
Foreign currency gain				—		3,544			612		—			4,156
	Earnings before income taxes and equity in earnings of subsidiaries			—		49,645			14,140		(6,273	)		57,512
Income taxes				—		20,106			3,813		(2,352	)		21,567
	Earnings before equity in earnings of subsidiaries			—		29,539			10,327		(3,921	)		35,945
	Equity in earnings of subsidiaries			35,945		10,326			—		(46,271	)		—
	Net earnings		$	35,945	$	39,865		$	10,327	$	(50,192	)	$	35,945

F-61

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF EARNINGS

For the Six Months Ended June 30, 2002
(in thousands)
(unaudited)

			Kinetic Concepts, Inc. Parent Company Borrower		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Reclassifications and Eliminations			Historical Kinetic Concepts, Inc. and Subsidiaries
Revenue:
	Rental and service		$	—	$	169,507		$	39,503		$	—		$	209,010
	Sales and other			—		46,687			19,738			(11,186	)		55,239
		Total revenue		—		216,194			59,241			(11,186	)		264,249
Rental expenses				—		92,983			35,432			—			128,415
Cost of goods sold				—		21,399			7,034			(7,064	)		21,369
		Gross profit		—		101,812			16,775			(4,122	)		114,465
Selling, general and administrative expenses				—		58,104			5,659			—			63,763
		Operating earnings		—		43,708			11,116			(4,122	)		50,702
Interest income				—		21			88			—			109
Interest expense				—		(20,692	)		—			—			(20,692	)
Foreign currency gain (loss)				—		2,559			(111	)		—			2,448
	Earnings before income taxes and equity in earnings of subsidiaries			—		25,596			11,093			(4,122	)		32,567
Income taxes				—		10,341			3,784			(1,587	)		12,538
	Earnings before equity in earnings of subsidiaries			—		15,255			7,309			(2,535	)		20,029
	Equity in earnings of subsidiaries			20,029		7,309			—			(27,338	)		—
	Net earnings		$	20,029	$	22,564		$	7,309		$	(29,873	)	$	20,029

F-62

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2003
(in thousands)
(unaudited)

	Kinetic Concepts, Inc. Parent Company Borrower			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Reclassifications and Eliminations			Kinetic Concepts, Inc. and Subsidiaries
Cash flows from operating activities:
Net earnings	$	35,945		$	39,865		$	10,327		$	(50,192	)	$	35,945
Adjustments to reconcile net earnings to net cash provided by operating activities		71,441			46,566			(3,122	)		47,875			162,760
Net cash provided by operating activities		107,386			86,431			7,205			(2,317	)		198,705
Cash flows from investing activities:
Additions to property, plant and equipment		—			(20,121	)		(13,949	)		(311	)		(34,381	)
Increase in inventory to be converted into equipment for short-term rental		—			(1,300	)		—			—			(1,300	)
Dispositions of property, plant and equipment		—			410			224			—			634
Businesses acquisitions, net of cash acquired		—			(2,224	)		—			—			(2,224	)
Increase in other assets		—			(454	)		29			—			(425	)
Net cash used by investing activities		—			(23,689	)		(13,696	)		(311	)		(37,696	)
Cash flows from financing activities:
Repayments of notes payable, long-term, capital lease and other obligations		—			(114,852	)		(4	)		—			(114,856	)
Proceeds from the exercise of stock options		846			—			—			—			846
Proceeds from (repayments of) intercompany investments and advances		(112,936	)		95,816			15,485			1,635			—
Other		4,704			(3,215	)		(993	)		(496	)		—
Net cash provided (used) by financing activities		(107,386	)		(22,251	)		14,488			1,139			(114,010	)
Effect of exchange rate changes on cash and cash equivalents		—			—			—			1,489			1,489
Net increase in cash and cash equivalents		—			40,491			7,997			—			48,488
Cash and cash equivalents, beginning of period		—			41,185			13,300			—			54,485
Cash and cash equivalents, end of period	$	—		$	81,676		$	21,297		$	—		$	102,973

F-63

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2002
(in thousands)
(unaudited)

	Kinetic Concepts, Inc. Parent Company Borrower			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Reclassifications and Eliminations			Kinetic Concepts, Inc. and Subsidiaries
Cash flows from operating activities:
Net earnings	$	20,029		$	22,564		$	7,309		$	(29,873	)	$	20,029
Adjustments to reconcile net earnings to net cash provided by operating activities		(20,029	)		6,961			(3,864	)		20,830			3,898
Net cash provided by operating activities		—			29,525			3,445			(9,043	)		23,927
Cash flows from investing activities:
Additions to property, plant and equipment		—			(19,694	)		(11,815	)		1,009			(30,500	)
Decrease in inventory to be converted into equipment for short-term rental		—			1,100			—			—			1,100
Dispositions of property, plant and equipment		—			1,130			669			—			1,799
Business acquisitions, net of cash acquired		—			—			(3,596	)		—			(3,596	)
Increase in other assets		—			(737	)		(435	)		—			(1,172	)
Net cash used by investing activities		—			(18,201	)		(15,177	)		1,009			(32,369	)
Cash flows from financing activities:
Proceeds from notes payable, long-term, capital lease and other obligations		—			17,076			—			12			17,088
Proceeds from exercise of stock options		8			—			12			(12	)		8
Proceeds (borrowings) on intercompany investments and advances		(5,691	)		(21,698	)		8,923			18,466			—
Other		5,683			(5,168	)		5,330			(5,845	)		—
Net cash provided (used) by financing activities		—			(9,790	)		14,265			12,621			17,096
Effect of exchange rate changes on cash and cash equivalents		—			—			—			515			515
Net increase in cash and cash equivalents		—			1,534			2,533			5,102			9,169
Cash and cash equivalents, beginning of period		—			—			5,301			(5,102	)		199
Cash and cash equivalents, end of period	$	—		$	1,534		$	7,834		$	—		$	9,368

F-64

PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 20. Indemnification of Directors and Officers and Limitation of Liability

Kinetic Concepts, Inc.

        Texas Law, our Restated Articles of Incorporation and our Second Amended and Restated By-Laws contain provisions for indemnification of our directors and officers.

        Article 2.02-1 of the Texas Business Corporation Act, or TBCA, provides generally that a person sued as a director, officer, employee or agent of a corporation, or while serving at the request of the corporation as a director, officer, partner, employee, agent, or similar functionary of another enterprise, may be indemnified by the corporation against judgments, penalties, fines, settlements and reasonable expenses if it is determined that such person has conducted himself in good faith and it is reasonably believed, in the case of conduct in his official capacity with the corporation, that his conduct was in the corporation's best interests, and in all other cases, that his conduct was at least not opposed to the corporation's best interests (and, in the case of any criminal proceeding, had no reasonable cause to believe his conduct was unlawful). Indemnification of a person found liable to the corporation or found liable on the basis that personal benefit was improperly received by him is limited to reasonable expenses actually incurred by the person in connection with the proceeding, and shall not be made if the person is found liable for willful or intentional misconduct in the performance of his duty to the corporation. Indemnification is mandatory, however, in the case of such person being wholly successful, on the merits or otherwise, in the defense of the proceeding.

        Article 2.02-1 also authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation or who is or was serving at the request of the corporation as a director, officer, employee, agent or similar functionary of another entity or enterprise against any liability asserted against him and incurred by him in such a capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against that liability under Article 2.02-1.

        Article 1302-7.06 of the Texas Miscellaneous Corporation Laws Act provides that a corporation's articles of incorporation may limit or eliminate the directors' liability for monetary damages to the corporation or its shareholders for an act or omission in the director's capacity as a director, except that no limitation or elimination of liability is permitted to the extent the director is found liable for a breach of the duty of loyalty, an act or omission not in good faith or that involves intentional misconduct or a knowing violation of the law, a transaction involving an improper personal benefit to the director, or an act or omission for which liability is expressly provided by an applicable statute.

        Similarly, Article Eight paragraph (2) of our Amended and Restated Articles of Incorporation states that, to the extent permitted by the TBCA, a director of the Company shall not be personally liable to the Company or its shareholders for monetary damages for an act or omission in the director's capacity as a director, except for liability for (a) a breach of the director's duty of loyalty to the Company or its shareholders, (b) an act or omission not in good faith that constitutes a breach of duty of the director to the Company or an act or omission that involves intentional misconduct or a knowing violation of the law, (c) a transaction from which the director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director's office, or (d) an act or omission for which the liability for the director is expressly provided for by statute.

        Article Twelve of our Amended and Restated Articles of Incorporation states that we shall indemnify our directors to the fullest extent provided by the TBCA.

        Article VIII, Section 2 of our Restated By-Laws provides that, subject to certain conditions, we shall indemnify a director who acted in good faith and in a manner which he reasonably believed to be

II-1

in, or not opposed to, our best interests, and in the case of any criminal proceeding, had no reasonable cause to believe the conduct was unlawful. Indemnification would cover expenses reasonably incurred, including attorneys' fees, judgments, fines and amounts paid in settlement.

        Article VIII, Section 16 of our Restated By-Laws provides that our board of directors may cause us to purchase and maintain insurance on behalf of any present or past director, officer, employee or agent (including any such person who is serving, at the request of the Company, in a similar or related capacity for another entity), insuring against any liability asserted against such person incurred in the capacity of such position or arising out of such status, regardless of whether we would have the power to indemnify such person.

        We will indemnify each of Fremont Partners, James R. Leininger, M.D. and Blum Capital Partners and its respective directors, members, officers, employees, agents, representatives and affiliates for losses, damages, costs or expenses which such person may suffer arising out of such person's performance of services under the Management Services Agreement, provided that such person will not be indemnified for losses resulting primarily from such person's own gross negligence or willful misconduct.

        Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Guarantors

        The following summaries are qualified in their entirety by reference to the complete text of any statutes referred to below and the certificates of incorporation and the bylaws or similar organizational documents of each guarantor guaranteeing the Issuer's 7³/8% Senior Subordinated Notes due 2013 (collectively, the "Guarantors").

Delaware Corporate Guarantors

        KCI USA, Inc., KCI Licensing, Inc., KCI International, Inc. and KCI Holding Company, Inc. (collectively, the "Delaware Corporate Guarantors"), are organized under the laws of the state of Delaware

        Section 145 of the General Corporation Law of the State of Delaware (the "DGCL") grants corporations the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful.

        In the case of an action by or in the right of the corporation, Section 145 of the DGCL grants corporations the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a

II-2

director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), actually and reasonably incurred by the person in connection with the defense or settlement of such action, or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

        Section 145 of the DGCL also empowers a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the corporation would have the power to indemnify such person against such liability under Section 145 of the DGCL.

        The certificates of incorporation of each of the Delaware Corporate Guarantors contain provisions that provide for indemnification of their respective officers and directors to the fullest extent permitted by the DGCL. These provisions apply to persons who have ceased to be directors and officers and inure to the benefit of their heirs, executors and administrators.

        Section 102(b)(7) of the DGCL allows a corporation to eliminate or limit the personal liability of directors to a corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase or redemption in violation of Delaware corporate law or obtained an improper personal benefit.

        The certificates of incorporation of each of the Delaware Corporate Guarantors contain provisions eliminating a director's personal liability to the Delaware Corporate Guarantor or its stockholders for monetary damages for breaches of fiduciary duty as a director, except in circumstances involving a breach of a director's duty of loyalty to the Delaware Corporate Guarantor or its stockholders, acts or omissions not in good faith or which involve intentional misconduct or knowing violations of the law, the unlawful payment of dividends or repurchase of stock or self-dealing.

Delaware Limited Liability Company Guarantors

        KCI Real Holdings, L.L.C. and KCI USA Real Holdings, L.L.C. (collectively, the "Delaware LLC Guarantors") are limited liability companies organized under the laws of the state of Delaware.

        Section 18-108 of the Delaware Limited Liability Company Act provides that, subject to such standards and restrictions, if any, as are set forth in its limited liability company agreement, a limited liability company may, and shall have the power to, indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever.

        Article 9.14 of the limited liability company agreements of each of the Delaware LLC Guarantors provide that no manager of the Delaware LLC Guarantor shall be personally liable for any debts, liabilities, or obligations of such Delaware LLC Guarantor, including under a judgment decree or order of court.

        Article 12.1 of the limited liability company agreements of each of the Delaware LLC Guarantors provide that the Delaware LLC Guarantor shall indemnify its managers and officers as fully as, and to

II-3

the same extent a corporation may indemnify its directors and officers under the DGCL, as now in effect or hereafter amended. Such Article 12.1 provides further that each of the Delaware LLC Guarantors shall have the power to purchase and maintain liability insurance coverage for its managers and officers as, and to the fullest extent, permitted by the Delaware Limited Liability Company Act, as presently in effect and as may be hereafter amended.

North Carolina Corporate Guarantor

        Medclaim, Inc. ("Medclaim") is organized under the laws of the state of North Carolina.

        Section 55-8-51 of the North Carolina Business Corporation Act ("NCBCA") empowers a corporation to indemnify an individual made a party to a proceeding because he is or was a director against liability incurred in the proceeding if: (1) he conducted himself in good faith; (2) he reasonably believed, in the case of conduct in his official capacity with the corporation, that his conduct was in its best interests, and in all other cases, that his conduct was at least not opposed to its best interests; and (3) in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful. Section 55-8-51 also provides that a company may indemnify a director's conduct with respect to an employee benefit plan for a purpose he reasonably believed to be in the interests of the participants in and beneficiaries of the plan.

        Section 55-8-51 of the NCBCA further provides that a corporation may not indemnify a director for any of the following: (1) in connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or (2) in connection with any other proceeding charging improper personal benefit to him, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received by him.

        Section 55-8-57 of the NCBCA provides that a corporation may in its articles of incorporation or bylaws or by contract or resolution indemnify or agree to indemnify any one or more of its directors, officers, employees or agents against liability and expenses in any proceeding (including without limitation a proceeding brought by or on behalf of the corporation itself) arising out of their status as such or their activities in any of the foregoing capacities; provided, however, that a corporation may not indemnify or agree to indemnify a person against liability or expenses he may incur on account of his activities which were at the time taken known or believed by him to be clearly in conflict with the best interests of the corporation.

        Section 8.1 of the bylaws of Medclaim provide that any person who at any time serves or has served as a director or officer of the corporation or, who, while serving as director of the corporation, serves or has served, at the request of the corporation, as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise, or as a trustee or administrator under an employee benefit plan, shall have a right to be indemnified by the corporation to the fullest extent permitted by law against (a) reasonable expenses, including attorney's fees, incurred by him in connection with any threatened, pending or completed civil, criminal, administrative, investigative, or arbitrative action suit, or proceeding (and any appeal therein), whether or not brought by or on behalf of the corporation, seeking to hold him liable by reason of the fact that he is or was acting in such capacity, and (b) reasonable payments made by him in satisfaction of any judgment, money decree, fine (including an excise tax assessed with respect to an employee benefit plan), penalty, or settlement for which he may have become liable in any such action, suit or proceeding.

        Section 55-8-58 of the NCBCA also permits the purchase and maintenance of insurance on behalf of any individual who is or was a director, officer, employee or agent of the corporation, or who, while a director, officer, employee or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic

II-4

corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against liability asserted against or incurred by him in that capacity.

        In addition, Section 55-8-52 of the NCBCA provides that unless limited by its articles of incorporation, a corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he was a party because he is or was a director of the corporation against reasonable expenses incurred by him in connection with the proceeding. Further, Section 55-8-56 of the NCBCA provides that unless a corporation's articles of incorporation provide otherwise, an officer of the corporation is entitled to mandatory indemnification to the same extent as a director.

Texas Limited Partnership Guarantors

        KCI Real Property Limited and KCI Properties Limited are limited partnerships formed under the laws of the State of Texas.

        Section 3.03(a) of the Texas Revised Limited Partnership Act ("TRLPA") provides that except in the case of a limited partner who knowingly permits that limited partner's name to be used in the name of the limited partnership, such exception subject to certain qualifications, a limited partner is not liable for the obligations of a limited partnership unless the limited partner is also a general partner or, in addition to the exercise of the limited partner's rights and powers as a limited partner, the limited partner participates in the control of the business. However, if the limited partner does participate in the control of the business, the limited partner is liable only to persons who transact business with the limited partnership reasonably believing, based on the limited partner's conduct, that the limited partner is a general partner.

        Article 10.2 of the limited partnership agreements of KCI Real Property Limited and KCI Properties Limited provides that the liability of each limited partner shall be limited to (i) its share of the assets and undistributed profits of the partnership, (ii) for a period of one year following any such return, an amount equal to the amount of any capital contribution rightfully returned to the limited partner necessary to discharge partnership liabilities to all creditors who extended credit to the partnership during the period the capital contribution was held by the partnership, and (iii) any partnership funds or property wrongfully distributed or returned to such limited partner.

        Section 4.03(b) of the TRLPA provides that a general partner of a limited partnership has the liabilities of a partner in a partnership without limited partners to persons other than the partnership and the other partners, except under certain circumstances provided for under the TRLPA. A general partner of a limited partnership also has the liabilities of a partner in a partnership without limited partners to the partnership and to the other partners, except as provided for under the TRLPA.

        Section 11.02 of the TRLPA provides that if provided in a written partnership agreement, a limited partnership may indemnify a person who was, is, or is threatened to be made a named defendant or respondent in a proceeding because the person is or was a general partner if it is determined that the person: (1) acted in good faith; (2) reasonably believed: (A) in the case of conduct in the person's official capacity as a general partner of the limited partnership, that the person's conduct was in the limited partnership's best interests; and (B) in all other cases, that the person's conduct was at least not opposed to the limited partnership's best interests; and (3) in the case of a criminal proceeding, had no reasonable cause to believe that the person's conduct was unlawful. Such a determination that indemnification is permissible must be made: (1) by a majority vote of a quorum consisting of general partners who at the time of the vote are not named defendants or respondents in the proceeding; (2) by special legal counsel selected by the general partners by a majority vote of a quorum consisting of general partners who at the time of the vote are not named defendants or respondents in the proceeding or, if such a quorum cannot be obtained, by a majority vote of all general partners; or

II-5

(3) by a majority in interest of the limited partners in a vote that excludes the interests held by general partners who are named defendants or respondents in the proceeding.

        Under Section 11.03 of the TRLPA, except as provided under certain circumstances, a general partner may not be indemnified with respect to a proceeding in which: (1) the person is found liable on the basis that the person improperly received personal benefit, whether or not the benefit resulted from an action taken in the person's official capacity; or (2) the person is found liable to the limited partnership or the limited partners.

        Section 11.08 of the TRLPA requires indemnification of a general partner against reasonable expenses incurred by the general partner in connection with a proceeding in which the general partner is a named defendant or respondent because the general partner is or was a general partner if the general partner has been wholly successful, on the merits or otherwise, in the defense of the proceeding.

        Section 11.2 of the partnership agreements of KCI Real Property Limited and KCI Properties Limited provide that each limited partner shall and does hereby agree to indemnify, defend and hold harmless the partnership, general partner and their representatives, agents and each other limited partner from and against any damages, claims, expenses, losses, or actions resulting from (i) a breach by such limited partner of any of the representations and warranties and covenants contained in the partnership agreement, or (ii) the untruth of any of the representations and warranties and covenants contained in the partnership agreement.

        Section 11.18 of the TRLPA permits the purchase and maintenance of insurance or another arrangement on behalf of any person who is or was a general partner, limited partner, employee, or agent of the limited partnership, or who is or was serving at the request of the limited partnership as a representative of another enterprise, against any liability asserted against the person and incurred by the person in that capacity or arising out of the person's status in that capacity, regardless of whether the limited partnership would have the power to indemnify the person against that liability.

        The directors and officers of each of the registrants are insured (subject to certain exceptions and deductions) against liabilities which they may incur in their capacity as such, including liabilities under the Securities Act and the Exchange Act.

Item 21. Exhibits and Financial Statement Schedules

(a)   Exhibits

Exhibit No.	Exhibit
*3.1	Restated Articles of Incorporation (with Amendments) of KCI.
*3.2	Articles of Amendment to the Amended and Restated Articles of Incorporation of KCI.
*3.3	Amended and Restated By-Laws of KCI.
3.4	Certificate of Incorporation of KCI Holding Company, Inc. (filed as Exhibit 3.7 to Registration Statement on Form S-4, filed on December 19, 1997).
3.5	By-laws of KCI Holding Company, Inc. (filed as Exhibit 3.8 to Registration Statement on Form S-4, filed on December 19, 1997).
*3.6	Certificate of Formation of KCI Real Holdings, L.L.C.
*3.7	Limited Liability Company Agreement of KCI Real Holdings, L.L.C.
**3.8	Certificate of Incorporation of KCI International, Inc.
**3.9	By-Laws of KCI International, Inc.
*3.10	Certificate of Incorporation of KCI Licensing, Inc.
*3.11	By-Laws of KCI Licensing, Inc.
*3.12	Certificate of Limited Partnership of KCI Properties Limited.
*3.13	Limited Partnership Agreement of KCI Properties Limited.

II-6

*3.14	Certificate of Limited Partnership of KCI Real Property Limited.
*3.15	Limited Partnership Agreement of KCI Real Property Limited.
3.16	Certificate of Incorporation of KCI USA, Inc., as successor to KCI Therapeutic Services, Inc. (filed as Exhibit 3.19 to Registration Statement on Form S-4, filed on December 19, 1997).
3.17	By-Laws of KCI USA, Inc. as successor to KCI Therapeutic Services, Inc. (filed as Exhibit 3.20 to Registration Statement on Form S-4, filed on December 19, 1997).
*3.18	Certificate of Formation of KCI USA Real Holdings, L.L.C.
*3.19	Limited Liability Company Agreement of KCI USA Real Holdings, L.L.C.
*3.20	Articles of Incorporation of Medclaim, Inc.
*3.21	By-Laws of Medclaim, Inc.
*4.1	Indenture, dated as of August 11, 2003, among KCI, as Issuer, the Guarantors, and U.S. Bank National Association, as Trustee.
4.2	Form of Series B 73/8% Senior Subordinated Notes due 2013 (included in Exhibit 4.1).
*5.1	Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
*5.2	Opinion of Cox & Smith Incorporated with respect to the new notes.
*10.1	Registration Rights Agreement, dated as of August 11, 2003, among KCI, as Issuer, the Guarantors, and Morgan Stanley & Co. Incorporated, Credit Suisse First Boston LLC, Goldman, Sachs & Co., J.P. Morgan Securities Inc., Scotia Capital (USA) Inc., and Wells Fargo Securities, LLC, as Placement Agents.
*10.2	Credit Agreement, dated as of August 11, 2003.
*10.3	Guarantee and Collateral Agreement, dated as of August 11, 2003.
*10.4	Security and Control Agreement, dated as of August 11, 2003, among KCI, U.S. Bank National Association, as Trustee, and U.S. Bank National Association, as Securities Intermediary.
*10.5	Series A Preferred Stock Purchase Agreement, dated as of August 11, 2003, among KCI, the Non-Sponsor Investors, the Sponsor Investors and the Director Investors.
*10.6	Investors' Rights Agreement, dated as of August 11, 2003, among KCI, the Non-Sponsor Investors, the Sponsor Investors and the Director Investors.
*10.7	Statement of Designations, Preferences and Rights of the Series A Convertible Participating Preferred Stock of Kinetic Concepts, Inc.
10.8	Agreement Among Shareholders, dated as of November 5, 1997 (filed as Exhibit 10.26 to Registration Statement on Form S-4, filed on December 19, 1997).
**10.9	Joinder and Amendment Agreement, dated as of June 25, 2003.
*10.10	Waiver and Consent, effective as of September 27, 2002.
*10.11	Amendment and Waiver, dated as of August 11, 2003.
10.12	KCI Employee Benefits Trust Agreement (filed as Exhibit 10.21 to our Annual Report on Form 10-K/A, dated December 31, 1996).
10.13	Deferred Compensation Plan (filed as Exhibit 99.2 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 1995).
10.14	Kinetic Concepts, Inc. Senior Executive Stock Option Plan (filed as Exhibit 10.31 to our Annual Report on Form 10-K for the year ended December 31, 1996).
10.15	Form of Option Instrument with respect to Senior Executive Stock Option Plan (filed as Exhibit 10.32 to our Annual Report on Form 10-K for the year ended December 31, 2000).
10.16	Kinetic Concepts Management Equity Plan effective October 2, 1997 (filed as Exhibit 10.33 to our Annual Report on Form 10-K for the year ended December 31, 1997).
10.17	Form of Option Instrument with Respect to the Kinetic Concepts, Inc. Management Equity Plan (filed as Exhibit 10.14 to our Annual Report on Form 10-K for the year ended December 31, 2000).

II-7

10.18	Director Equity Agreement, dated May 12, 1998, between KCI and Charles N. Martin (filed as Exhibit 10.8 to our Annual Report on Form 10-K for the year ended December 31, 1998).
10.19	Kinetic Concepts, Inc. CEO Special Bonus Plan (filed as Exhibit 10.12 to our Annual Report on Form 10-K for the year ended December 31, 2000).
10.20	Kinetic Concepts, Inc. 2000 Special Bonus Plan (filed as Exhibit 10.13 to our Annual Report on Form 10-K for the year ended December 31, 2000).
10.21	Employee Benefits Trust Agreement, by and between the Company and Keith D. Thatcher, dated September 1, 1992 (filed as Exhibit 10.21 to our Annual Report on Form 10-K/A, dated December 31, 1994).
10.22	Letter, dated March 28, 2000, from KCI to Dennert O. Ware outlining the terms of his employment (filed as Exhibit 10.12 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).
10.23	Letter, dated November 22, 1994, from KCI to Christopher M. Fashek outlining the terms of his employment (filed as Exhibit 10.23 to our Annual Report on Form 10-K/A, dated December 31, 1994).
10.24	Settlement Agreement, by and among the Company and certain of its subsidiaries and shareholders and Hillenbrand Industries, Inc. and certain of its subsidiaries and shareholders, dated December 31, 2002 (filed as Exhibit 10.16 to our Annual Report on Form 10-K for the year ended December 31, 2002).
**10.25	Purchasing Agreement, dated effective May 1, 2001 between Healthtrust Purchasing Group, L.P. and KCI Therapeutic Services, Inc., as amended by that certain Amendment to Purchasing Agreement, dated September 1, 2002 by and between Healthtrust Purchasing Group, L.P. and Kinetic Concepts, Inc.
10.26	Therapeutic Specialty Beds, Therapeutic Surfaces & Related Products Supplier Agreement, dated effective September 1, 2001 between Novation, LLC and KCI USA, Inc., as amended by that certain Amendment of Agreement (MS 10730), dated effective May 13, 2002 (filed as Exhibit 10.16 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2001).
*10.27	Standard Office Building Lease Agreement, dated July 31, 2002 between CKW San Antonio, L.P. d/b/a San Antonio CKW, L.P. and Kinetic Concepts, Inc. for the lease of approximately 138,231 square feet of space in the building located at 8023 Vantage Drive, San Antonio, Bexar County, Texas 78230.
**10.28	Amended and Restated Manufacturing Agreement, by and between the Company and Avail Medical Products, Inc., dated December 18, 2002.
*10.29	First Amended and Restated Management Services Agreement, dated as of August 11, 2003, among KCI, Dr. James Leininger, Blum Capital Partners, L.P., Blum Strategic GP II, L.L.C., Fremont Partners, L.L.C. and Fremont Partners III, L.L.C.
***10.30	License Agreement, dated as of October 6, 1993, between Wake Forest University and Kinetic Concepts, Inc., as amended by that certain Amendment to License Agreement, dated as of July 1, 2000.
*12.1	Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
21.1	List of Subsidiaries (filed as Exhibit 21.1 to our Annual Report on Form 10-K for the year ended December 31, 2002).
23.1	Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1).
23.2	Consent of Cox & Smith Incorporated (included in Exhibit 5.2).
*23.3	Consent of Ernst & Young LLP.
24.1	Power of Attorney (included in signature page).

II-8

*25.1	Statement of Eligibility on Form T-1 of U.S. Bank National Association, as trustee under the Indenture, dated as of August 11, 2003, by and among KCI, as Issuer, the Guarantors and U.S. Bank National Association, as trustee.
*99.1	Form of Letter of Transmittal.
*99.2	Form of Notice of Guaranteed Delivery.
*99.3	Form of Letter to Clients.
*99.4	Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.

*

Exhibits filed with this registration statement.

**

To be filed by amendment.

***

To be filed by amendment together with a confidential treatment request.

Item 22. Undertakings

        The undersigned registrant hereby undertakes:

        (1)   To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement;

(a)

To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;



(b)

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;



(c)

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by these paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or Section 15(d) of the Securities and Exchange Act of 1934 that are incorporated by reference in the registration statement.

        (2)   That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

        (3)   To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

        (4)   If the registrant is a foreign private issuer, to file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information

II-9

otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements.

        The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference to the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

        Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

        The undersigned registrant hereby undertakes (i) to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means; and (ii) to arrange or provide for a facility in the U.S. for the purpose of responding to such requests. The undertaking in subparagraph (i) above includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

        The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

II-10

SIGNATURES

        Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, Texas, on September 29, 2003.

KINETIC CONCEPTS, INC.
By:	/s/  ROBERT JAUNICH II Robert Jaunich II Chairman of the Board of Directors

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dennert O. Ware, Dennis E. Noll and Martin J. Landon, and each of them individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign this Registration Statement filed herewith and any or all amendments to said Registration Statement (including post-effective amendments and registration statements filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and otherwise), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents the full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute, may lawfully do or cause to be done by virtue thereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Name	Title	Date
/s/  ROBERT JAUNICH II Robert Jaunich II	Chairman of the Board of Directors	September 29, 2003
/s/  DENNERT O. WARE Dennert O. Ware	Director, President and Chief Executive Officer (Principal Executive Officer)	September 29, 2003
/s/  MARTIN J. LANDON Martin J. Landon	Vice President and Chief Financial Officer—Acting (Principal Financial and Principal Accounting Officer)	September 29, 2003

II-11

/s/  JAMES R. LEININGER, M.D. James R. Leininger	Director, Chairman Emeritus	September 29, 2003
/s/  JOHN P. BYRNES John P. Byrnes	Director	September 29, 2003
/s/  RONALD W. DOLLENS Ronald W. Dollens	Director	September 29, 2003
/s/  JAMES T. FARRELL James T. Farrell	Director	September 29, 2003
/s/  HARRY R. JACOBSON, M.D. Harry R. Jacobson	Director	September 29, 2003
N. Colin Lind	Director
/s/  DAVID J. SIMPSON David J. Simpson	Director	September 29, 2003
/s/  C. THOMAS SMITH C. Thomas Smith	Director	September 29, 2003
/s/  DONALD E. STEEN Donald E. Steen	Director	September 29, 2003

II-12

SIGNATURES

        Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, Texas, on September 29, 2003.

KCI USA, INC.
By:	/s/  CHRISTOPHER M. FASHEK
Name:	Christopher M. Fashek
Title:	President & Chief Executive Officer

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dennert O. Ware, Dennis E. Noll and Martin J. Landon, each of them individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign this Registration Statement filed herewith and any or all amendments to said Registration Statement (including post-effective amendments and registration statements filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and otherwise), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents the full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute, may lawfully do or cause to be done by virtue thereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/  CHRISTOPHER M. FASHEK Christopher M. Fashek	President & Chief Executive Officer (Principal Executive Officer)	September 29, 2003
/s/  KEITH R. JONES Keith R. Jones	Vice President—Finance (Principal Financial Officer and Principal Accounting Officer)	September 29, 2003
/s/  DENNERT O. WARE Dennert O. Ware	Director	September 29, 2003
/s/  DENNIS E. NOLL Dennis E. Noll	Director	September 29, 2003

II-13

SIGNATURES

        Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, Texas, on September 29, 2003.

KCI HOLDING COMPANY, INC.
By:	/s/  DENNERT O. WARE
Name:	Dennert O. Ware
Title:	President

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dennert O. Ware, Dennis E. Noll and Martin J. Landon, each of them individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign this Registration Statement filed herewith and any or all amendments to said Registration Statement (including post-effective amendments and registration statements filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and otherwise), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents the full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute, may lawfully do or cause to be done by virtue thereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/  DENNERT O. WARE Dennert O. Ware	Director and President (Principal Executive Officer)	September 29, 2003
/s/  MARTIN J. LANDON Martin J. Landon	Vice President & Treasurer (Principal Financial Officer and Principal Accounting Officer)	September 29, 2003
/s/  DENNIS E. NOLL Dennis E. Noll	Director	September 29, 2003

II-14

SIGNATURES

        Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, Texas, on September 29, 2003.

KCI LICENSING, INC.
By:	/s/  CHRISTOPHER M. FASHEK
Name:	Christopher M. Fashek
Title:	President

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dennert O. Ware, Dennis E. Noll and Martin J. Landon, each of them individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign this Registration Statement filed herewith and any or all amendments to said Registration Statement (including post-effective amendments and registration statements filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and otherwise), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents the full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute, may lawfully do or cause to be done by virtue thereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/  CHRISTOPHER M. FASHEK Christopher M. Fashek	President (Principal Executive Officer)	September 29, 2003
/s/  MARTIN J. LANDON Martin J. Landon	Treasurer (Principal Financial Officer and Principal Accounting Officer)	September 29, 2003
/s/  DENNERT O. WARE Dennert O. Ware	Director	September 29, 2003
/s/  DENNIS E. NOLL Dennis E. Noll	Director	September 29, 2003

II-15

SIGNATURES

        Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, Texas, on September 29, 2003.

KCI INTERNATIONAL, INC.
By:	/s/  JÖRG MENTEN
Name:	Jörg Menten
Title:	President

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dennert O. Ware, Dennis E. Noll and Martin J. Landon, each of them individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign this Registration Statement filed herewith and any or all amendments to said Registration Statement (including post-effective amendments and registration statements filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and otherwise), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents the full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute, may lawfully do or cause to be done by virtue thereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/  JÖRG MENTEN Jörg Menten	President (Principal Executive Officer)	September 29, 2003
/s/  MARTIN J. LANDON Martin J. Landon	Vice President & Treasurer (Principal Financial Officer and Principal Accounting Officer)	September 29, 2003
/s/  DENNERT O. WARE Dennert O. Ware	Director	September 29, 2003
/s/  DENNIS E. NOLL Dennis E. Noll	Director	September 29, 2003

II-16

SIGNATURES

        Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, Texas, on September 29, 2003.

KCI PROPERTIES LIMITED
By:	/s/  DENNERT O. WARE
Name:	Dennert O. Ware
Title:	President

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dennert O. Ware, Dennis E. Noll and Martin J. Landon, each of them individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign this Registration Statement filed herewith and any or all amendments to said Registration Statement (including post-effective amendments and registration statements filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and otherwise), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents the full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute, may lawfully do or cause to be done by virtue thereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/  DENNERT O. WARE Dennert O. Ware	Manager and President (Principal Executive Officer)	September 29, 2003
/s/  MARTIN J. LANDON Martin J. Landon	Vice President & Treasurer (Principal Financial Officer and Principal Accounting Officer)	September 29, 2003
/s/  DENNIS E. NOLL Dennis E. Noll	Manager	September 29, 2003

II-17

SIGNATURES

        Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, Texas, on September 29, 2003.

KCI REAL PROPERTY LIMITED
By:	/s/  DENNERT O. WARE
Name:	Dennert O. Ware
Title:	President

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dennert O. Ware, Dennis E. Noll and Martin J. Landon, each of them individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign this Registration Statement filed herewith and any or all amendments to said Registration Statement (including post-effective amendments and registration statements filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and otherwise), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents the full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute, may lawfully do or cause to be done by virtue thereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/  DENNERT O. WARE Dennert O. Ware	Manager and President (Principal Executive Officer)	September 29, 2003
/s/  MARTIN J. LANDON Martin J. Landon	Vice President & Treasurer (Principal Financial Officer and Principal Accounting Officer)	September 29, 2003
/s/  DENNIS E. NOLL Dennis E. Noll	Manager	September 29, 2003

II-18

SIGNATURES

        Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, Texas, on September 29, 2003.

KCI REAL HOLDINGS, L.L.C.
By:	/s/  DENNERT O. WARE
Name:	Dennert O. Ware
Title:	President

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dennert O. Ware, Dennis E. Noll and Martin J. Landon, each of them individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign this Registration Statement filed herewith and any or all amendments to said Registration Statement (including post-effective amendments and registration statements filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and otherwise), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents the full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute, may lawfully do or cause to be done by virtue thereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/  DENNERT O. WARE Dennert O. Ware	Manager and President (Principal Executive Officer)	September 29, 2003
/s/  LULU OLSON Lulu Olson	Vice President & Treasurer (Principal Financial Officer and Principal Accounting Officer)	September 29, 2003
/s/  DENNIS E. NOLL Dennis E. Noll	Manager	September 29, 2003

II-19

SIGNATURES

        Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, Texas, on September 29, 2003.

KCI USA REAL HOLDINGS, L.L.C.
By:	/s/  DENNERT O. WARE
Name:	Dennert O. Ware
Title:	President

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dennert O. Ware, Dennis E. Noll and Martin J. Landon, each of them individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign this Registration Statement filed herewith and any or all amendments to said Registration Statement (including post-effective amendments and registration statements filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and otherwise), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents the full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute, may lawfully do or cause to be done by virtue thereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/  DENNERT O. WARE Dennert O. Ware	Manager and President (Principal Executive Officer)	September 29, 2003
/s/  LULU OLSON Lulu Olson	Vice President & Treasurer (Principal Financial Officer and Principal Accounting Officer)	September 29, 2003
/s/  DENNIS E. NOLL Dennis E. Noll	Manager	September 29, 2003

II-20

SIGNATURES

        Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, Texas, on September 29, 2003.

MEDCLAIM, INC.
By:	/s/  DENNERT O. WARE
Name:	Dennert O. Ware
Title:	President

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dennert O. Ware, Dennis E. Noll and Martin J. Landon, each of them individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign this Registration Statement filed herewith and any or all amendments to said Registration Statement (including post-effective amendments and registration statements filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and otherwise), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents the full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute, may lawfully do or cause to be done by virtue thereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/  DENNERT O. WARE Dennert O. Ware	Director and President (Principal Executive Officer)	September 29, 2003
/s/  MARTIN J. LANDON Martin J. Landon	Executive Vice President & Treasurer (Principal Financial Officer and Principal Accounting Officer)	September 29, 2003
/s/  DENNIS E. NOLL Dennis E. Noll	Director	September 29, 2003

II-21

Exhibit Index

Exhibit No.	Exhibit
*3.1	Restated Articles of Incorporation (with Amendments) of KCI.
*3.2	Articles of Amendment to the Amended and Restated Articles of Incorporation of KCI.
*3.3	Amended and Restated By-Laws of KCI.
3.4	Certificate of Incorporation of KCI Holding Company, Inc. (filed as Exhibit 3.7 to Registration Statement on Form S-4, filed on December 19, 1997).
3.5	By-laws of KCI Holding Company, Inc. (filed as Exhibit 3.8 to Registration Statement on Form S-4, filed on December 19, 1997).
*3.6	Certificate of Formation of KCI Real Holdings, L.L.C.
*3.7	Limited Liability Company Agreement of KCI Real Holdings, L.L.C.
**3.8	Certificate of Incorporation of KCI International, Inc.
**3.9	By-Laws of KCI International, Inc.
*3.10	Certificate of Incorporation of KCI Licensing, Inc.
*3.11	By-Laws of KCI Licensing, Inc.
*3.12	Certificate of Limited Partnership of KCI Properties Limited.
*3.13	Limited Partnership Agreement of KCI Properties Limited.
*3.14	Certificate of Limited Partnership of KCI Real Property Limited.
*3.15	Limited Partnership Agreement of KCI Real Property Limited.
3.16	Certificate of Incorporation of KCI USA, Inc., as successor to KCI Therapeutic Services, Inc. (filed as Exhibit 3.19 to Registration Statement on Form S-4, filed on December 19, 1997).
3.17	By-Laws of KCI USA, Inc. as successor to KCI Therapeutic Services, Inc. (filed as Exhibit 3.20 to Registration Statement on Form S-4, filed on December 19, 1997).
*3.18	Certificate of Formation of KCI USA Real Holdings, L.L.C.
*3.19	Limited Liability Company Agreement of KCI USA Real Holdings, L.L.C.
*3.20	Articles of Incorporation of Medclaim, Inc.
*3.21	By-Laws of Medclaim, Inc.
*4.1	Indenture, dated as of August 11, 2003, among KCI, as Issuer, the Guarantors, and U.S. Bank National Association, as Trustee.
4.2	Form of Series B 73/8% Senior Subordinated Notes due 2013 (included in Exhibit 4.1).
*5.1	Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
*5.2	Opinion of Cox & Smith Incorporated with respect to the new notes.
*10.1	Registration Rights Agreement, dated as of August 11, 2003, among KCI, as Issuer, the Guarantors, and Morgan Stanley & Co. Incorporated, Credit Suisse First Boston LLC, Goldman, Sachs & Co., J.P. Morgan Securities Inc., Scotia Capital (USA) Inc., and Wells Fargo Securities, LLC, as Placement Agents.
*10.2	Credit Agreement, dated as of August 11, 2003.
*10.3	Guarantee and Collateral Agreement, dated as of August 11, 2003.
*10.4	Security and Control Agreement, dated as of August 11, 2003, among KCI, U.S. Bank National Association, as Trustee, and U.S. Bank National Association, as Securities Intermediary.
*10.5	Series A Preferred Stock Purchase Agreement, dated as of August 11, 2003, among KCI, the Non-Sponsor Investors, the Sponsor Investors and the Director Investors.
*10.6	Investors' Rights Agreement, dated as of August 11, 2003, among KCI, the Non-Sponsor Investors, the Sponsor Investors and the Director Investors.
*10.7	Statement of Designations, Preferences and Rights of the Series A Convertible Participating Preferred Stock of Kinetic Concepts, Inc.
10.8	Agreement Among Shareholders, dated as of November 5, 1997 (filed as Exhibit 10.26 to Registration Statement on Form S-4, filed on December 19, 1997).

II-22

**10.9	Joinder and Amendment Agreement, dated as of June 25, 2003.
*10.10	Waiver and Consent, effective as of September 27, 2002.
*10.11	Amendment and Waiver, dated as of August 11, 2003.
10.12	KCI Employee Benefits Trust Agreement (filed as Exhibit 10.21 to our Annual Report on Form 10-K/A, dated December 31, 1996).
10.13	Deferred Compensation Plan (filed as Exhibit 99.2 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 1995).
10.14	Kinetic Concepts, Inc. Senior Executive Stock Option Plan (filed as Exhibit 10.31 to our Annual Report on Form 10-K for the year ended December 31, 1996).
10.15	Form of Option Instrument with respect to Senior Executive Stock Option Plan (filed as Exhibit 10.32 to our Annual Report on Form 10-K for the year ended December 31, 2000).
10.16	Kinetic Concepts Management Equity Plan effective October 2, 1997 (filed as Exhibit 10.33 to our Annual Report on Form 10-K for the year ended December 31, 1997).
10.17	Form of Option Instrument with Respect to the Kinetic Concepts, Inc. Management Equity Plan (filed as Exhibit 10.14 to our Annual Report on Form 10-K for the year ended December 31, 2000).
10.18	Director Equity Agreement, dated May 12, 1998, between KCI and Charles N. Martin (filed as Exhibit 10.8 to our Annual Report on Form 10-K for the year ended December 31, 1998).
10.19	Kinetic Concepts, Inc. CEO Special Bonus Plan (filed as Exhibit 10.12 to our Annual Report on Form 10-K for the year ended December 31, 2000).
10.20	Kinetic Concepts, Inc. 2000 Special Bonus Plan (filed as Exhibit 10.13 to our Annual Report on Form 10-K for the year ended December 31, 2000).
10.21	Employee Benefits Trust Agreement, by and between the Company and Keith D. Thatcher, dated September 1, 1992 (filed as Exhibit 10.21 to our Annual Report on Form 10-K/A, dated December 31, 1994).
10.22	Letter, dated March 28, 2000, from KCI to Dennert O. Ware outlining the terms of his employment (filed as Exhibit 10.12 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).
10.23	Letter, dated November 22, 1994, from KCI to Christopher M. Fashek outlining the terms of his employment (filed as Exhibit 10.23 to our Annual Report on Form 10-K/A, dated December 31, 1994).
10.24	Settlement Agreement, by and among the Company and certain of its subsidiaries and shareholders and Hillenbrand Industries, Inc. and certain of its subsidiaries and shareholders, dated December 31, 2002 (filed as Exhibit 10.16 to our Annual Report on Form 10-K for the year ended December 31, 2002).
**10.25	Purchasing Agreement, dated effective May 1, 2001 between Healthtrust Purchasing Group, L.P. and KCI Therapeutic Services, Inc., as amended by that certain Amendment to Purchasing Agreement, dated September 1, 2002 by and between Healthtrust Purchasing Group, L.P. and Kinetic Concepts, Inc.
10.26	Therapeutic Specialty Beds, Therapeutic Surfaces & Related Products Supplier Agreement, dated effective September 1, 2001 between Novation, LLC and KCI USA, Inc., as amended by that certain Amendment of Agreement (MS 10730), dated effective May 13, 2002 (filed as Exhibit 10.16 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2001).
*10.27	Standard Office Building Lease Agreement, dated July 31, 2002 between CKW San Antonio, L.P. d/b/a San Antonio CKW, L.P. and Kinetic Concepts, Inc. for the lease of approximately 138,231 square feet of space in the building located at 8023 Vantage Drive, San Antonio, Bexar County, Texas 78230.

II-23

**10.28	Amended and Restated Manufacturing Agreement, by and between the Company and Avail Medical Products, Inc., dated December 18, 2002.
*10.29	First Amended and Restated Management Services Agreement, dated as of August 11, 2003, among KCI, Dr. James Leininger, Blum Capital Partners, L.P., Blum Strategic GP II, L.L.C., Fremont Partners, L.L.C. and Fremont Partners III, L.L.C.
***10.30	License Agreement, dated as of October 6, 1993, between Wake Forest University and Kinetic Concepts, Inc., as amended by that certain Amendment to License Agreement, dated as of July 1, 2000.
*12.1	Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
21.1	List of Subsidiaries (filed as Exhibit 21.1 to our Annual Report on Form 10-K for the year ended December 31, 2002).
23.1	Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1).
23.2	Consent of Cox & Smith Incorporated (included in Exhibit 5.2).
*23.3	Consent of Ernst & Young LLP.
24.1	Power of Attorney (included in signature page).
*25.1	Statement of Eligibility on Form T-1 of U.S. Bank National Association, as trustee under the Indenture, dated as of August 11, 2003, by and among KCI, as Issuer, the Guarantors and U.S. Bank National Association, as trustee.
*99.1	Form of Letter of Transmittal.
*99.2	Form of Notice of Guaranteed Delivery.
*99.3	Form of Letter to Clients.
*99.4	Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.

*

Exhibits filed with this registration statement.

**

To be filed by amendment.

***

To be filed by amendment together with a confidential treatment request.

II-24

EX-3.1

Exhibit 3.1

RESTATED ARTICLES OF INCORPORATION
(WITH AMENDMENTS)
OF KINETIC CONCEPTS, INC.

ARTICLE ONE

Kinetic Concepts, Inc., pursuant to the provisions of Article 4.07 of the Texas Business Corporation Act (“TBCA”), hereby adopts restated articles of incorporation that accurately copy the articles of incorporation and all amendments thereto that are in effect to date and as further amended by such restated articles of incorporation as hereinafter set forth and that contain no other change in any provisions thereof.

ARTICLE TWO

The articles of incorporation of the corporation are amended by the restated articles of incorporation as follows:

Article Three of the Articles of Incorporation is amended by the restated articles of incorporation of the corporation to read as follows:

“ARTICLE THREE

The purpose for which the Corporation is organized is to transact any or all lawful business for which corporations may be organized under the Texas Business Corporation Act; provided, however, that the corporation shall not transact any business in this state that is prohibited by Article 2.01-B of the Texas Business Corporation Act.”

Article Four of the Articles of Incorporation is amended by the restated articles of incorporation of the corporation to read as follows:

“ARTICLE FOUR

The total number of shares of all classes of stock that the Corporation is authorized to issue is one hundred fifty million (150,000,000) shares, all of which shall be shares of Common Stock, par value $.001 per share.”

Article Six has been redesignated Article Ten and amended by the restated articles of incorporation of the corporation to read as follows:

“ARTICLE TEN

The street address of the registered office of the Corporation is 8023 Vantage Drive, San Antonio, Texas 78230, and the name of the registered agent of the Corporation at such address is Dennis E. Noll.”

Article Seven has been redesignated as paragraph (2) of Article Eight and amended by the restated articles of incorporation of the corporation to read as follows:

“(2) To the extent permitted by the Texas Business Corporation Act as it now exists and as it may hereafter be amended, a Director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for an act or omission in the Director’s capacity as a director, except for liability for (a) a breach of the Director’s duty of loyalty to the Corporation or its shareholders, (b) an act or omission not in good faith that constitutes a breach of duty of the Director to the Corporation or an act or omission that involves intentional misconduct or a knowing violation of the law, (c) a transaction from which the Director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the Director’s office, or (d) an act or omission for which the liability for the Director is expressly provided for by statute.”

Article Eight has been redesignated Article Nine and amended by the restated articles of incorporation of the corporation to read as follows:

“ARTICLE NINE

The current board of directors of the Corporation at the time of filing of these Amended and Restated Articles of Incorporation consists of six (6) directors. The names and address of the persons who are acting at the time of filing of these Amended and Restated Articles of Incorporation in the capacity of directors until the selection of their successors are:

NAME	ADDRESS
James R. Leininger, M.D.	8023 Vantage Drive
	San Antonio, Texas 78230
Raymond R. Hannigan	8023 Vantage Drive
	San Antonio, Texas 78230
Robert Jaunich II	50 Fremont Street
	Suite 3700
	San Francisco, California 94105
James T. Farrell	50 Fremont Street
	Suite 3700
	San Francisco, California 94105

2

N. Colin Lind	909 Montgomery Street
	Suite 400
	San Francisco, California 94133
Jeffrey W. Ubben	909 Montgomery Street
	Suite 400
	San Francisco, California 94133

Article Nine has been redesignated Article Six and amended by the restated articles of incorporation of the corporation to read as follows:

“ARTICLE SIX

No shareholder or other holder of securities of the Corporation shall have any preemptive right to acquire additional, unissued or treasury shares of the Corporation, or securities of the Corporation convertible into or carrying a right to subscribe to or acquire shares, except as provided by any agreement between the Corporation and its shareholders.”

Articles Ten and Eleven have been deleted in their entirety by the amendments effected by the restated articles of incorporation of the corporation .

The Articles of Incorporation are further amended by the restated articles of incorporation of the corporation by adding new Article Seven and paragraph (1) to Article Eight to read as follows:

“ARTICLE SEVEN

(1) With respect to any matter for which, but for this provision, the affirmative vote of the holders of two-thirds of the shares entitled to vote is required by the Act, the act of the shareholders on that matter shall be the affirmative vote of a majority of the shares entitled to vote on that matter rather than the affirmative vote otherwise required by the Act. With respect to any matter for which, but for this provision, the affirmative vote of the holders of two-thirds of the shares of any class or series is required by the Act, the act of the shareholders on that matter shall be the affirmative vote of a majority of the shares of that class or series rather than the affirmative vote of the holders of shares of that class or series otherwise required by the Act.

(2) Any action required by the Texas Business Corporation Act to be taken at any annual or special meeting of shareholders, or any action which may be taken at any annual or special meeting of shareholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in

3

writing, setting forth the action so taken shall be signed by the holder or holders of all shares entitled to vote on the action were present and voted.

ARTICLE EIGHT

(1) Elections of directors of the Corporation need not be by written ballot, except and to the extent provided in the By-laws of the Corporation.”

The Articles of Incorporation are further amended by the restated articles of incorporation of the corporation by adding new Articles Eleven and Twelve to read as follows:

“ARTICLE ELEVEN

(1) The Corporation reserves the right to amend, alter, change or repeal any provision of these Articles of Incorporation, in the manner now or hereafter prescribed by law, and all rights conferred on shareholders in these Articles of Incorporation are subject to this reservation.

(2) The By-laws of the Corporation may be amended, repealed or adopted by the affirmative vote of the holders of a majority of shares then entitled to vote on such action. The Board of Directors shall not have the power to amend, repeal or adopt any By-law of the Corporation.

ARTICLE TWELVE

The Corporation shall indemnify its directors to the fullest extent provided by the Texas Business Corporation act, as amended.”

ARTICLE THREE

Each such amendment made by the restated articles of incorporation has been effected in conformity with the provisions of the Texas Business Corporation Act and such restated articles of incorporation and each such amendment made by the restated articles of incorporation were duly adopted by the shareholders of the corporation on the 5th day of January 1998.

ARTICLE FOUR

The number of shares outstanding was 19,431,254, and the number of shares entitled to vote on the restated articles of incorporation as so amended was 19,431,254. All of the shareholders have signed a written consent to the adoption of such restated articles of incorporation as so amended pursuant to Article 9.10(A) of the TBCA and any written notice required by Article 9.10(A) of the TBCA has been given.

4

ARTICLE FIVE

The articles of incorporation and all amendments and supplements thereto are hereby superseded by the following restated articles of incorporation which accurately copy the entire text thereof and as amended as above set forth:

“AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

KINETIC CONCEPTS, INC.

ARTICLE ONE

The name of the corporation (which is hereinafter called the “Corporation”) is Kinetic Concepts, Inc.

ARTICLE TWO

The period of duration of the Corporation is perpetual.

ARTICLE THREE

The purpose for which the Corporation is organized is to transact any or all lawful business for which corporations may be organized under the Texas Business Corporation Act; provided, however, that the corporation shall not transact any business in this state that is prohibited by Article 2.01-B of the Texas Business Corporation Act.

ARTICLE FOUR

The total number of shares of all classes of stock that the Corporation is authorized to issue is one hundred fifty million (150,000,000) shares, all of which shall be shares of Common Stock, par value $.001 per share.”

ARTICLE FIVE

The Corporation will not commence business until it has received for the issuance of its shares consideration of the value of at least One Thousand Dollars ($1,000.00), consisting of money, labor done or property actually received.

5

ARTICLE SIX

No shareholder or other holder of securities of the Corporation shall have any preemptive right to acquire additional, unissued or treasury shares of the Corporation, or securities of the Corporation convertible into or carrying a right to subscribe to or acquire shares, except as provided by any agreement between the Corporation and its shareholders.

ARTICLE SEVEN

(1) With respect to any matter for which, but for this provision, the affirmative vote of the holders of two-thirds of the shares entitled to vote is required by the Act, the act of the shareholders on that matter shall be the affirmative vote of a majority of the shares entitled to vote on that matter rather than the affirmative vote otherwise required by the Act. With respect to any matter for which, but for this provision, the affirmative vote of the holders of two-thirds of the shares of any class or series is required by the Act, the act of the shareholders on that matter shall be the affirmative vote of a majority of the shares of that class or series rather than the affirmative vote of the holders of shares of that class or series otherwise required by the Act.

(2) Any action required by the Texas Business Corporation Act to be taken at any annual or special meeting of shareholders, or any action which may be taken at any annual or special meeting of shareholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken shall be signed by the holder or holders of shares having not less than the minimum number of votes that would be necessary to take such action at a meeting at which the holders of all shares entitled to vote on the action were present and voted.

ARTICLE EIGHT

(1) Elections of directors of the Corporation need not be by written ballot, except and to the extent provided in the By-laws of the Corporation.

(2) To the extent permitted by the Texas Business Corporation Act as it now exists and as it may hereafter be amended, a Director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for an act or omission in the Director’s capacity as a director, except for liability for (a) a breach of the Director’s duty of loyalty to the Corporation or its shareholders, (b) an act or omission not in good faith that constitutes a breach of duty of the Director to the Corporation or an act or omission that involves intentional misconduct or a knowing violation of the law, (c) a transaction from which the Director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the Director’s office, or (d) an act or omission for which the liability for the Director is expressly provided for by statute.

6

Any repeal or modification of all or part of this article Eight by the shareholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.

ARTICLE NINE

The current board of directors of the Corporation at the time of filing of these Amended and Restated Articles of Incorporation consists of six (6) directors. The names and address of the persons who are acting at the time of filing of these Amended and Restated Articles of Incorporation in the capacity of directors until the selection of their successors are:

NAME	ADDRESS
James R. Leininger, M.D.	8023 Vantage Drive
	San Antonio, Texas 78230
Raymond R. Hannigan	8023 Vantage Drive
	San Antonio, Texas 78230
Robert Jaunich II	50 Fremont Street
	Suite 3700
	San Francisco, California 94105
James T. Farrell	50 Fremont Street
	Suite 3700
	San Francisco, California 94105
N. Colin Lind	909 Montgomery Street
	Suite 400
	San Francisco, California 94133
Jeffrey W. Ubben	909 Montgomery Street
	Suite 400
	San Francisco, California 94133

ARTICLE TEN

The street address of the registered office of the Corporation is 8023 Vantage Drive, San Antonio, Texas 78230, and the name of the registered agent of the Corporation at such address is Dennis E. Noll.”

ARTICLE ELEVEN

(1) The Corporation reserves the right to amend, alter, change or repeal any provision of these Articles of Incorporation, in the manner now or hereafter

7

prescribed by law, and all rights conferred on shareholders in these Articles of Incorporation are subject to this reservation.

(2) The By-laws of the Corporation may be amended, repealed or adopted by the affirmative vote of the holders of a majority of shares then entitled to vote on such action. The Board of Directors shall not have the power to amend, repeal or adopt any By-law of the Corporation.

ARTICLE TWELVE

The Corporation shall indemnify its directors to the fullest extent provided by the Texas Business Corporation act, as amended.

/s/ Dennis E. Noll

Name: Dennis E. Noll

Title: Senior Vice President

8

EX-3.2

Exhibit 3.2

ARTICLES OF AMENDMENT

TO THE

AMENDED AND RESTATED
ARTICLES OF INCORPORATION

OF

KINETIC CONCEPTS, INC.

Pursuant to the provisions of the Texas Business Corporation Act, Kinetic Concepts, Inc. (the “Corporation”) hereby adopts the following Articles of Amendment to its Amended and Restated Articles of Incorporation:

ARTICLE ONE

The name of the Corporation is Kinetic Concepts, Inc.

ARTICLE TWO

The following amendment to the Amended and Restated Articles of Incorporation was adopted by the shareholders of the Corporation on July           , 2003 in conformity with the provisions of the Texas Business Corporation Act:

Article Four of the Amended and Restated Articles of Incorporation is hereby amended to read, in its entirety, as follows:

ARTICLE FOUR

The total number of shares of all classes of stock that the Corporation is authorized to issue is 200,000,000 shares, of which 150,000,000 shares shall be designated Common Stock, par value $.001 per share (“Common Stock”), and 50,000,000 shares shall be designated Preferred Stock, par value $.001 per share (“Preferred Stock”).

The Preferred Stock may be divided into and issued in one or more series.  The Board of Directors of the Corporation is expressly authorized to establish series of unissued shares of Preferred Stock and to fix and determine the designations, preferences, limitations and relative rights, including voting rights, of the shares of such series in a resolution or resolutions adopted by the Board of Directors providing for the issue of

Preferred Stock of such series.  In such resolution or resolutions the Board of Directors, to the extent applicable, shall:

(i)designate the series and specify the number of shares of Preferred Stock which shall belong to such series;

(ii)fix the rate of any dividend for such series of Preferred Stock, which dividend may vary from series to series;

(iii)specify whether dividends for such series are cumulative, non-cumulative or partially cumulative;

(iv)specify the manner in which dividends for such series are payable and the date or dates from which such dividends shall accrue;

(v)state whether the shares of such series have preferences over any other class, classes or series of shares as to the payment of dividends;

(vi)state whether such series shall be redeemable and the price at and the terms and conditions on which shares of such series may be redeemed, which redemption may be at the option of the Corporation, the shareholder or another person or upon the occurrence of a designated event or any combination of the foregoing;

(vii)fix the amount payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation;

(viii)state whether the shares of such series have preference in the assets of the Corporation over any other class, classes or series of shares upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation;

(ix)state whether a sinking fund shall be created for the redemption or purchase of the shares of such series, and, if such a fund is established, the terms and provisions governing the operation of any such fund and the status as to reissuance of shares of Preferred Stock of such series purchased or otherwise reacquired, redeemed or retired through the operation thereof;

(x)state whether the shares of such series shall be convertible, and, if convertible, the terms and conditions on which such shares of such series may be converted, which terms and conditions may provide that such shares are convertible at the option of the Corporation, the

2

shareholder or another person or upon the occurrence of a designated event, or any combination of the foregoing into shares of any other class or series;

(xi)state whether the shares of such series are exchangeable, at the option of the Corporation, the shareholder or another person or upon the occurrence of a designated event, or any combination of the foregoing, for shares, obligations, indebtedness, evidence of ownership, rights to purchase securities or other securities of the Corporation or one or more other domestic or foreign Corporations or other entities or for other property or for any combination of the foregoing; and

(xii)state what voting rights the shares of such series shall have, if any.

The Board of Directors of the Corporation, in such resolution or resolutions, may, in a manner not inconsistent with the provisions of these Articles of Incorporation and to the extent permitted by law:

(i)limit the number of shares of such series that may be issued;

(ii)impose conditions or restrictions upon the creation of indebtedness of the Corporation or upon the issue of additional shares of Preferred Stock or other stock ranking equally therewith or prior thereto as to dividends or distribution of assets on voluntary or involuntary liquidation, dissolution or winding up of the Corporation;

(iii)impose conditions or restrictions upon the payment of dividends upon, or the making of other distributions of any kind or character, or the redemption, purchase, retirement or reacquisition of shares of stock ranking junior to Preferred Stock of such series as to dividends or distribution of assets on voluntary or involuntary liquidation, dissolution or winding up of the Corporation; and

(iv)grant other such special rights to the holders of Preferred Stock of such series as the Board of Directors may determine.

ARTICLE THREE

The number of shares of each class or series of capital stock outstanding, all of which were entitled to vote on the amendment to the Amended and Restated Articles of Incorporation, was as follows:

3

Class	Number of Shares
Common Stock	[70,400,000]

ARTICLE FOUR

The number of shares voted for and against the amendment to Article Four of the Amended and Restated Articles of Incorporation was as follows:

Class	For	Against
Common Stock

ARTICLE FIVE

The amendment will have no effect on the stated capital of the Corporation.

4

Executed this            th day July, 2003.

KINETIC CONCEPTS, INC.

By:

Dennert O. Ware, Chief Executive Officer

5

EX-3.3

Exhibit 3.3

AMENDED AND RESTATED

BY-LAWS

OF

KINETIC CONCEPTS, INC.

ARTICLE I

OFFICES

Section 1.               Principal Office.  The principal office of the Corporation shall be in the City of San Antonio, Texas.

Section 2.               Other Offices.  The Corporation way also have offices at such other places both within and without the State of Texas as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

SHAREHOLDERS

Section 1.               Time and Place of Meeting.  All meetings of the shareholders shall be held at such time and at such place within or without the State of Texas as shall be determined by the Board of Directors.

Section 2.               Annual Meetings.  The annual meeting of shareholders of the Corporation for the election of directors of the Corporation, and for the transaction of such other business as may properly come before such meeting, shall be held at such place, date and time as shall be fixed by the Board and designated in the notice or waiver of notice of such annual meeting.

Section 3.               Special Meetings.  Special meetings of the shareholders may be called at any time by the President or the Board of Directors, and shall be called by the President or Secretary at the request in writing of the holders of not less than fifty percent  (50%) of all the shares issued, outstanding and entitled to vote at the meeting.  Such request shall state the purpose or purposes of the proposed meeting.  Business transacted at special meetings shall be confined to the purposes stated in the notice of the netting.

Section 4.               Notice.  Written or printed notice stating the place, day and hour of any shareholders’ meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the President,  Secretary, or the officer or person calling the meeting, to each shareholder of record entitled to vote at such meeting.  If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, to the shareholder at this address as it appears on the stock transfer books of the Corporation.

Section 5.               Record Date.  The Board of Directors may fix in advance a record date for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such record date to be not less than ten (10) nor more than sixty (60) days prior to such meeting or the Board of Directors may close the stock transfer books for such purpose for a period of not less than ten (10) nor more than sixty (60) days prior to such meeting.  In the absence of any action by the Board of Directors, the date upon which the notice of the meeting is mailed shall be the record date.

Section 6.               List of  Shareholders.  The officer or agent of the Corporation having charge of the share transfer records for shares of the Corporation shall make, at least ten (10) days before each meeting of the shareholders, a complete list of the shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number of voting shares held by each, which list, for a period of ten (10) days prior to such meeting, shall be kept on file at the registered office of the Corporation shall be subject to inspection by any such shareholder at any time during the usual business hours.  Such list shall also be produced and kept open at the time and place of  the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting.  The original share transfer records shall be prima facie evidence as to who are the shareholders entitled to examine such list or transfer books or to vote at any meetings of shareholders.

Section 7.               Quorum.  Except as otherwise provided by law or the Articles of Incorporation, the holders of a majority of  the issued and outstanding shares and entitled do vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by the Texas Business Corporation Act (herein called the “Act”).  If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented.  When any adjourned meeting is reconvened and a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.  Once a quorum is constituted, the shareholders present or represented by proxy  a meeting may continue to transact business until adjournment, notwithstanding the subsequent withdrawal therefrom of such number of shareholders as to leave less than a quorum.

Section 8.               Voting.  When a quorum is present at any meeting, the vote of the holders of a majority of  the shares present or represented by proxy at such meeting and entitled to vote shall be the act of  the shareholders, unless the vote of a different number is required by the Act, the Articles of Incorporation or these By-Laws.

Section 9.               Proxy.  Each shareholder shall at every meeting of the shareholder be entitled to one vote in person or by proxy for each share having voting power held by such shareholder.  Every proxy must be executed in writing by the shareholder or by his duly authorized attorney-in-fact, and shall be filed with the Secretary of the Corporation prior to or at the time of the meeting.  No proxy shall be

2

valid after eleven months from the date of its execution unless otherwise provided therein.  Each proxy shall be revocable unless expressly provided therein to be irrevocable and unless otherwise made irrevocable by law.

Section 10.             Action by Written Consent.  Any action required or permitted to be taken at any meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof, and such consent shall have the same force and effect as a unanimous vote of shareholders.

Section 11.             Meeting by Conference Telephone.  Shareholders may participate in and hold meetings of shareholders by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transactions of any business on the ground that the meeting is not lawfully called or convened.

ARTICLE III

DIRECTORS

Section 1.               Numbers of Directors.  The Corporation shall have no less than one and no more than ten directors as may be provided from time to time by a resolution of the Board of Directors or by a vote of the holders of a majority of  shares then entitled to vote in the election of Directors, but no decrease shall have the effect of reducing the term of any incumbent Director.  Directors shall be elected at the annual meeting of the shareholders, except as provided in Section 2 of this Article, and each director shall hold office until his successor is elected and qualified.  Directors need not be shareholders of the Corporation or residence of the State of Texas.  Except as otherwise provided by any agreement between the Corporation and its shareholders, any or all of the Directors may be removed, with or without cause, by the shareholders, at any time, by a vote of the holders of a majority of  the shares then entitled to vote in the election of Directors, provided that notice of  the meeting states that one of the purposes of the meeting is the removal of a director or directors.

Section 2.               Vacancies.  Except as otherwise provided by any agreement between the Corporation and its shareholders, the affirmative vote of the holders of majority of  the shares then entitled to vote in the election of Directors may fill any vacancy occurring in the Board of Directors.  A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office.  Any directorship to be filled by reason of  an increase in the number of directors shall be filled by a vote of the holders of  a majority of the shares then entitled to vote in the election of  Directors at an annual meeting or at a special meeting of shareholders called for that  purpose.  Except as otherwise provided by any agreement between the Corporation and its shareholders, at any annual meeting of shareholders, or any special meaning called for such purpose, any director may be removed from office with or without cause, though his term may not have expired.

3

Section 3.               General Powers.  The business and affairs of the Corporation shall be managed by its Board of Directors, which may exercise all powers of the Corporation and do all such lawful acts and things as are not by the Act, the Articles of  Incorporation or by these By-Laws directed or required to be exercised or  done by the shareholders.

Section 4.               Place of  Meetings.  The directors of the Corporation may hold their meetings both regular and special, either within or without the State of Texas.

Section 5.               Annual Meetings.  The first meeting of each newly elected Board of Directors shall be held without further notice immediately following the annual meeting of the shareholders, and at the same place, unless by unanimous consent of the directors then elected and serving such time or place shall be changed.

Section 6.               Regular Meetings.  Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by the Board of Directors.

Section 7.               Special Meetings.  Special meetings of the Board of Directors may be called by the President on two days’ notice to each director, either personally or by mail or by telegram.  Special meetings shall be called by the President or Secretary in like manner and on the written request of any two directors.

Section 8.               Quorum.  At all meetings of the Board of Directors, the presence of  a majority of  the number of directors fixed by Section 1 of this Article shall be  necessary and sufficient  to constitute a quorum for the transaction of  business, and the affirmative vote of at least a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by the Act, the Articles of  Incorporation or these By-Laws.  If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present.

Section 9.               Executive Committee.  The Board of Directors may, by resolution passed by a majority of the whole Board, designate an Executive Committee, to consist of two or more directors, one of whom shall be designated as chairman, who shall preside at all meetings of such Committee.  To the extent provided in the resolution of the Board of Directors,  the Executive Committee shall have and may exercise all of the authority of the Board of Directors in the management of the business and affairs of the Corporation, except where action of  the Board of Directors is required by the Act or by the Articles of Incorporation, and shall have the power to authorize the seal of the  Corporation to be affixed to all papers which may require it.  The executive Committee shall keep regular minutes of its proceedings and report the same to the Board of Directors when required.  Any member of  the Executive Committee may be removed, for or without cause, by the affirmative vote a majority of the whole Board of Directors. If any vacancy or vacancies occur in the Executive Committee, such vacancy or

4

vacancies shall be filled by the affirmative vote of  a majority of the whole Board of Directors.

Section 10.             Other Committees.  The Board of Directors may,  by resolution passed by a majority of the whole Board, designate other committees, each committee to consist of two or more directors, which committees shall have such power and authority and shall perform such functions as may be provided in such resolution. Such committee or committees shall have such name or names as may be designated by the Board of Directors and shall keep regular minutes of  their proceedings and report the same to the Board of Directors when required.

Section 11.             Compensation of Directors.  Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board of Directors; provided that nothing herein contained shall be construed to preclude any directors from serving the Corporation in any other capacity and receiving compensation therefore.  Members of the Executive Committee may, by resolution of the Board of Directors, be allowed like compensation for attending Executive Committee meetings.

Section 12.             Action by Written Consent.  Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee designated by the Board of Directors may be taken without a meeting if a written consent, setting forth the action so taken, is signed by all the members of the Board of Directors or of such committee, and such consent shall have the same force and effect as a unanimous vote at a meeting.

Section 13.             Meetings by Conference Telephone.  Members of the Board of Directors or members of any committee designated by the Board of Directors may participate in and hold a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of  which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meting, except where a person participates in the meeting for the express purpose of objecting to the transactions of any business on the ground that the meeting is not lawfully called or convened.. .

ARTICLE IV

NOTICES

Section 1.               Form of Notice.  Whenever under the provisions of the Act, the Articles or Incorporation or these By-Laws, notice is required to be given to any director or shareholder, and no provision is made as to how such notice shall be given, it shall not be construed to mean personal notice, but any such notice may be given in writing, by mail, postage prepaid, addressed to such director or shareholder at such address as appears on the books of the Corporation.  Any notice required or permitted to be given by mail shall be deemed to be given at the time when the same be thus deposited, postage prepaid; in the United States mail as aforesaid.

5

Section 2.               Waiver.  Whenever any notice is required to be given to any director or shareholder of the Corporation, under the provisions of the Act, the Articles of  Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated in such notice, shall be deemed equivalent to the giving of such notice.

ARTICLE V

OFFICERS

Section 1.               In General.  The officers of the Corporation shall be elected by the Board of Directors and shall be a President, a Secretary and a Treasurer.  The Board of Directors may also, if it chooses to do so, elect a Chairman of the Board, additional Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers, all of whom shall also be officers.  Two or more offices may be held by the same person.

Section 2.               Election.  The Board of Directors at its first meeting after such annual meeting of the shareholders shall elect a President and, if it so chooses, may elect a Chairman of the Board, both of  whom shall be members of the Board, but the other officers need to be of the Board.  The Board of Directors may appoint such other officers and agents as it shall deem necessary and may determine the salaries of all officers and agents from time to time.  The officers shall hold office until their successors are chosen and qualified.  Any officer elected or appointed by the Board of Directors may be removed, for or without cause, at any time by a majority vote of  the whole Board. Election or appointment of an officer or agent shall not itself create contract rights.

Section 3.               Chairman.  The Chairman of the Board of Directors, if there be a  Chairman, shall preside at all meetings of the shareholders and the Board of Directors and shall have such other powers as my from time to time be assigned by the Board of Directors.

Section 4.               President.  The President shall preside at all meetings of the shareholders and the Board of Directors, if a Chairman of the Board has not been elected, and shall see that all orders and resolutions of  the Board of Directors are carried into effect.  The President shall execute all contracts requiring a seal and shall also create mortgages, conveyances or other legal instruments in the name of and on behalf of  the Corporation, but this provision shall not prohibit the delegation of such powers by the Board of Directors to some other officer, agent or attorney-in-fact of the Corporation.

Section 5.               Vice Presidents.  The Vice President or, if there be more than one, the Vice Presidents in order of their seniority or in any other order determined by the Board of Directors, shall,  in the absence or disability of  the senior Vice President, perform the duties and exercise the powers of  the Senior Vice President, and shall generally assist the President and Senior Vice Presidents and perform such other duties as the Board of Directors shall prescribe.

6

Section 6.               Secretary.  The Secretary shall attend all sessions of the Board of Directors and all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform like duties for any other committee of the Board when required.  He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be.  He shall keep in safe custody the seal of the Corporation.

Section 7.               Assistant Secretaries.  Any Assistant Secretary shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as may be prescribed by the Board of Directors or the President.

Section 8.               Treasurer.  The Treasurer shall have the custody of all corporate finds and securities, and shall keep full and accurate accounts of receipts and disbursements of the Corporation, and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors.  He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and directors at the regular meetings of the Board or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation, and shall perform such other duties as may be prescribed by the Board of Directors or the President.

Section 9.               Assistant Treasurers.  Any Assistant Treasurer shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as may be prescribed by the Board of Directors or the President.

ARTICLE VI

CERTIFICATES OF REPRESENTING SHARES

Section 1.               Form of Certificates.  The Corporation shall deliver certificates representing shares to which shareholders are entitled.  Certificates representing shares of the Corporation shall be in such form as shall be determined by the Board of Directors and shall be numbered consecutively and entered in the books of the Corporation as they are issued.  Each certificate shall state on the face thereof the holder’s name, the number, class of shares, and the par value of the shares or a statement that the shares are without par value.  They shall be signed by the President or a Vice President and the Secretary or an Assistant Secretary, and may be sealed with the seal of the Corporation or a facsimile thereof if the Corporation shall then have a seal.  If any certificate is countersigned by a transfer agent or registered by a registrar, either of which is other than the Corporation or an employee of the Corporation, the signatures of the Corporation’s officers may be facsimiles.  In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on such certificate or certificates, shall cease to be such officer or officers of the Corporation, whether because

7

of death, resignation or otherwise, before such or certificates have been delivered by the Corporation or its agents, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed the certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the Corporation.

Section 2.               Lost Certificates.  The Board of Directors may direct that a new Certificate be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost or destroyed.  When authorizing the issue of a new certificate, the Board of Directors, in its discretion and as a condition precedent to the issuance thereof, may require the owner of the lost or destroyed, certificate, or his legal representative, to advertise the same in such manner as it shall require and/or give .the Corporation a bond in such form, in such sum, and with such surety or sureties as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed.

Section 3.               Transfer of Shares.  Shares of stock shall be transferable only on the books of the Corporation by the holder thereof in person or by his duly authorized attorney and, upon surrender to the Corporation or to the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation or the transfer agent of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

Section 4.               Registered Shareholders.  The Corporation shall be entitled to recognize the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.

ARTICLE VII

GENERAL PROVISIONS

Section 1.               Dividends.  Dividends upon the outstanding shares of the Corporation, subject to the provisions of the Act and of the Articles of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting.  Dividends may be declared and paid in cash, in property, or in shares of the Corporation, provided that all such declarations and payments of dividends shall be in strict compliance with all applicable laws and the Articles of Incorporation.  The Board of Directors may fix in advance a record date for the purposes of determining shareholders entitled to receive payment of any dividend, such record date to be not more than sixty (60) days prior to the payment of such dividend, or the Board of Directors may close the stock transfer books for such purpose for a period of not more than fifty (60) days prior to the payment date of such dividend.  In the absence of any action by the Board of

8

Directors, the date upon which the Board of Directors adopts the resolution declaring such dividend shall be the record date.

Section 2.               Reserves.  There may be created by resolution of the Board of Directors out of the earned surplus of the Corporation such reserve or reserves as the Board of Directors from time to time, in its discretion deems proper to provide for contingencies or to equalize dividends, or to repair or maintain any property of the Corporation, or for such other purpose as the Board shall deem beneficial to the Corporation, and the Board may modify or abolish any reserve in the same manner in which it was created.

Section 3.               Fiscal Year.  The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.

Section 4.               Annual Statement.  The Board of Directors shall present at each annual meeting and when called for by vote of the shareholders at any special meeting of the shareholders, a full and clear statement of the business and condition of the Corporation.

Section 5.               Disallowed Payments.  Any payments made to an officer of the Corporation such as a salary, commission, bonus, interest, or rent, or entertainment incurred by him, which shall be disallowed in whole or in part as a deductible expense by the Internal Revenue Service, shall be reimbursed by such officer to the Corporation to the full extent of such disallowance.  It shall be the duty of the Directors, as a Board, to enforce payment by the officer, subject to the determination of the Directors, proportionate amounts may be withheld from his future compensation payments until the amount owed to the Corporation has been recovered.

ARTICLE VIII

INDEMNIFICATION OF OFFICERS AND DIRECTORS

Section 1.               As utilized in this Article, the following terms shall have the followings terms shall have the meanings indicated:

(a)           The term “corporation” includes any domestic or foreign predecessor entity of the corporation in a merger, consolidation or other action in which the liabilities of the predecessor are transferred to the corporation by operation of law and in any other transaction in which the corporation assumes the liabilities of the predecessor, but does not specifically exclude liabilities that are the subject matter of this Article.

(b)           The term “director” means any person who is or was a director of the corporation and any person who, while a director of the corporation, is or was serving at the request of the corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise.

9

(c)           The term “expenses” include court costs and attorneys’ fees.

(d)           The term “official capacity” means:  (i) when used with respect to a director, the office of director in the corporation, and (ii) when used with respect to a person other than a director, the elective or appointive office in the corporation held by the officer or the employment or agency relationship undertaken by the employee or agent on behalf of the corporation, but (iii) in both (i) and (ii) above does not include service for any other foreign or domestic corporation or any partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise.

(e)           The term “proceeding” means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, any appeal in such an action, suit or proceeding and any inquiry or investigation that could lead to such an action, suit or proceeding.

Section 2.               The corporation shall indemnify a person who was, is or is threatened to be made a named defendant or respondent in a proceeding because the person is or was a director only if it is determined, in accordance with Section 6 of this Article that the person (a) conducted himself or herself in good faith; (b) reasonably believed:  (1) in the case of conduct in the official capacity as a director of the corporation, that the conduct was in the corporation’s best interests, and (ii) in all other cases, that the conduct was at least not opposed to the corporation’s best interests; and (iii) in the case of any criminal proceeding, had no reasonable cause to believe the conduct was unlawful.

Section 3.               A director shall not be indemnified by the corporation as provided in Section 2 of this Article for obligations resulting from a proceeding (a) in which the director is found liable on the basis that a personal benefit was improperly received by the director, whether or not the benefit resulted from an action taken in the person’s official capacity, or (b) in which the person is found liable to the corporation, except to the extent permitted in Section 5 of this Article.

Section 4.               The termination of a proceeding by judgment, order, settlement or conviction or on a plea of nolo contendere or its equivalent is not of itself determinative that the person did not meet the requirements set forth in Section 2 of this Article.  A person shall be deemed to have been found liable in respect of any claim, issue or matter only after the person shall have been so adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom.

Section 5.               A person may be indemnified by the corporation as provided in Section 2 of this Article against judgments, penalties (including excise and similar taxes), fines, settlements and reasonable expenses actually inured by the person in connection with the proceeding; but if the person is found liable to the corporation or is found liable on the basis that a personal benefit was improperly received by the person, the indemnification (a) shall be limited to reasonable expenses actually incurred by the person in connection with the proceeding, and (b) shall not be made in respect of any

10

proceeding in which the person shall have been found liable for willful or intentional misconduct in the performance of the person’s duty to the corporation.

Section 6.               A determination of indemnification under Section 2 of this Article shall be made (a) by a majority vote of a quorum consisting of directors who at the time of the vote are not named defendants or respondents in the proceeding; (b) if such a quorum cannot be obtained, by a majority vote of a committee of the board of directors, designated to act in the matter by a majority vote of all directors, consisting solely of two (2) or more directors who at the time of the vote are not named defendants or respondents in the proceeding; (c) by special legal counsel selected by the board of directors or a committee thereof by a vote as set forth in subsection (a) or (b) of this Section 6, or, if such a quorum cannot be obtained and such a committee cannot be established, by a majority vote of all directors; or (d) by the shareholders in a vote that excludes the shares held by directors who ate named defendants or respondents in the proceeding.

Section 7.               Authorization of indemnification and determination as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination that indemnification is permissible is made by special legal counsel, authorization of indemnification and determination as to reasonableness of expenses shall be made in the manner specified by subsection (c) of Section 6 of this Article for the selection of special legal counsel.  A provision contained in the articles of incorporation, the bylaw, a resolution of shareholders or directors, or an agreement that makes mandatory the indemnification described in Section 2 of this Article shall be        deemed to constitute authorization of indemnification in the manner required herein, even though such provision may not have been adopted or authorized in the same manner as the determination that indemnification is permissible.

Section 8.               The corporation shall indemnify a director against reasonable expenses incurred by the director in connection with a proceeding in which the director is a named defendant or respondent because the person is or was a director of the director has been wholly successful, on the merits or otherwise, in the defense of the proceeding.

Section 9.               If upon application of a director, a court of competent jurisdiction determines after giving any notice the court considers necessary, that the director is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not the director has met the requirements set forth in Section 2 of this Article or has been found liable in the circumstances described in Section 3 of this Article, the corporation shall indemnify the director to such further extent as the court shall determine; but if the person is found liable to the corporation or is found liable on the basis that personal benefit was improperly received by the person, the indemnification shall be limited to reasonable expenses actually incurred by the person in connection with the proceeding.

11

Section 10.             Reasonable expenses incurred by a director who was, is or is threatened to be made a named defendant or respondent in a proceeding may be paid or reimbursed by the corporation in advance of the final disposition of the proceeding and without the defemination [sic] specified in Section 6 of this Article or the authorization or determination specified in Section 7 of this Article, after the corporation receives a written affirmation by the director of a good faith belief that the standard of conduct necessary for indemnification under this Article has been met and a written undertaking by or on behalf of the director to repay the amount paid or reimbursed if it is ultimately determined that he has not meet that standard or if it is ultimately determined that indemnification of the director against expenses incurred by him in connection with that proceeding is prohibited by Section 5 of this Article.  A provision contained in the articles of incorporation, these bylaws, a resolution of the shareholders or directors, or an agreement that makes mandatory the payment or reimbursement permitted under this Section small be deemed to constitute authorization of that payment or reimbursement.

Section 11.             The written undertaking required by Section 10 of this Article shall be an unlimited general obligation of the director, but need not be secured.  It may be accepted without reference to financial ability to make repayment.

Section 12.             Notwithstanding any other provision of this Article, the corporation may pay or reimburse expenses incurred by a director in connection with an appearance as a witness or other participation in a proceeding at a time when he is not a named defendant or respondent in the proceeding.

Section 13.             An officer of the corporation shall be indemnified by the corporation as and to the same extent provided by Sections 7, 8 and 9 of this Article for a director and is entitled to seek indemnification under those sections to the same extent as a director.  The corporation may indemnify and advance expenses to an officer, employee or agent of the corporation to the same extent that is may indemnify and advance expenses to directors under this Article.

Section 14.             The corporation may indemnify and advance expenses to persons who are not or were not officers, employees or agents of the corporation but who are or were serving at the request of the corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, to the same extent that it may indemnify and advance expenses to directors under this Article.

Section 15.             The corporation may indemnify and advance expenses to an officer, employee, agent or person identified in Section 14 of this Article and who is not a director to such further extent, consistent with law, as may be provided by the articles of incorporation, these bylaws, general or specific action of the board of directors or contract or as permitted or required by common law.

Section 16.             The corporation may purchase and maintain insurance or another arrangement on behalf of any person who is or was a director, officer, employee

12

or agent of the corporation or who is or was serving at the request of the corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, against any liability asserted against such person and incurred by such person in such a capacity or arising out of the status as such a person, whether or not the corporation would have the power to indemnify such person against that liability under this Article.  If the insurance or other arrangement is with a person or entity that is not regularly engaged in the business of providing insurance coverage, the insurance or arrangement may provide for payment of a liability with respect to which the corporation would not have the power to indemnify the person only if including coverage for the additional liability has been approved by the shareholders of the corporation.  Without limiting the power of the corporation to procure or maintain any kind of insurance or other arrangement, the corporation may, for the benefit of persons indemnified by the corporation (a) create a trust fund, (b) establish any form of self-insurance, (c) secure its indemnity obligations by grant of a security interest or other lien on the assets of the corporation, or (d) establish a letter of credit, guaranty or surety arrangement.  The insurance or other arrangement may be procured, maintained or established within the corporation or with any insurer or other person deemed appropriate by the board of directors, regardless of whether all or part of the stock or other securities of the insurer or other person are owned in whole or part by the corporation.  In the absence of fraud, the judgment of the board of directors as to the terms and conditions of the insurance or other arrangement and the identity of the insurer or other person participating in an arrangement shall be conclusive and the insurance or arrangement shall not be voidable and shall not subject the directors approving the insurance or arrangement to liability, on any ground, regardless of whether directors participating in the approval are beneficiaries of the insurance or arrangement.

Section 17.             Any indemnification of or advance of expenses to a director in accordance with this Article shall be reported in writing to the shareholders with or before the notice or waiver of notice of the next meeting of shareholders or with or before the next submission to shareholders of a consent to action without a meeting and, in any case, within the twelve (12) month period immediately following the date of the indemnification or advance.

Section 18.             For purposes of this Article, the corporation is deemed to have requested a director to serve an employee benefit plan whenever the performance by the director of the director’s duties to the corporation also imposes duties on, or otherwise involves services by, the director to the plan or participants or beneficiaries of the plan.

Excise taxes, assessed on a director with respect to an employee benefit plan pursuant to applicable law shall be deemed to be fines.  Action taken or omitted by the director with respect to an employee benefit plan in the performance of the director’s duties or for a purpose reasonably believed by the director to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is nor opposed to the best interests of the corporation.

13

ARTICLE IX

BY-LAWS

Section 1.               Amendments.  These By-Laws may be altered, amended or repealed and new By-Laws may be adopted by the shareholders in accordance with the Articles of Incorporation.

Section 2                When By-Laws Silent.  It is expressly recognized that when the By-Laws are silent as to the manner of performing any corporate function, the provisions of the Act shall control.

14

EX-3.6

Exhibit 3.6

CERTIFICATE OF FORMATION
OF
KCI REAL HOLDINGS, L.L.C.

This Certificate of Formation of KCI REAL HOLDINGS, L.L.C. (the “Company”) is being executed by the undersigned for the purpose of forming a limited liability company pursuant to the Delaware Limited Liability Company Act.

1.The name of the limited liability company is KCI REAL HOLDINGS, L.L.C.

2.The address of the registered office of the Company in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle.  The name of the registered agent of the Company at such address is The Corporation Trust Company.

IN WITNESS WHEREOF, the undersigned, an authorized person of the Company, has caused this Certificate of Formation to be duly executed this 13th day of December, 2001.

Tobin E. Olson, Authorized Person

EX-3.7

Exhibit 3.7

LIMITED LIABILITY COMPANY AGREEMENT
OF
KCI REAL HOLDINGS, L.L.C.

Organized under the Delaware Limited Liability Company Act

THIS LIMITED LIABILITY COMPANY AGREEMENT (as amended from time to time, this “Agreement”) hereby is entered into and adopted effective as of December 13, 2001, by Kinetic Concepts, Inc., a Texas corporation, as the initial Member (as defined below) of KCI Real Holdings, L.L.C., a Delaware limited liability company (the “Company”).

ARTICLE I

DEFINITIONS

1.1Definitions.  As used in this Agreement, the following terms have the following meanings:

“Act” means the Delaware Limited Liability Company Act and any successor statute, as amended from time to time.

“Agreement” has the meaning given to that term in the introductory paragraph.

“Capital Contribution” means the amount of money and the fair market value of any property contributed to the Company by a Member after appropriate reduction for liabilities assumed by the Company or otherwise burdening the Capital Contribution.  The initial Capital Contribution of each Member is set forth in Exhibit A.

“Certificate” has the meaning given to that term in Section 2.1.

“Company” means KCI Real Holdings, L.L.C., a Delaware limited liability company.

“DGCL” means the Delaware General Corporation Law, as amended.

“Manager” means a person that has been designated by the Members of the Company as a Manager of the Company pursuant to this Agreement.

“Member” means any Person executing this Agreement as of the date of this Agreement as a member or hereafter admitted to the Company as a member as provided in this Agreement, but does not include any Person who has ceased to be a member in the Company.

“Percentage Interest” means the interest of a Member in the Company, including, without limitation, rights to distributions (liquidating or otherwise), allocations, information, and to vote, consent or approve.

ARTICLE II

Name and Location

Section 2.1.  Formation.  The Company has been organized as a Delaware limited liability company by the filing of a Certificate of Formation (the “Certificate”) under and pursuant to the Act.

Section 2.2.  Name.  The name of this limited liability company is KCI Real Holdings, L.L.C. and all Company business must be conducted in that name or such other names that comply with applicable law as the Managers may select from time to time.

Section 2.3.  Principal Office.  The principal office of the Company shall be located in the City of Wilmington, State of Delaware.

Section 2.4.  Registered Office.  The address of the registered office of the Company in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle.  The name of the registered agent of the corporation at such address is The Corporation Trust Company.

Section 2.5. Other Offices.  Other offices and other facilities for the transaction of business shall be located at such places as the Managers may from time to time determine.

Section 2.6. Purposes.  The purposes of the Company are to engage in any business or activity that is not forbidden by the law of the State of Delaware and of the jurisdiction in which the Company engages in business.

ARTICLE III

MEMBERSHIP

Section 3.1.  Members’ Interests.  The sole Member of the Company is Kinetic Concepts, Inc. which owns 100% of the Percentage Interest of the Company.

Section 3.2.  Admission to Membership.  The admission of new Members shall be only by the unanimous vote of the Members.  If new members are admitted, this Agreement shall be amended to reflect each Member’s revised Percentage Interest.

Section 3.3.  Property Rights.  No Member shall have any right, title, or interest in any of the property or assets of the Company.

Section 3.4.  Liability of Members.  No Member of the Company shall be personally liable for any debts, liabilities, or obligations of the Company, including under a judgment decree, or order of court.

Section 3.5.  Transferability of Membership.  Membership in the Company is transferable only with the unanimous written consent of all Members.  If such unanimous written consent is not obtained, the transferee shall be entitled to receive only the share of profits or other compensation by way of income and the return of contributions to which the transferor Member otherwise would be entitled.

2

Section 3.6.  Resignation of Member.  A Member may not withdraw from the Company except on the unanimous consent of the remaining Members.  The terms of a Member’s withdrawal shall be determined by agreement between the remaining Members and the withdrawing Member.

ARTICLE IV

MEMBERS’ MEETINGS

Section 4.1.  Time and Place of Meeting.  All meetings of the Members shall be held at such time and at such place within or without the State of Delaware as shall be determined by the Managers.

Section 4.2.  Annual Meetings.  In the absence of an earlier meeting at such time and place as the Managers shall specify, annual meetings of the Members shall be held at the principal office of the Company on the date which is thirty (30) days after the end of the Company’s fiscal year if not a legal holiday, and if a legal holiday, then on the next full business day following, at 10:00 a.m., at which the Members may transact such business as may properly be brought before the meeting.

Section 4.3.  Special Meetings.  Special meetings of the Members may be called at any time by any Member.  Business transacted at special meetings shall be confined to the purposes stated in the notice of the meeting.

Section 4.4.  Notice.  Written or printed notice stating the place, day and hour of any Members’ meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the person calling the meeting, to each Member entitled to vote at such meeting.  If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, to the Member at his address as it appears on the records of the Company at the time of mailing.

Section 4.5.  Quorum.  Members present in person or represented by proxy, holding a majority of the total votes which may be cast at any meeting shall constitute a quorum at all meetings of the Members for the transaction of business.  If, however, such quorum shall not be present or represented at any meeting of the Members, the Members entitled to vote, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented.  When any adjourned meeting is reconvened and a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed.  Once a quorum is constituted, the Members present or represented by proxy at a meeting may continue to transact business until adjournment, notwithstanding the subsequent withdrawal therefrom of such number of Members as to leave less than a quorum.

Section 4.6.  Voting.  When a quorum is present at any meeting, the vote of the Members, whether present or represented by proxy at such meeting, holding a majority of the total votes which may be cast at any meeting shall be the act of the Members, unless the vote of a different percentage is required by the Act, the Articles of Organization or this Agreement.  Each Member shall be entitled to one vote for each percentage point represented by their Percentage Interest.  Fractional percentage interests shall be entitled to a corresponding fractional vote.

Section 4.7.  Proxy.  Every proxy must be executed in writing by the Member or by his duly authorized attorney-in-fact, and shall be filed with the Secretary of the Company prior to or at the time of

3

the meeting.  No proxy shall be valid after eleven (11) months from the date of its execution unless otherwise provided therein.  Each proxy shall be revocable unless expressly provided therein to be irrevocable and unless otherwise made irrevocable by law.

Section 4.8.  Action by Written Consent.  Any action required or permitted to be taken at any meeting of the Members may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the Members entitled to vote with respect to the subject matter thereof, and such consent shall have the same force and effect as a unanimous vote of Members.

Section 4.9.  Meetings by Conference Telephone.  Members may participate in and hold meetings of Members by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

ARTICLE V

MEMBERSHIP CAPITAL CONTRIBUTIONS

Section 5.1.  Capital Contributions.  The initial capital contribution of each Member shall be set forth on Exhibit A attached hereto.

Section 5.2.  Additional Contributions.  No additional capital contributions shall be required of any Member.

Section 5.3.  Loans from Members.  Upon the approval of the Managers, any Member may (but shall not be obligated to) advance funds in the form of a loan to the Company.

ARTICLE VI

DISTRIBUTION TO MEMBERS

The Managers shall determine, in their sole discretion, the amount and timing of all distributions from the Company.  Distributions shall be divided among the Members in accordance with their Percentage Interests.  Distributions in kind shall be made on the basis of agreed value as determined by the Managers.  Notwithstanding the foregoing, the Company may not make a distribution to its Members to the extent that, immediately after giving effect to the distribution, the liabilities of the Company, other than liabilities to Members with respect to their interests and liabilities for which the recourse of creditors is limited to specified property of the Company, exceed the fair value of the Company assets, except that the fair value of property that is subject to liability for which recourse of creditors is limited, shall be included in the Company assets only to the extent that the fair value of the property exceeds that liability.

4

ARTICLE VII

ALLOCATION OF NET PROFITS AND LOSSES FOR TAX PURPOSES

For accounting and income tax purposes, all items of income, gain, loss, deduction, and credit of the Company for any taxable year shall be allocated among the Members in accordance with their respective Percentage Interests, except as may be otherwise required by Section 704(c) of the Internal Revenue Code of 1986, as amended.

ARTICLE VIII

DISSOLUTION AND WINDING UP

Section 8.1.  Dissolution.  The Company shall be dissolved upon the first of the following to occur:

(a)Thirty (30) years from the date of filing the Articles of Organization of the Company;

(b)Written consent of all Members to dissolution;

(c)The bankruptcy, retirement, resignation, expulsion or dissolution of a Member, unless there is at least one remaining Member and such Member or Members unanimously agree to continue the Company and its business.

Section 8.2.  Winding Up.  Unless the Company is continued pursuant to Section 1(c) of this Article VIII, in the event of dissolution of the Company, the Managers shall wind up the Company’s affairs as soon as reasonably practicable.  On the winding up of the Company, the Managers shall pay and/or transfer the assets of the Company in the following order:

(a)In discharging liabilities (including loans from Members) and the expenses of concluding the Company’s affairs;

(b)The balance, if any, shall be divided between the Members in accordance with the Members’ Percentage Interests.

ARTICLE IX

MANAGERS

Section 9.1.  Selection of Managers.  Management of the Company shall be vested in the Managers.  The Managers of the Company shall be appointed by the Members.  Each Manager shall serve as a Manager until removed pursuant to Sections 9.2 or 9.3.  Managers need not be residents of the State of Delaware.  The initial Managers of the Company shall be the following named persons:

Dennert O. Ware

Dennis E. Noll

Section 9.2.  Resignations.  Each Manager shall have the right to resign at any time upon written notice of such resignation to the President or Secretary of the Company.  Unless otherwise specified in such written notice, the resignation shall be effective upon the receipt by the Company.

5

Section 9.3.  Removal of Manager.  Any Manager may be removed, for or without cause, though his term may not have expired, by the vote of a majority of the Percentage Interests of the Members at a special meeting called for that purpose.

Section 9.4.  General Powers.  The business of the Company shall be managed by its Managers, which may exercise any and all powers of the Company and do any and all such lawful acts and things as are not reserved under the Act, the Articles of Organization or by this Agreement directly to the Members.

Section 9.5.  Place of Meetings.  The Managers of the Company may hold their meetings, both regular and special, either within or without the State of Delaware.

Section 9.6.  Annual Meetings.  The annual meeting of the Managers shall be held without further notice immediately following the annual meeting of the Members, and at the same place, unless such time or place shall be changed by unanimous consent of the Managers.

Section 9.7.  Regular Meetings.  Regular meetings of the Managers may be held without notice at such time and place as shall from time to time be determined by the Managers.

Section 9.8.  Special Meetings.  Special meetings of the Managers may be called by any Manager on two (2) days notice to each Manager, with such notice to be given personally, by mail, or by facsimile.

Section 9.9.  Quorum and Voting.  At all meetings of the Managers the presence of at least a majority of the number of Managers shall be necessary and sufficient to constitute a quorum for the transaction of business, and the affirmative vote of at least a majority of the Managers present at any meeting at which there is a quorum shall be the act of the Managers, except as may be otherwise specifically provided by the Act, the Articles of Organization or this Agreement.  If a quorum shall not be present at any meeting of Managers, the Managers present may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present.

Section 9.10.  Committees.  The Managers may, by resolution passed by a majority of the Managers, designate committees, each of which shall consist of one or more Managers and shall have such power and authority and shall perform such functions as may be provided in such resolution.  Such committee or committees shall have such name or names as may be designated by the Managers and shall keep regular minutes of their proceedings and report the same to the Managers when required.

Section 9.11.  Compensation of Managers.  The Members shall have the authority to fix the compensation of Managers and to provide for the reimbursement of reasonable expenses incurred by the Managers on behalf of the Company.

Section 9.12.  Action by Written Consent.  Any action required or permitted to be taken at any meeting of the Managers or of any committee designated by the Managers may be taken without a meeting if a written consent, setting forth the action so taken, is signed by all the Managers or of such committee.  Such consent shall have the same force and effect as a unanimous vote at a meeting.

Section 9.13.  Meetings by Conference Telephone.  Managers or members of any committee designated by the Managers may participate in and hold a meeting of the Managers or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other.  Participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of

6

objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

Section 9.14.  Liability of Managers.  No Manager of the Company shall be personally liable for any debts, liabilities, or obligations of the Company, including under a judgment decree, or order of court.

ARTICLE X

NOTICES

Section 10.1.  Form of Notice.  Whenever under the provisions of the Act, the Articles of Organization or this Agreement notice is required to be given to any Manager or Member, and no provision is made as to how such notice shall be given, notice shall not be construed to mean personal notice.  Any such notice may be given in writing, by mail, postage prepaid, addressed to such Manager or Member at such address as appears on the books of the Company, or by telex, telegraph or mailgram.  Any notice required or permitted to be given by mail shall be deemed to be given at the time the same is deposited, postage prepaid, in the United States mail as aforesaid.

Section 10.2.  Waiver.  Whenever any notice is required to be given to any Manager or Member of the Company under the provisions of the Act, the Articles of Organization or this Agreement, a waiver thereof in writing signed by the person or persons entitled to such notice, whether signed before or after the time stated in such waiver, shall be deemed equivalent to the giving of such notice.

ARTICLE XI

OFFICERS

Section 11.1.  In General.  The officers of the Corporation shall be elected by the Managers and shall be a Chairman, a President, a Secretary and a Treasurer.  The Managers may also elect Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers, all of whom shall also be officers.  Two or more offices may be held by the same person.  Managers may be officers.

Section 11.2.  Election.  The Managers at their first meeting after each annual meeting of the Members shall elect a Chairman, a President, a Secretary and a Treasurer and may appoint such other officers and agents as it shall deem necessary, and may determine the salaries of all officers and agents from time to time.  The officers shall hold office until their successors are duly elected and qualified.  Any officer elected or appointed by the Managers may be removed, for or without cause, at any time by a majority vote of the Managers.  Election or appointment of an officer or agent shall not of itself create contract rights.

Section 11.3.  Chairman.  The Chairman of the Managers, if there be a Chairman, shall preside at all meetings of the Members and the Managers shall have such other powers as may from time to time be assigned by the Managers.

Section 11.4.  President.  The President shall be the chief executive officer of the Company, shall have authority and responsibility for the general and active management of the business of the Company and shall see that all orders and resolutions of the Managers are carried into effect.  Subject to the prior approval of the Managers, the President shall execute all contracts, mortgages, conveyances or other legal

7

instruments in the name of and on behalf of the Company, but this provision shall not prohibit the delegation of such powers by the Managers to some other officer, agent or attorney-in-fact of the Company.

Section 11.5.  Vice Presidents.  The Vice President or, if there be more than one, the Vice Presidents in the order of their seniority or in any other order determined by the Managers, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President, and shall generally assist the President and perform such other duties as the Managers shall prescribe.

Section 11.6.  Secretary.  The Secretary shall attend all sessions of the Managers and all meetings of the Members and shall record all votes and the minutes of all such proceedings in a book to be kept for that purpose, and shall perform like duties for any other committees of the Managers when required.  The Secretary shall give, or cause to be given, notice of all meetings of the Members and special meetings of the Managers, and shall perform such other duties as may be prescribed by the Managers or President, under whose supervision he shall be.

Section 11.7.  Assistant Secretaries.  Any Assistant Secretary shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as may be prescribed by the Managers or the President.

Section 11.8.  Treasurer.  The Treasurer shall have the custody of all corporate funds and securities, shall keep full and accurate accounts of receipts and disbursements of the Company, and shall deposit all moneys and other valuable effects in the name of and to the credit of the Company in such depositories as may be designated by the Managers.  The Treasurer shall disburse the funds of the Company as may be ordered by the Managers, taking proper vouchers for such disbursements, shall render to the President and Managers, at the regular meetings of the Managers or whenever they may otherwise require, an account of all his transactions as Treasurer and of the financial condition of the Company, and shall perform such other duties as may be prescribed by the Managers or the President.

Section 11.9.  Assistant Treasurers.  Any Assistant Treasurer shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as may be prescribed by the Managers or the President.

ARTICLE XII

INDEMNITY

Section 12.1.  Indemnification. The Company shall indemnify its Managers, officers, employees, agents and others as fully as, and to the same extent a corporation may indemnify its directors, officers, employees and agents under the Delaware General Corporation Law, as now in effect or hereafter amended.  The Company shall have the power to purchase and maintain liability insurance coverage for those persons as, and to the fullest extent, permitted by the Act, as presently in effect and as may be hereafter amended.

Section 12.2.  Indemnification Not Exclusive.  The rights of indemnification and reimbursement provided for in Section 12.1 shall not be deemed exclusive of any other rights to which any such Manager, officer, employee or agent may be entitled under the Statement of Formation, any agreement or vote of Members, or as a matter of law or otherwise.

8

ARTICLE XIII

MISCELLANEOUS

Section 13.1.  Fiscal Year.  The fiscal year of the Company shall end on December 31st.

Section 13.2.  Records.  The Managers shall maintain records and accounts of all operations of the Company.  At a minimum, the Company shall keep at its principal place of business the following records:

(a)A current list of the name and last known mailing address of each Member;

(b)A current list of each Member’s Percentage Interest;

(c)A copy of the Articles of Organization and Agreement of the Company, and all amendments thereto, together with executed copies of any powers of attorney;

(d)Copies of the Federal, state, and local income tax returns and reports for the Company’s six most recent tax years; and

(e)Correct and complete books and records of account of the Company; and

(f)Minute books which accurately reflect the meetings of the Members and Managers.

Section 13.3.  Seal.  The Company may by resolution of the Managers adopt and have a seal, and said seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.  Any officer of the Company shall have authority to affix the seal to any document requiring it.

Section 13.4.  Checks.  All checks, drafts or orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Company shall be signed by such officer or officers, agent or agents of the Company and in such manner as shall from time to time be determined by resolution of the Managers.  In the absence of such determination by the Managers, such instruments shall be signed by the Treasurer or the Secretary and countersigned by the President or a Vice President of the Company.

Section 13.5.  Deposits.  All funds of the Company shall be deposited from time to time to the credit of the Company in such banks, trust companies or other depositories as the Managers may select.

Section 13.6.  Annual Statement.  The Managers shall present at each annual meeting, and, when called for by vote of the Members, at any special meeting of the Members, a full and clear statement of the business and condition of the Company.

Section 13.7.  Financial Statements.  As soon as practicable after the end of each fiscal year of the Company, a balance sheet as at the end of such fiscal year, and a profit and loss statement for the period ended, shall be distributed to the Members, along with such tax information (including all information returns) as may be necessary for the preparation of each Member of its federal, state and local income tax returns.  The balance sheet and profit and loss statement referred to in the previous sentence may be as shown on the Company’s federal income tax return.

9

ARTICLE XIV

AMENDMENTS

Section 14.1.  Amendments.  This Agreement may be altered, amended or repealed and a new Agreement may be adopted by the vote of a majority of the Percentage Interests of the Members, at any regular meeting or at any special meeting called for that purpose.

Section 14.2.  When Regulations Silent.  It is expressly recognized that when this Agreement is silent as to the manner of performing any Company function, the provisions of the Act shall control.

Executed and adopted as the Limited Liability Agreement of the Company by the undersigned sole member of the Company as of the 13th day of December, 2001.

KINETIC CONCEPTS, INC.

By:

Dennis E. Noll, Senior Vice President

10

EXHIBIT A

Member	Initial Capital Contribution	Percentage Interest
Kinetic Concepts, Inc.	Contribution of Kinetic Concepts, Inc.’s 90 % membership interests in each of KCI Properties Limited and KCI Real Property Limited	100	%

EX-3.10

Exhibit 3.10

CERTIFICATE OF INCORPORATION
OF
KCI LICENSING, INC.

FIRST:  The name of the corporation is KCI Licensing, Inc.

SECOND:  The address of the registered office of the corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle.  The name of the registered agent of the corporation at such address is The Corporation Trust Company.

THIRD:  The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

FOURTH:  The total number of shares of stock which the corporation shall have authority to issue is one thousand (1,000) shares of Common Stock, par value $.01 per share.

FIFTH:  The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors and the directors need not be elected by ballot unless required by the by-laws of the Corporation.

SIXTH:  In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to make, alter, adopt, amend, change or repeal the by-laws of the corporation.

SEVENTH:  The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by the laws of the State of Delaware.  All rights herein conferred are granted subject to this reservation.

EIGHTH:  The corporation shall indemnify to the fullest extent permitted by, and in the manner permissible under, the laws of the State of Delaware any person (and heirs, executors, administrators and estate of such person) made, or threatened to be made, a party to any threatened, pending or completed action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he is or was a director or officer of the corporation, or served another corporation, partnership, joint venture, trust or other enterprise as a director, advisory director, officer, employee or agent at the request of the corporation, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding.  The foregoing rights of indemnification shall not be deemed exclusive of any other rights to which any such person may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise.  The Board of Directors in its discretion shall have

the power on behalf of the corporation to indemnify similarly any person, other than a director or officer, made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he is or was an advisory director, employee or agent of the corporation.  The provisions of this Article Ninth shall be applicable to persons who have ceased to be directors, advisory directors, officers, employees or agents of the corporation and shall inure to the benefit of their heirs, executors and administrators.

Pursuant to section 102(b)(7) (or any successor statute) of the General Corporation Law of the State of Delaware, the personal liability of a director to the corporation or the stockholders of the corporation for monetary damages for breach of fiduciary duty is hereby eliminated.  The terms of the preceding sentence, however, shall not eliminate or limit the liability of a director (i) for any breach of the director’s duty of loyalty to the corporation or the stockholders of the corporation, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 (or a successor statute) of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit.  No amendment or repeal of this paragraph shall apply to or have effect on the liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.

NINTH:  The incorporator is Tobin E. Olson, whose mailing address is 112 East Pecan Street, Suite 1800, San Antonio, Texas 78205.

The undersigned, being the incorporator named above, for the purposes of organizing a corporation pursuant to the General Corporation Law of the State of Delaware, does make this certificate, hereby declaring and certifying that this is his act and deed and the facts herein stated are true, and accordingly has hereunto set his hand this 28th day of July, 1999.

Tobin E. Olson, Incorporator

2

EX-3.11

Exhibit 3.11

BY-LAWS

OF

KCI LICENSING, INC.

ARTICLE I

OFFICES

Section 1.Registered Office. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware.

Section 2.Other Offices.  The Corporation may have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1.Time and Place of Meeting.  All meetings of the stockholders shall be held at such time and at such place within or without the State of Delaware as shall be determined by the Board of Directors.

Section 2.Annual Meetings. Annual meetings of the stockholders shall be held on the first Wednesday in May each year, if not a legal holiday, and if a legal holiday, then on the next full business day following, at 10:00 a.m., at which the stockholders shall elect by a plurality vote a board of directors and transact such other business as may properly be brought before the meeting.

Section 3.Special Meetings.  Special meetings of the stockholders, for any proper purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation of the Corporation, may be called at any time by the President or the Board of Directors, and shall be called by the President or Secretary at the request in writing of the holders of shares of the Corporation then issued, outstanding and entitled to vote at the meeting which represent not less than 25% of the votes entitled to be cast at the meeting.  Such request shall state the purpose or purposes of the proposed meeting. Business transacted at special meetings shall be confined to the purpose or purposes stated in the notice of the meeting.

Section 4.Notice. Written or printed notice stating the place, date and hour of any meeting of stockholders, and in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (6O) days before the date of the meeting, either personally or by mail,

by or at the direction of the President, a Vice President, the Secretary, an Assistant Secretary or the person calling the meeting, to each stockholder of record entitled to vote at such meeting.  If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at his address as it appears on the stock ledger of the Corporation.

Section 5.List of Stockholders. The officer or agent of the Corporation having charge of the stock ledger of the Corporation shall make, at least ten (10) days before each meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder.  Such list, for a period of ten (10) days prior to such meeting, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held.  Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder during the whole time of the meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine such list or stock ledger, or to vote at any meetings of stockholders.

Section 6.Quorum. The holders of issued and outstanding shares which represent not less than a majority of the votes entitled to be cast thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation (all references to the Certificate of Incorporation in these By-Laws includes any Certificate of Designation respecting a resolution of the Board of Directors providing for the issue of a series of preferred stock of the Corporation and which has been filed in the office of the Secretary of State of the State of Delaware).  If, however, such quorum shall not be present or represented at any meeting of the stockholders, a majority in interest of the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time until a quorum shall be present or represented without notice of the adjourned meeting other than announcement of the time and place thereof at the meeting at which the adjournment is taken. When any adjourned meeting is reconvened and a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than thirty (3O) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 7.Voting. When a quorum is present at any meeting, the vote of the holders of a majority of the shares present or represented by proxy at such meeting and entitled to vote shall decide any question brought before such meeting, unless the vote of a different number is expressly required by statute, the Certificate of Incorporation or

2

these By-Laws.  The voting for election of directors may be by written ballot or other means.

Section 8.Proxy.  Unless otherwise provided in the Certificate of Incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share having voting power held by such stockholder. Every proxy must be executed in writing (which shall include telegraphing or cabling) by the stockholder or by his duly authorized attorney-in-fact, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period.

Section 9.Action Without a Meeting.  Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

ARTICLE III

DIRECTORS

Section 1.Number of Directors. The number of directors of the Corporation shall be three (3).  Directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director shall hold office until his successor is elected and qualified.  Directors need not be stockholders of the Corporation.

Section 2.Vacancies and Additional Directorships. Unless otherwise provided in the Certificate of Incorporation, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify.

Section 3.General Powers. The business of the Corporation shall be managed by its Board of Directors, which may exercise all powers of the Corporation and do all such lawful acts and things as are not by statute, or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders.

Section 4.Place of Meetings. The directors of the Corporation may hold their meetings, both regular and special, either within or without the State of Delaware.

3

Section 5.Annual Meetings. The first meeting of each newly elected Board of Directors shall be held without further notice immediately following the annual meeting of the stockholders, and at the same place, unless by unanimous consent of the directors then elected and serving such time or place shall be changed.

Section 6.Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by the Board of Directors.

Section 7.Special Meetings. Special meetings of the Board of Directors may be called by either the Chairman of the Board or the President on two business days’ notice to each director, either personally or by mail or by telegram, and in the case of notice by mail, such notice shall be deemed to have been given on the third day following the date on which such notice is deposited in the United States mail, postage prepaid, properly addressed to such director.  Special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of any two directors.

Section 8.Quorum. At all meetings of the Board of Directors the presence of a majority of the number of directors constituting the whole Board shall be necessary and sufficient to constitute a quorum for the transaction of business, and the affirmative vote of at least a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute, by the Certificate of Incorporation or by these By-Laws. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present.

Section 9.Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees in addition to the executive committee provided for in Section 10 of this Article III, each committee to consist of one or more of the directors of the Corporation.  Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the By-Laws of the Corporation; and, unless the resolution or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock or to adopt a certificate of ownership and merger.  Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the

4

Board of Directors.  Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

Section 10.Executive Committee.  The Board of Directors may, by resolution passed by a majority of the whole Board, designate an executive committee which shall consist of two or more members.  The Chairman of the Board and the President shall be members of the executive committee.  The executive committee shall have, except as otherwise provided by law or by resolution of the Board of Directors, all the authority of the Board of Directors during the intervals between the meetings of the Board of Directors.

Section 11.Compensation of Directors. Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board of Directors, provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of the committees of the Board of Directors may, by resolution of the Board of Directors, be allowed like compensation for attending meetings of such committees.

Section 12.Action Without a Meeting.  Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee designated by the Board of Directors may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or Committee.

Section 13.Meetings by Conference Call, Etc.  Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

Section 14.Removal of Directors. Unless otherwise restricted by the Certificate of Incorporation or by law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors.

Section 15.Reliance Upon Books.  Directors and members of any committee designated by the Board of Directors shall, in the performance of their duties, be fully protected in relying in good faith upon the books of accounts or reports made to the Corporation by any of its officers, or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any such committee, or in relying in good faith upon other records of the Corporation.

5

ARTICLE IV

NOTICES

Section 1.Form of Notice. Whenever under the provisions of the statutes, the Certificate of Incorporation or these By-Laws, notice is required to be given to any director or stockholder, and no provision is made as to how such notice shall be given, it shall not be construed to mean personal notice, but any such notice may be given in writing, by mail, postage prepaid, addressed to such director or stockholder at such address as appears on the books of the Corporation. Any notice required or permitted to be given by mail shall be deemed to be given at the time when the same be thus deposited in the United States mail as aforesaid.

Section 2.Waiver.  Whenever any notice is required to be given to any director or stockholder of the Corporation under the provisions of the statutes, the Certificate of Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated in such notice, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice.  Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the attendance is for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

ARTICLE V

OFFICERS

Section 1.In General. The officers of the Corporation shall be elected by the Board of Directors and shall be a President, a Vice President, a Secretary and a Treasurer.  The Board of Directors may also, if it chooses to do so, elect a Chairman of the Board, additional Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers, all of whom shall also be officers.  Two or more offices may be held by the same person, unless the Certificate of Incorporation or these By-Laws otherwise provide.

Section 2.Election. The Board of Directors at its first meeting after each annual meeting of the stockholders shall elect a President, who shall be a member of the Board, and shall elect one or more vice presidents, a secretary and a treasurer who need not be members of the Board.  The Board of Directors also may appoint a Chairman of the Board, who shall be a member of the Board, and such other officers and agents as it shall deem necessary and may determine the salaries of all officers and agents from time to time.  The officers shall hold office until their successors are chosen and qualified.  Any officer elected or appointed by the Board of Directors may

6

be removed, for or without cause, at any time by a majority vote of the whole Board. Election or appointment of an officer or agent shall not of itself create contract rights.

Section 3.Chairman of the Board. The Chairman of the Board, if there be one, shall preside at all meetings of the stockholders and of the Board of Directors, and shall be responsible for developing the general over-all policies and programs of the Corporation and shall have such other powers and duties as may be assigned to or vested in him from time to time by the Board of Directors.

Section 4.President.  The President shall have general responsibility for carrying out the business and affairs of the Corporation, and shall have general supervision and direction of all other officers of the Corporation, except the Chairman of the Board, if there be one.  In the absence of the Chairman of the Board or if a Chairman of the Board has not been elected, he shall preside at all meetings of the stockholders and of the Board of Directors.  The President shall have such other powers and duties as may be assigned to or vested in him from time to time by the Board of Directors.

Section 5.Vice Presidents. The Vice President or, if there be more than one, the Vice Presidents in the order of their seniority or in any other order determined by the Board of Directors, shall, in the absence or disability of the Chairman of the Board, if there be one, or the President, perform the duties and exercise the powers of such offices, respectively, and shall generally assist the Chairman of the Board, if there be one, and President and perform such other duties as the Board of Directors shall prescribe.

Section 6.Secretary.  The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform like duties for committees of the Board when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. He shall keep in safe custody the seal of the Corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed it may be attested by his signature or by the signature of such assistant secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature.

Section 7.Assistant Secretaries. Any Assistant Secretary shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as may be prescribed by the Board of Directors or the President.

Section 8.Treasurer. The Treasurer shall have the custody of all corporate funds and securities, and shall keep full and accurate accounts of receipts and disbursements of the Corporation, and shall deposit all moneys and other valuable effects in the name

7

and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation in such manner as may be authorized by the Board of Directors from time to time, making proper vouchers for such disbursements, and shall render to the President and directors, at the regular meetings of the Board or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation, and shall perform such other duties as may be prescribed by the Board of Directors or the President.

Section 9.Assistant Treasurers.  Any Assistant Treasurer shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as may be prescribed by the Board of Directors or the President.

Section 10.Bonding. If required by the Board of Directors, all or certain of the officers shall give the Corporation a bond in such form, in such sum and with such surety or sureties as shall be satisfactory to the Board, for the faithful performance of the duties of their office and for the restoration to the Corporation, in case of their death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in their possession or under their control belonging to the Corporation.

ARTICLE VI

CERTIFICATES REPRESENTING SHARES

Section 1.Form of certificates.  The Corporation shall deliver certificates representing all shares to which stockholders are entitled. Certificates representing shares of the Corporation shall be in such form as shall be determined by the Board of Directors and shall be numbered consecutively and entered in the books of the Corporation as they are issued. Each certificate shall state on the face thereof the holder’s name, the number, class of shares, and the par value of the shares or a statement that the shares are without par value. They shall be signed by the Chairman of the Board of Directors, or the President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, and may be sealed with the seal of the Corporation or a facsimile thereof if the Corporation shall then have a seal.  If any certificate is countersigned by a transfer agent or registered by a registrar, either of which is other than the Corporation or an employee of the Corporation, the signatures of the Corporation’s officers may be facsimiles. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed on such certificate, shall cease to be such officer, transfer agent or registrar, whether because of death, resignation or otherwise, before such certificate has been delivered by the Corporation or its agents, such certificate may nevertheless be issued and delivered with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

8

If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions or such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

Section 2.Lost Certificates.  The Board of Directors may direct that a new certificate be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing the issue of a new certificate, the Board of Directors, in its discretion and as a condition precedent to the issuance thereof, may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such form, in such sum, and with such surety or sureties as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

Section 3.Transfer of Shares.  Shares of stock shall be transferable only on the books of the Corporation by the holder thereof in person or by his duly authorized attorney and, upon surrender to the Corporation or to the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation or the transfer agent of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

Section 4.Registered Stockholders.  The Corporation shall be entitled to recognize the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.

Section 5.Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment

9

of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to  any other action.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

ARTICLE VII

GENERAL PROVISIONS

Section 1.Dividends. Dividends upon the outstanding shares of the Corporation, subject to the provisions of the statutes and of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting. Dividends may be declared and paid in cash, in property, or in shares of the Corporation, provided that all such declarations and payments of dividends shall be in strict compliance with all applicable laws and the Certificate of Incorporation.

Section 2.Fiscal Year. The fiscal year of the Corporation shall be as fixed by the Board of Directors.

Section 3.Seal. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

Section 4.Annual Statement. The Board of Directors shall present at each annual meeting and when called for by vote of the stockholders at any special meeting of the stockholders, a full and clear statement of the business and condition of the Corporation.

10

ARTICLE VIII

BY-LAWS

Section 1.Amendments. These By-Laws may be altered, amended or repealed and new By-Laws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the Certificate of Incorporation, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new By-Laws be contained in the notice of such special meeting.  If the power to adopt, amend or repeal by-laws is conferred upon the Board of Directors by the Certificate of Incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal by-laws.  Any action of the Board of Directors to effect any alteration, amendment, repeal or adoption of new By-Laws may be taken only by the affirmative vote of a majority of the whole Board.

Section 2.When By-Laws Silent. It is expressly recognized that when the By-Laws are silent as to the manner of performing any corporate function, the provisions of the statutes shall control.

11

EX-3.12

Exhibit 3.12

CERTIFICATE OF LIMITED PARTNERSHIP

OF

KCI PROPERTIES LIMITED

1.The name of the Limited Partnership is KCI Properties Limited.

2.The location of the Limited Partnership’s principal office where records are to be kept or made available is 8023 Vantage Drive, San Antonio, Texas 78230.

3.The registered office of the Limited Partnership is 8023 Vantage Drive, San Antonio, Texas 78230.  The registered agent at such address is Dennis E. Noll.

4.The name and mailing and street address of the General Partner of the Limited Partnership is as follows:

KCI USA Real Holdings, L.L.C.

8023 Vantage Drive

San Antonio, Texas 78230

5.The limited partnership is being formed pursuant to a Plan of Conversion under Section 2.15 of the Texas Revised Limited Partnership Act.

6.The following information relates to the converting entity:

Name:	KCI Properties Limited
Address:	8023 Vantage Drive, San Antonio, Texas  78230
Date of formation:	December 23, 1991
Prior form of organization:	Limited liability company
Jurisdiction of organization:	Texas

IN WITNESS WHEREOF, the undersigned has hereunto set his hand to this Certificate this 14th day of December, 2001.

GENERAL PARTNER:
KCI USA REAL HOLDINGS, L.L.C.
By:
	Dennis E. Noll, Manager and Vice President

EX-3.13

Exhibit 3.13

LIMITED PARTNERSHIP AGREEMENT
OF
KCI PROPERTIES LIMITED

THIS LIMITED PARTNERSHIP AGREEMENT (this “Agreement”) is entered into by and between KCI USA Real Holdings, L.L.C., a Delaware limited liability company, as the general partner, and KCI Real Holdings, L.L.C., a Delaware limited liability company, as the sole limited partner.

RECITATIONS

KCI Properties Limited, a Texas limited liability company (“KCIP”), has filed Articles of Conversion and executed a Plan of Conversion, pursuant to which KCIP has been converted into KCI Properties Limited, a Texas limited partnership (the “Partnership”) effective on December 17, 2001 (the “Effective Date”).

The Partnership has been formed with KCI USA Real Holdings, L.L.C., a Delaware limited liability company (the “General Partner”), owning a 10% partnership interest and serving as the General Partner and KCI Real Holdings, L.L.C., a Delaware limited liability company (the “Original Limited Partner”) owning a 90% partnership interest and being a Limited Partner.

The General Partner and the Original Limited Partner desire to adopt this Partnership Agreement to read as hereinafter set forth.

NOW, THEREFORE, to reflect the foregoing, the parties hereto agree as follows:

1.The General Partner is hereby admitted to the Partnership as a general partner and the Original Limited Partner is hereby admitted to the Partnership as a limited partner.

2.The General Partner and the Limited Partners agree as follows:

ARTICLE I

DEFINITIONS

1.1Definitions.  As used in this Agreement, the following terms shall have the respective meanings indicated:

“Affiliate” shall mean, when used with reference to a specific Person, (a) any Person that directly or indirectly controls, is controlled by, or is under common control with the specified Person, (b) any Person that is an officer, director, partner, trustee, or serves in a similar capacity with respect to the specified Person, or for which the specified Person is an officer, partner, trustee, or serves in a similar capacity, and (c) any Person that, directly or indirectly, is the beneficial owner of ten percent (10%) or more of any class of equity securities of the specified Person, or of which the specified Person, directly or indirectly, is the owner of ten percent (10%) or more of any class of equity securities.

“Agreement” or “Partnership Agreement” shall mean this Limited Partnership Agreement of KCI Properties Limited, as amended or restated from time to time.

“Available Cash” shall mean, at the time of determination, the amount of Partnership cash on hand that exceeds the amount necessary to meet the current costs, expenses, and liabilities of the Partnership and to provide for adequate reserves, as determined in the reasonable discretion of the

General Partner.  In determining the amount of Available Cash, the General Partner shall take into account, in addition to all other costs, expenses and liabilities, the amount required to (i) pay interest due and payable on any Partnership indebtedness, (ii) make principal payments on Partnership indebtedness as required or advisable, and (iii) pay the reimbursement of the costs and expenses set forth in Section 9.7 hereof.  For purposes of determining Available Cash, depreciation shall not be considered an expense of the Partnership.

“Bankrupt” or “Bankruptcy” shall mean, in respect of a Partner, the occurrence of any of the following with respect to such Partner:

(a)such Partner shall (i) voluntarily consent to an order for relief by filing a petition for relief under the laws of the United States codified as Title 11 of the United States Code, (ii) seek, consent to, or not contest the appointment of a receiver, custodian, or trustee for itself or for all or any part of its property, (iii) file a petition seeking relief under the bankruptcy, arrangement, reorganization, or other debtor relief laws of any state or other competent jurisdiction, (iv) make a general assignment for the benefit of creditors, or (v) admit in writing that it is generally not paying its debts as such debts become due;

(b)(i) a petition is filed against such Partner seeking an order for relief under the laws of the United States codified as Title 11 of the United States Code, or seeking relief under the bankruptcy, arrangement, reorganization, or other debtor relief laws of the United States or any state or other competent jurisdiction, or (ii) a court of competent jurisdiction enters an order, judgment, or decree appointing, without the consent of such Partner, a receiver, custodian, or trustee for it, or for all or any part of its property, and such petition, order, judgment, or decree shall not be and remain discharged or stayed within sixty (60) days after its entry; or

(c)the interest in the Partnership or any Partner is seized or subjected to a charging order by a creditor of such Partner and the same is not released from seizure or charging order or bonded out within thirty (30) days from the date of notice of such seizure or charging order.

“Capital Account” shall mean a separate account for each Partner which shall be maintained as follows:

(a)To each Partner’s Capital Account there shall be credited such Partner’s Capital Contributions, such Partner’s distributive share of Profits, and the amount of any Partnership liabilities assumed by such Partner or which are secured by any of the Partnership’s property Distributed to such Partner; and

(b)To each Partner’s Capital Account there shall be debited the amount of Distributions to such Partner pursuant to any provision of this Agreement, such Partner’s distributive share of Losses, and the amount of any liabilities of such Partner assumed by the Partnership or which are secured by any property contributed by such Partner to the Partnership.

In the event any interest in the Partnership is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest.

The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations.  In the event the General Partner shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits

2

thereto, are computed in order to comply with such Regulations, the General Partner may make such modification, provided that it is not likely to have a material effect on the amounts distributable to any Partner upon the dissolution of the Partnership.  The General Partner shall adjust the amounts debited or credited to Capital Accounts with respect to (i) any property contributed to the Partnership or distributed to the Partners, and (ii) any liabilities which are secured by such contributed or distributed property or which are assumed by the Partnership or the General Partner, in the event the General Partner shall determine such adjustments are necessary or appropriate pursuant to Regulations Section 1.704-1(b)(2)(iv).  The General Partner also shall make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).

“Capital Contribution” shall mean the amount of money and the fair market value of property contributed to the Partnership by a Partner.  The initial Capital Contributions of each Partner are set forth in Exhibit A.

“Certificate of Limited Partnership” shall mean a certificate in the form acceptable for filing with the Secretary of State of Texas under the Limited Partnership Act.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the corresponding provisions of any successor statute.

“Dispose,” “Disposing,” and “Disposition” shall mean a sale, assignment, transfer, exchange, mortgage, pledge, grant of a security interest, or other disposition or encumbrance or the acts thereof.

“Distributions” shall mean the amount of cash and the fair market value of any property distributed to a Partner, after appropriate reduction for any liabilities assumed by a Partner in connection with such Distribution.

“Effective Date” shall have the meaning set forth in the recitals.

“General Partner” shall mean KCI USA Real Holdings, L.L.C., a Delaware limited liability company, together with each other Person (if any) that subsequently becomes a General Partner in the Partnership pursuant to the provisions of this Agreement, but excludes any such Person that subsequently ceases to be a General Partner pursuant to the provisions of this Agreement.

“Independent Accountants” shall mean the independent accountants selected by the General Partner.

“Limited Partners” shall mean each Person set forth on Exhibit A hereto and that is designated on the signature pages hereof as, and that has executed this Agreement as a Limited Partner, but excludes any such Person that subsequently ceases to be a Limited Partner pursuant to the provisions of this Agreement, all as shown on the books and records of the Partnership.

“Limited Partnership Act” shall mean the Texas Revised Limited Partnership Act, Texas Civil Statutes, Article 6132a-1, adopted 1987, as amended from time to time, and any successor to said Act.

“Liquidator” shall have the meaning set forth in Section 13.2 hereof.

“Partners” or “Partner” shall mean the General Partner and the Limited Partners, or any one of them.

“Partnership” shall have the meaning attributed to it in Section 3.1.

3

“Partnership Interest” shall have the meaning set forth in Section 6.3 hereof.

“Partnership Year” shall mean the calendar year.

“Percentage Interest” shall have the meaning set forth in Section 6.3 hereof.

“Person” shall mean an individual, partnership, corporation, trust, unincorporated association, or other entity or association.

“Profits and Losses” shall mean for each Partnership Year or other period, an amount equal to the Partnership’s taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

(a)Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this Section shall be added to such taxable income or loss;

(b)Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses shall be subtracted from such taxable income or loss;

(c)Gain or loss resulting from any Disposition of Partnership property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the fair market value of the property Disposed of, notwithstanding that the adjusted tax basis of such property differs from its fair market value;

(d)In the event the Partnership makes a Distribution of Partnership property in kind, Profits and Losses shall include the amount of gain or loss which the Partnership would have recognized if the property distributed had been sold for its fair market value (after appropriate adjustment for liabilities) immediately prior to such Distribution.

“Regulations” shall mean the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Section 754 Election” shall have the meaning set forth in Section 8.5(a) hereof.

“Voting Interest” shall mean the interest of each Partner as set forth on Exhibit A, as said interests may be adjusted, from time to time, pursuant to this Agreement.

“Winding Up” shall mean the period following a dissolution of the Partnership.

4

ARTICLE II

FORMATION OF LIMITED PARTNERSHIP:
INITIAL CLOSING AND ORGANIZATIONAL CERTIFICATES

2.1Formation and Continuation of Limited Partnership.  The Partnership shall continue as the entity converted from KCI Properties Limited, a Texas limited liability company from which the Partnership was converted on December 17, 2001, under and pursuant to the Limited Partnership Act and the Certificate.  Except as provided to the contrary in this Agreement, the rights, duties, status, and liabilities of the Partners, and the formation, administration, dissolution, and continuation or termination of the Partnership, shall be as provided in the Limited Partnership Act.

2.2Organizational Certificates.  Upon the request of the General Partner, each Limited Partner shall promptly execute, acknowledge, swear to, and deliver all certificates and other instruments and perform such additional acts consistent with the terms of this Agreement as may be necessary to enable the General Partner to form, qualify and continue the Partnership as a limited partnership under the laws of the State of Texas.

ARTICLE III

PARTNERSHIP NAME, OFFICES, AND TERM

3.1Limited Partnership Name.  The name of the Partnership shall be “KCI Properties Limited” and the business of the Partnership shall be conducted under such name or under such other assumed name as may be selected from time to time by the General Partner.

3.2Principal Place of Business.

(a)The address of the registered office of the Partnership in the State of Texas shall be 8023 Vantage Drive, San Antonio, Texas, 78230, and the name of the registered agent at such address is Dennis E. Noll.

(b)The principal place of business of the Partnership shall be 8023 Vantage Drive, San Antonio, Texas, 78230;

or such other place as may be designated by the General Partner.  The books and records of the Partnership shall be maintained at the Partnership’s principal place of business.  The Partnership shall have such other places of business as the General Partner deems necessary or desirable.  The General Partner shall notify the Limited Partners of any change in the principal place of business of the Partnership.

(c)The General Partner’s principal place of business is 8023 Vantage Drive, San Antonio, Texas, 78230.

3.3Term.  The Partnership shall continue, unless sooner terminated in accordance with any provision of this Agreement, until the close of Partnership business on December 31, 2051.

5

ARTICLE IV

PURPOSES

The purpose and intent of this Partnership will be as follows:

(a)To own, operate, invest, maintain, rent, lease, manage, develop, explore, or sell, whether as part or as whole, all or any portion of the Partnership’s assets;

(b)To produce income from the Partnership’s assets; and

(c)For any other lawful business which may be carried on by a limited partnership under the laws of the State of Texas.

ARTICLE V

DISPOSITION OF PARTNERSHIP INTERESTS

5.1Dispositions.  No Partner shall Dispose of any Partnership Interests it owns or may acquire except with the written consent of all of the Partners.

5.2Options on Assignment.  Except as provided in Section 5.1 of this Agreement and subject to the provisions of the remaining sentences of this Section 5.2, before any Partner (including any heir, devisee, legatee, personal representative, or assignee or transferee of any Partner) may assign or transfer all or any part of his or her Partnership Interests, he or she must first (i) notify each of the other Partners by United States Certified Mail, Return Receipt Requested, as to the Partnership Interests he or she intends to assign or transfer, the name of the proposed assignee or transferee, and the price and terms upon which the assignment or transfer is to be made (hereinafter referred to as “the Notice”) and (ii) obtain the unanimous written consent of the Partners, which consent may be granted or withheld in each said Partner’s sole discretion, to allow such assignment or transfer (hereinafter referred to as “Consent”).  If, within sixty (60) days of the date of such Notice to purchase, such assigning Partner has not received Consent, then it shall be presumed that the non-assigning Partners denied such assignment or transfer.  If the assigning Partner has received Consent, the Company shall have an exclusive option for a period of ninety (90) days after the date of such Notice to purchase, at the price and on the terms set out in the Notice, all (but not less than all) of the Partnership Interests to be Disposed of.  If Consent is received and the foregoing option is not exercised, each of the non-assigning Partners shall have an exclusive option for a period of thirty (30) days after (i) the primary option expires or (ii) notice of non-exercise of the primary option is given, whichever is first to occur, to purchase, at the price and on the terms set out in the Notice, all (but not less than all) of the Partnership Interests to be Disposed of.  The purchasing Partners shall have the right to exercise said option in such proportions as they agree upon among themselves or, in the absence of any such agreement, in proportion to their respective Partnership Interests as reflected by the Company books on the date such Notice is given.  If Consent is received and neither of the foregoing options are exercised, the selling Partner may assign or transfer his or her Partnership Interests at the price, on the terms, and to the assignee or transferee stated in the notice at any time within sixty (60) days after the foregoing option to the non-assigning Partners expires, but not thereafter unless and until he or she gives a new notice to the other Partners holding a majority of the total Partnership Interests (other than the assigning Partner’s Partnership Interests) again consent, and they and the Company again fail to exercise their respective options under the foregoing provisions.  Notwithstanding any provision in this Section to the contrary, with respect to any donative or testamentary transfer to a proposed transferee (other than as provided in Section 5.1 of this Agreement),

6

the Company or the purchasing Partner shall exercise their respective options upon the price as determined in Section 5.3 of the Agreement.

5.3Purchase by Partnership.  The Partnership may acquire a portion or all of a Limited Partner’s Partnership Interests, upon such terms, provisions, and conditions as may be agreed upon by the General Partner and such Limited Partner.  In the event of a default hereunder, which default is not cured within thirty (30) days after notice of said default, the Partnership shall have the option to purchase the defaulting Partner’s interest upon the price and terms as determined in Section 5.3 of this Agreement, as if said defaulting Partner was in Bankruptcy.

5.4Status After Disposition.  No Limited Partner shall have the right, without the consent of the General Partner, to constitute its assignee as a Limited Partner (whether or not such transfer is permitted under Article V).  In addition, no Disposition by a Limited Partner shall release such Limited Partner from any of its obligations under this Agreement without the written consent of the General Partner (which consent may be granted or withheld in the sole discretion of the General Partner).  A Person that receives an interest or right in or in respect of the Partnership but that is not admitted to the Partnership as a substituted or additional Partner shall not be entitled to vote, and the interest of such Person shall not be counted in determining, for voting or quorum purposes, the Voting Interests.  Any Person receiving an interest or right in or in respect of the Partnership (whether or not such Person becomes a Limited Partner) shall not be entitled to Dispose of its interest or right or any part thereof without fulfilling the conditions of Sections 5.1 and 5.2 to the same extent and in the same manner as any Limited Partner that desires to effect a Disposition of an interest in the Partnership.

5.5Disposition Documents.  Notwithstanding Sections 5.1 or 5.2, the Partnership shall not recognize, for any purpose, any purported Disposition of all or any portion of or interest in a Limited Partner’s Partnership Interests unless and until the provisions of this Article V have been satisfied and there shall have been delivered to the General Partner a dated notification of such Disposition (i) executed, acknowledged, and sworn to by both the Limited Partner effecting such Disposition and the Person to whom such interest is Disposed, (ii) if the assignee wishes to become a substituted Limited Partner, the acceptance by such assignee of all of the terms and provisions of this Agreement (including, without limitation, a grant by such assignee to the General Partner and any successors thereto and each of its officers of the power of attorney set forth in Article XIV), and (iii) containing a representation that such Disposition was made in accordance with all applicable laws and regulations.  Each Disposition shall be effective as of the first day of the calendar month immediately following the month in which the Partnership actually receives the aforesaid notification of Disposition.

5.6Disposition Costs.  All costs incurred by the Partnership in connection with the Disposition of an interest in the Partnership (including, without limitation, the fees incurred in connection with the obtaining of the legal opinions referred to in Section 5.1(c)) shall be borne and paid by the Partner effecting the Disposition within ten (10) days after the receipt by such Partner (or such Partner’s estate or legal representative, as applicable) of the Partnership’s invoice for the amount due.

5.7Admission of a Substituted Limited Partner.  The General Partner may, in its absolute discretion, and without the consent or agreement of any other Partner, admit an assignee of a Partnership Interest as a substituted Limited Partner.  Upon admission, a substituted Limited Partner shall be subject to all provisions of this Agreement as if originally a party hereto.

5.8Disposition of General Partner’s Interests.  The General Partner shall have the right, from time to time, with the approval of a majority of the Voting Interests to effect a Disposition of all or any portion of its interests in the Partnership to one or more Persons and to admit the Person or Persons to whom such interest or portion thereof is Disposed as an additional or substituted General Partner.  In

7

the event any Person is admitted as a substituted General Partner, such admission shall occur contemporaneously with the withdrawal of the General Partner that disposes of its interest.  Any additional or substituted General Partner shall continue the business of the Partnership.  Notwithstanding anything in this Agreement to the contrary, any General Partner who voluntarily or involuntarily for any reason withdraws from the Partnership (including, without limitation, a withdrawal by a General Partner pursuant to Section 13.1(b)), or sells, transfers, or assigns his interest in the Partnership, shall be and remain liable for all obligations and liabilities incurred by him as a General Partner prior to the time of such withdrawal, sale, transfer, or assignment, but he shall be free of any obligation or liability as a General Partner incurred as a result of the activities of the Partnership from and after the time of such withdrawal, sale, transfer, or assignment.

5.9Pledge of Partnership Interest.  Nothing in this Agreement including, without limitation, Sections 5.1 and 5.2 shall prevent any Partner from pledging its Partnership Interest to any financial institution, whether acting on its own behalf or as Collateral Trustee or Agent, to which such Partner or the Partnership has incurred or guaranteed any obligation, and neither any such financial institution which exercises its rights and remedies under any such pledge agreement nor any person who becomes a holder of Partnership Interests as the result thereof or its successors or assigns shall be bound by the restrictions set forth in Sections 5.1 and 5.2.

ARTICLE VI

CONTRIBUTIONS AND LOANS

6.1Capital Contributions.  Each Partner will be deemed to have contributed to the capital of the Partnership effective on the date hereof its proportionate share based upon its respective Partnership Interest, of the total capital of the Partnership.  Except as otherwise provided in this Agreement, no Partner shall have any obligation to make any additional contributions of capital to the Partnership or to make any loan to the Partnership, and no Partner shall have any liability to the Partnership or any other Partner by virtue of refusing to make any additional contributions of capital or loans to the Partnership.

6.2Return of Capital Contributions.  No Partner is entitled to the return of its Capital Contribution to the Partnership or to be paid interest in respect of either its Capital Account or any Capital Contribution made by it to the Partnership.  No unrepaid Capital Contribution shall be deemed or considered to be a liability of the Partnership or of any Partner.  No Partner shall be required to contribute or loan any cash or property to the Partnership to enable the Partnership to return any Partner’s Capital Contribution to the Partnership.

6.3Partnership Interests; Percentage Interests.

(a)The interest of each Partner in the Partnership (which shall include, without limitation, its rights as General Partner or Limited Partner, as the case may be, and its interest in revenues, income, gains, losses, deductions, Available Cash and Distributions pursuant to Section 13.3) shall be referred to as its “Partnership Interest.”

(b)The capital percentages (the “Percentage Interests”) of the Partners shall be as set forth opposite the name of each Partner in Exhibit A, as said interests may be adjusted, from time to time, pursuant to this Agreement.

6.4Computation of Capital Account.  The balance of the “Capital Account” of a Partner is initially zero and as of any date is increased by (i) the amount of cash contributed by that Partner to the Partnership on or prior to that date, (ii) the fair market value (as set forth in this Agreement, or if not set

8

forth in this Agreement, as determined by the General Partner) of any property (reduced by any liabilities which are assumed by the Partnership or to which such property is subject) which is contributed by that Partner to the Partnership on or prior to that date and (iii) any item of Partnership income or gain which is allocated to such Partner pursuant to Section 7.1 on or prior to that date; and is decreased by (iv) any Partnership deduction or loss which is allocated to such Partner pursuant to Section 7.1 on or prior to that date, (v) the amount of cash distributed by the Partnership to such Partner on or prior to that date and (vi) the fair market value (as set forth in this Agreement, or if not set forth in this Agreement, as determined by the General Partner) of any property (reduced by any liabilities which are assumed by the distributee Partner or to which the property is subject) which is distributed by the Partnership to the Partner on or prior to that date.  For Capital Account purposes, depreciation, cost recovery deductions and gain or loss on sale or other disposition shall take into account the book basis, and not the tax basis, of the assets of the Partnership.

ARTICLE VII

ALLOCATIONS AND DISTRIBUTIONS

7.1Capital Accounts.  A “Capital Account” shall be established and maintained for each Partner.  For purposes of this Article VII, the term “Partner” shall include any assignee of a Partnership Interest.

7.2Allocation of Profits and Losses.  All Profits and Losses realized or incurred in the business of the Partnership shall be allocated among the Partners in accordance with their respective Percentage Interests on the date of such allocation.  Notwithstanding the foregoing sentence, in accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the capital of the Partnership shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property and its initial fair market value.

7.3Distributions.  Distributions of Available Cash shall be made at such times and in such amounts as the General Partner, in its sole discretion, may determine, and shall be distributed among the Partners in accordance with their respective Percentage Interests immediately prior to Distribution.

7.4Qualified Income Offset.  Notwithstanding Section 7.2, in the event any Partner unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specifically allocated to such Partners in an amount and manner sufficient to eliminate the deficit balances in their Capital Accounts created by such adjustments, allocations, or distributions as quickly as possible.  Any special allocations of items of income or gain pursuant to this Section 7.4 shall be taken into account in computing subsequent allocations of Profits pursuant to this Article VII, so that the net amount of any items so allocated and the Profits, Losses and all other items allocated to each Partner pursuant to this Article VII shall, to the extent possible, be equal to the net amount that would have been allocated to each such Partner pursuant to the provisions of this Article VII if such unexpected adjustments, allocations or distributions had not occurred.

9

ARTICLE VIII

ADMINISTRATIVE AND TAX MATTERS

8.1Books and Records.  The books and records of the Partnership shall be kept, at the expense of the Partnership, by the General Partner at its principal places of business or at such other place as the General Partner may designate.  The books and records of the Partnership shall be maintained on a calendar year basis, using the accrual method and in accordance with this Agreement and reasonable accounting practices; provided, however, the General Partner may elect to keep books and records on the cash basis of accounting for income tax purposes.  The books and records of the Partnership shall reflect all Partnership transactions and shall be appropriate and adequate for conducting the Partnership business.  On or before March 15 (or as soon thereafter as may be practicable) of each year, each Partner shall receive a report indicating its share of Partnership income, credits, and deductions for income tax purposes during the immediately preceding year.

8.2Inspection.  Each Partner shall have the right, upon giving seven (7) business days prior written notice to the General Partner, to inspect the books and records of the Partnership during reasonable business hours at the principal place of business of the Partnership or such other location as the General Partner may designate.

8.3Bank Accounts: Investments.  All funds of the Partnership shall be deposited in its name in an account or accounts maintained in a national or state bank or banks or brokerage account or accounts designated from time to time by the General Partner.  The funds of the Partnership shall not be commingled with the funds of any other Person.  Checks shall be drawn upon the Partnership account or accounts only for the purposes of the Partnership and shall be signed by such signatory party or parties as may be designated from time to time by the General Partner.  The General Partner shall have the right to deposit Partnership funds that, from time to time, are not required for the operation of the business of the Partnership in interest bearing bank accounts or to purchase commercial paper, treasury bills, or other short-term instruments or interests as the General Partner deem necessary, appropriate, or advisable.

8.4Tax Matters Partner.  The Partners recognize that the General Partner will be treated as the tax matters partner of the Partnership pursuant to Section 6231(a)(7) of the Code.  The Tax Matters Partner shall use its best efforts to cause all Partners to become “notice partners” within the meaning of Section 6231(a)(8) of the Code.  The Tax Matters Partner shall keep all other Partners informed of all matters that may come to its attention in its capacity as Tax Matters Partner by giving the other Partners notice thereof within thirty (30) days after the Tax Matters Partner becomes informed of any such matter.  The Tax Matters Partner shall not take any action contemplated by Sections 6222 through 6232 of the Code unless the Tax Matters Partner has first given the other Partners notice of the contemplated action and received the approval to such contemplated action of Partners owning, in the aggregate, at least a majority of the Voting Interests.  This provision is not intended to authorize the Tax Matters Partner to take any action that is left to the determination of an individual Partner under Sections 6222 through 6232 of the Code.

8.5Tax Returns and Elections.

(a)Tax Returns.  The General Partner shall prepare and file (or cause to be prepared and filed) all income tax returns of the Partnership and shall furnish copies thereof to the Limited Partners.  The General Partner, on behalf of the Partnership and at the time and in the manner provided in Regulation Section 1.745-1(b), may make an election to adjust the basis of Partnership property in the manner provided in Sections 734(b) and 743(b) of the Code (a “Section 754 Election”).

10

(b)Income Tax Elections.  The General Partner shall have the right to make any applicable elections under the Code which, in its best judgment, are in the best interest of the Partnership, other than an election to treat the Partnership as other than a partnership for federal income tax purposes.

ARTICLE IX

MANAGEMENT; LIMITATIONS;
MEETINGS; STANDARD OF CARE; INDEMNIFICATION

9.1Management.  The management and control of the Partnership shall be vested solely in the General Partner, who shall have (subject to the limitations imposed by this Agreement) full, exclusive, and complete discretion in the management and control of, and in the making of all decisions affecting, the Partnership business.  Without limiting the generality of the preceding sentence, the General Partner shall have (subject to the aforesaid limitations) the authority, the right, and the power, on behalf of the Partnership:

(a)to enter into, execute, deliver, amend, and perform any and all agreements, contracts, documents, certifications, and instruments binding the Partnership as may be necessary or convenient in connection with the ownership, management, maintenance, and operation of Partnership property;

(b)to execute, in furtherance of any or all of the purposes of the Partnership, any lease, bill of sale, contract, or other instrument purporting to convey or encumber the real or personal property of the Partnership;

(c)to sell, transfer, exchange, or otherwise dispose of the assets of the Partnership;

(d)to establish reserves for working capital and for taxes, insurance, debt service, repairs, replacements or renewals, or other costs and expenses incident to the ownership of Partnership property and for other such purposes as the General Partner deems appropriate under the circumstances from time to time;

(e)to have the Partnership’s direct expenses billed directly to and paid by the Partnership;

(f)to pay all taxes, charges, and assessments against the Partnership and its property;

(g)to admit Partners as contemplated by Article V of this Agreement;

(h)to open, maintain, and close bank accounts, to designate and change signatories on such accounts, and to draw checks and other orders for the payment of monies;

(i)to settle claims, to prosecute, defend, and settle lawsuits, and to handle all matters with governmental agencies;

(j)to deposit Partnership funds that, from time to time, are not required for the operation of the business of the Partnership in interest bearing bank, brokerage or money market fund accounts or to purchase commercial paper, treasury bills, or other short-term instruments or interests as the General Partner deems necessary, appropriate, or advisable;

11

(k)to engage consultants, accountants, attorneys, managers, and any and all other agents and assistants, both professional and non-professional, as the General Partner may deem necessary, appropriate, or advisable in furtherance of the purposes of the Partnership, and to compensate such Persons for services rendered;

(l)to collect all sums due the Partnership;

(m)to prepare and file all Partnership tax returns and to make all elections for the Partnership thereunder;

(n)except as otherwise provided herein, to determine the timing and amount of any distributions to the Partners (whether for cash or property);

(o)to take any and all other action that the General Partner may deem necessary, appropriate, or desirable in furtherance of the purposes of the Partnership which is not inconsistent with Section 9.3; and

(p)to purchase such insurance as the General Partner, in its discretion, may determine.

No person dealing with the Partnership shall be required to inquire into the authority of the General Partner to take any action or make any decision hereunder, and every agreement, contract, undertaking, document, certification or instrument executed by the General Partner with respect to any business or property of the Partnership shall be conclusive evidence in favor of any and every person relying thereon or claiming thereunder that (i) at the time of the execution and/or delivery thereof, this Agreement was in full force and effect, (ii) such instrument was duly executed in accordance with the terms and provisions of this Agreement and is binding upon the Partnership, and (iii) the General Partner was duly authorized and empowered to execute and deliver any and every such agreement, contract, undertaking, document, certification or instrument for and on behalf of the Partnership.

9.2Authority of the General Partner.  Any person dealing with the Partnership or the General Partner may rely upon a certificate signed by the General Partner thereunto duly authorized, concerning:

(a)the identity of the General Partner or any other Partner;

(b)the existence or nonexistence of any fact or facts that constitute conditions precedent to acts by the General Partner or in any other manner germane to the affairs of the Partnership;

(c)the person or persons who are authorized to execute and deliver any instrument or document of the Partnership; or

(d)any act or failure to act by the Partnership or concerning any other matter whatsoever involving the Partnership or any Partner.

9.3Specific Limitations on the General Partner’s Authority.  Notwithstanding anything to the contrary contained in this Agreement, the General Partner shall have no right, power, or authority, without the prior approval (which shall not be unreasonably withheld or delayed) to the specific act in question by Partners owning, in the aggregate, at least two-thirds (2/3) of the Voting Interests, to effectuate any one or more of the following acts:

12

(a)to do any act in contravention of this Agreement;

(b)to possess Partnership property or assign, transfer, mortgage, pledge, or grant a security interest in and/or a deed of trust with respect to Partnership property for other than a Partnership purpose; or

(c)to sell, transfer or otherwise dispose of all or substantially all of the assets of the Partnership.

9.4Meetings of Partners.  Any matter requiring the approval of the Partners pursuant to this Agreement may be considered at a meeting of the Partners called by the General Partner or Partners owning fifteen percent (15%) of the Voting Interests and held not less than seven (7) nor more than forty-five (45) days after written notice of such meeting, stating the date, time, and place where such meeting is to be held and the purposes for which it is called, is delivered to the Partners in accordance with the provisions of Section 15.3. The presence at such meeting of the General Partner and Limited Partners owning, in the aggregate, a majority of the Voting Interests shall constitute a quorum for the transaction of business.  Any action required or permitted to be taken at any meeting of the Partners may, however, be taken (i) without a meeting by means of the General Partner’s submitting to the Limited Partners, in accordance with the provisions of Section 15.3, a statement of the matter to be voted on, the purpose thereof, and the period within which the Limited Partners must respond either in the affirmative or in the negative to the matter in respect of which the vote is requested or (ii) by means of a telephone conference in which all Partners participating in the meeting and constituting a quorum can hear and speak to each other.  Except as specifically provided to the contrary in this Agreement, all decisions of the Partners pursuant to this Section 9.4 shall be made by the concurring vote (whether by actual vote or deemed vote pursuant to Section 15.14) of Partners owning, in the aggregate, at least a majority of the Voting Interests including, without limitation, the termination of any management or similar agreements or contracts regarding the management of any properties owned by the Partnership.

9.5Standards of Care.  In the performance of its duties under this Agreement, the General Partner shall use reasonable efforts to conduct the business of the Partnership in a good and businesslike manner and in accordance with good business practice.  Neither the General Partner (or any Affiliate thereof) nor its shareholders, directors, officers, partners or employees shall be held liable or responsible to any Partner or to the Partnership, however, for any losses sustained or liabilities incurred, in connection with, or attributable to, errors in judgment, negligence, or other fault of the General Partner (or any Affiliate thereof) or its shareholders, directors, officers, partners or employees, except that which is attributable to the proven gross negligence or willful misconduct of such General Partner (or any Affiliate thereof) or its shareholders, directors, officers, or employees.  The Partners acknowledge that the General Partner and the Limited Partners and the Affiliates of the General Partner, are engaged in activities other than the activities of the Partnership and that the General Partner shall not be expected or required to devote their full time to the management of the Partnership.  Participation in the Partnership shall not in any way act as a restraint on the other present or future business activities or investments of any Partner (or any Affiliate of a Partner), or any employee, officer, director, or shareholder of any Partner, whether or not such activities are competitive with the business of the Partnership.  As a result of this Agreement, no Partner (or any Affiliate of a Partner) or any employee, officer, director, or shareholder of any Partner shall, under any circumstances, be obligated or bound to offer or present to the Partnership or any of the other Partners any business opportunity presented or offered to them or the Partnership as a prerequisite to the acquisition of or investment in such business opportunity by such Partner (or any Affiliate of such Partner) or any employee, officer, director, or shareholder of such Partner for its account or the account of others.  In furtherance thereof, each of the Partners hereby agrees that any business or activity in which a Partner (or any Affiliate of a Partner) or any employee, officer, director, or shareholder of a Partner engages, conducts, or participates outside the Partnership shall be

13

conclusively deemed not to be a business or activity in competition with or an opportunity of the Partnership.  Any such business or activity of a Partner (or any Affiliate of a Partner) or any employee, officer, director, or shareholder of a Partner may be undertaken with or without notice to or participation therein by the Partnership or the other Partners.  Each Partner and the Partnership hereby waive any right or claim that such Partner or the Partnership may have against a Partner (or any Affiliate of a Partner) or any employee, officer, director, or shareholder of a Partner with respect to any such business or activity or the income or profits therefrom.

9.6Indemnification of the General Partner.  The Partnership shall indemnify and hold harmless to the fullest extent permitted by law, the General Partner (or any Affiliate thereof) and its shareholders, directors, officers, partners, and employees (herein referred to in the aggregate as “Indemnified Parties”), to the extent that the Partnership assets are sufficient therefor, from and against any and all claims, demands, liabilities, costs (including reasonable attorney’s fees and court costs), damages, and causes of action arising out of, relating to, or which are or may be directly or indirectly attributable or incidental to actions or occurrences under this Agreement or which otherwise relate to the Partnership or occurrences during the term of the Partnership, whether or not arising out of the negligence of the Indemnified Party, except where the claim at issue is based upon the proven gross negligence, willful misconduct or fraud of the Indemnified Party or a breach of the Act or this Agreement by the Indemnified Party.  The indemnification rights herein contained shall be cumulative of, and in addition to, any and all rights, remedies, and recourses to which the Indemnified Party shall be entitled as against third parties.

9.7Reimbursement.  The General Partner shall be entitled to reimbursement out of Partnership funds for any and all actual costs and expenses, incurred by the General Partner on behalf of the Partnership, while acting on behalf of the Partnership.

9.8Removal of the General Partner.  The General Partner may be removed from the Partnership, with or without cause, by approval or written consent of Partners who own at least two-thirds (2/3) of the Voting Interests (excluding the Voting Interests of the General Partner).  Any action of the Limited Partners shall be reflected in a written instrument approved by the requisite percentage.  In the event of the removal of a General Partner as herein provided, the General Partner shall retain its interest in the Partnership; provided, however, that the foregoing shall not constitute a waiver or exculpation by the Partnership or any Partner of any liability which the General Partner may have to the Partnership or any Partner, and the General Partner, even though removed, shall remain entitled to indemnification from the Partnership pursuant to Section 9.6 with respect to any matter arising prior to its removal, and provided further that in the event of the removal of the sole remaining General Partner, the Partnership shall be dissolved and liquidated, unless reconstituted or continued by the selection of a substitute General Partner as provided in Article XIII.

ARTICLE X

STATUS AND LIABILITY OF LIMITED PARTNERS

10.1General.  Subject to the terms and conditions of this Agreement, each Limited Partner shall have all of the rights, and be afforded the status, of a limited partner as set forth in the Limited Partnership Act.  The Limited Partners shall not take part in the management or control of the Partnership business, transact any business for the Partnership, or have the power to sign for or bind the Partnership.

10.2Limitation of Liability.  The liability of each Limited Partner shall be limited as provided under the Limited Partnership Act to (i) its share of the assets and undistributed Profits of the Partnership, (ii) for a period of one (1) year following any such return, an amount equal to the amount of

14

any Capital Contribution rightfully returned to the Limited Partner necessary to discharge Partnership liabilities to all creditors who extended credit to the Partnership during the period the Capital Contribution was held by the Partnership, and (iii) any Partnership funds or property wrongfully distributed or returned to such Limited Partner.

ARTICLE XI

LIMITED PARTNER REPRESENTATIONS
AND WARRANTIES AND COVENANTS;
INDEMNIFICATION RIGHT OF RESCISSION

11.1Representations and Warranties and Covenants of the Limited Partners. Each Limited Partner hereby represents and warrants to the Partnership and all other Partners that:

(a)it has received written information concerning the Partnership, has thoroughly read the information and understands completely the nature of the risks involved in the proposed investment; has been advised that the General Partner is available to answer questions about the purchase of Partnership Interests and has asked any questions of the General Partner that it desires to ask and has received answers or other information from the General Partner with respect to all such questions;

(b)it understands that no state or Federal governmental authority has made or will make any finding, determination, recommendation, or endorsement relating to the fairness for investment of the Partnership Interests offered by the Partnership;

(c)it recognizes that prior to this offering there has been no public market for the interests in the Partnership offered by the Partnership and it is unlikely that after the offering there will be such market; it understands that the transferability of Partnership Interests is restricted and that it cannot expect to be able readily to liquidate its investment in case of emergency and that it may have to continue to bear the risk of holding the Partnership Interests for an indefinite period;

(d)it is making such investment for its own account and not for the account of others, and is not buying with the present intention of reselling, transferring, or subdividing all or any portion of the Partnership Interests purchased that would require registration under the Securities Act or any applicable state securities laws;

(e)it understands that in the absence of either an effective registration statement covering the Partnership Interests under the Securities Act and any applicable state securities laws, or an opinion of counsel satisfactory to the General Partner that registration is not required under said Act and securities laws, it may not Dispose of its Partnership Interests;

(f)it will take no action that subjects the Partnership or its Partners or any of their respective Affiliates to liability; and

(g)it is aware that the General Partner and Affiliates of the General Partner will engage in businesses that are competitive with that of the Partnership, and it agrees to such activities even though there are conflicts of interests inherent therein.

11.2Indemnification.  Each Limited Partner shall and does hereby agree to indemnify, defend, and hold harmless the Partnership, the General Partner and their representatives and agents and each

15

other Limited Partner from and against any damages, claims, expenses, losses, or actions resulting from (i) a breach by such Limited Partner of any of the representations and warranties and covenants contained in Section 11.1, or (ii) the untruth of any of the representations and warranties and covenants contained in Section 11.1. If the representations and warranties and covenants contained in Section 11.1 are either breached or not true, then such Limited Partner, as to whom the warranties and representations and covenants are not true or who breached the warranties and representations and covenants, shall, at the election of the General Partner, be subject to the right of rescission set forth in Section 11.3 and to all other rights and remedies available to the Partnership at law or in equity.

11.3Alternate Right of Rescission.  If the General Partner discovers any breach or untruth of any of the representations and warranties and covenants set forth in Section 11.1 by a Limited Partner, the General Partner may, at its election, rescind the sale of any interest in the Partnership to such Limited Partner by returning to such Limited Partner an amount equal to the excess of (i) the cash contributions made to the Partnership by the Limited Partner in question to the date that the right of rescission is exercised over (ii) the aggregate of all cash distributed to such Limited Partner by the Partnership to the date that the right of rescission is exercised.

ARTICLE XII

RELIANCE

12.1Reliance.  The Limited Partners acknowledge that the General Partner, in determining whether to execute this Agreement, have relied upon the representations, warranties, covenants, and agreements of the Limited Partners contained in this Agreement and would not have executed this Agreement but for such representations, warranties, covenants, and agreements.

ARTICLE XIII

DISSOLUTION:  WINDING UP

13.1Dissolution.  The Partnership shall be dissolved and its affairs shall be wound up upon the occurrence of any of the following:

(a)The expiration of the term provided in Section 3.3, unless extended by amendment of this Agreement approved by all of the Partners;

(b)The sole remaining General Partner’s Bankruptcy, dissolution, removal or withdrawal from the Partnership (including a Disposition by the sole remaining General Partner of his entire interest as General Partner in the Partnership pursuant to Section 5.9), unless the remaining Partners agree to continue the Partnership and its business and, if applicable, elect and approve a substitute general partner, it being agreed that the General Partner has the right to withdraw at any time by giving one hundred eighty (180) days prior written notice thereof to each of the Limited Partners;

(c)The sale, transfer, or other Disposition of all or substantially all of the assets of the Partnership;

(d)The approval of the Partners owning, in the aggregate, greater than fifty percent (50%) of the Voting Interests; or

(e)Any event that makes it unlawful for the Partnership business to be conducted.

16

Neither the death, dissolution, mental incompetency, or Bankruptcy of any Limited Partner nor the admission or substitution of a Person as a Limited Partner shall dissolve, or be deemed to dissolve, the Partnership or cause any interruption in or affect the continued existence of the Partnership and its business.  To the extent that any event other than those specifically set forth in clauses (a), (b), (c), (d) and (e) hereinabove is determined to cause, technically, a dissolution of the Partnership, the Partners hereby agree that upon the occurrence of any such event the Partnership shall automatically be reconstituted immediately as a new limited partnership on terms identical to those set forth in this Agreement which shall be composed of the remaining Partners who may continue the business of the Partnership, either alone or with other Persons, and who shall approve of the general partner of the new partnership.

13.2Liquidator.  If the Partnership is dissolved and is not automatically reconstituted pursuant to Section 13.1 or otherwise reconstituted by the affirmative vote of the General Partner and all Limited Partners, an accounting of the Partnership assets, liabilities, and operations through the last day of the month in which the dissolution occurs shall be made by the Independent Accountants and the affairs of the Partnership shall be wound up and terminated.  The General Partner shall serve as the Liquidator (unless dissolution is caused by the Bankruptcy of the General Partner, in which event the liquidating trustee shall be a Person approved of by the Limited Partners owning, in the aggregate, at least a majority of the Voting Interests).  The party actually conducting such liquidation in accordance with the foregoing sentence, whether the General Partner, a Limited Partner, or any other person approved by the remaining Partners, is herein referred to as the “Liquidator.”  The Liquidator, if a Person other than the General Partner, shall have sufficient business expertise and competence to conduct the Winding Up and termination of the Partnership and, in the course thereof, to cause the Partnership to perform any contracts which the Partnership has or thereafter enters into.  The Liquidator shall have full right and unlimited discretion to determine the time, manner and terms of any sale or sales of Partnership property pursuant to such liquidation, having due regard for the activity and condition of the relevant market and general financial and economic conditions.  The Liquidator (other than the General Partner) appointed as provided herein shall be entitled to receive such reasonable compensation for its services as shall be agreed upon by the Liquidator and the Partners owning, in the aggregate, at least a majority of the Voting Interests.

13.3Liquidation.

(a)Procedures.  In the course of Winding Up and terminating the business and affairs of the Partnership, its assets (other than cash) shall be sold, its liabilities and obligations to creditors (including any loan made by Partners) and all expenses incurred in its liquidation shall be paid, and all resulting revenues shall be credited or charged to the Capital Accounts of the Partners in accordance with Section 7.2.  All Partnership property shall be sold upon liquidation of the Partnership and no Partnership property shall be distributed in kind to the Partners except by agreement of all Partners.  If Partnership property is to be distributed in kind, the Liquidator shall determine the fair market value of such Partnership property and the Capital Accounts of the Partners shall be adjusted for the gain or loss that would have been recognized if the Partnership property to be distributed had been sold by the Partnership for such fair market value.

(b)Distribution.  The net proceeds from such sales (after deducting all selling costs and expenses in connection therewith), together with (at the expiration of the period referred to in Section 13.4) the balance in the reserve account referred to in Section 13.4 and any Partnership property that is to be distributed in kind shall be distributed among the remaining Partners in the following order and priorities:

17

(i)Partnership assets shall be distributed to the General Partner for any compensation, fees or unreimbursed costs and expenses owed by the Partnership to the General Partner;

(ii)Partnership assets shall be distributed to the Partners in an amount sufficient to discharge completely the principal and accrued interest owing to such Partners pursuant to any loans made to the Partnership by such Partners; and

(iii)Partnership assets shall be distributed among the Partners in accordance with their positive Capital Account balances, as determined after taking into account all Capital Account adjustments for the taxable year of the Partnership during which the liquidation of the Partnership occurs.

(c)Negative Capital Accounts.  No Partner shall be required to restore any deficit balance existing on its Capital Account upon the liquidation and termination of the Partnership.

(d)Miscellaneous.  The Liquidator shall be instructed to use all reasonable efforts to effect complete liquidation of the Partnership within one year after the date the Partnership is dissolved.  Each holder of a Partnership Interest shall look solely to the assets of the Partnership for all distributions and shall have no recourse therefor (upon dissolution or otherwise) against the Partnership, the General Partner or the Liquidator.  Upon the completion of the liquidation of the Partnership and the distribution of all Partnership funds, the Partnership shall terminate and the General Partner (or the Liquidator, as the case may be) shall have the authority to execute and record all documents required to effectuate the dissolution and termination of the Partnership.

13.4Creation of Reserves.  After making payment or provision for payment of all debts and liabilities of the Partnership and all expenses of liquidation, the Liquidator may establish, for a period not to exceed one year beginning on the date of dissolution, such cash reserves as the Liquidator may deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the Partnership.

13.5Final Audit.  Within a reasonable time following the completion of the liquidation, the Liquidator shall supply to each of the Partners a statement, certified by Independent Accountants if a Limited Partner shall so request, which shall set forth the assets and the liabilities of the Partnership as of the date of complete liquidation, each Partner’s pro rata portion of distributions pursuant to Section 13.3, and the amount retained as reserves by the Liquidator pursuant to Section 13.4.

ARTICLE XIV

POWER OF ATTORNEY

14.1Grant of Power.  Each Partner does hereby irrevocably make, constitute, and appoint the General Partner, each of their partners and any successors thereto, each with full power of substitution, as its true and lawful attorney and agent, with full power and authority in its name, place, and stead and to execute, swear to, acknowledge, deliver, file, and record in the appropriate public offices (i) all certificates and other instruments (including, without limitation, the Certificate of Limited Partnership and, at the option of the General Partner, counterparts of this Agreement) and all amendments thereto that the General Partner deems appropriate, necessary or advisable to form, qualify, reform, or continue the qualification of, the Partnership as a limited partnership (or a partnership in which the Limited Partners have limited liability) in the State of Texas and in each jurisdiction in which the Partnership conducts business; (ii) all instruments that the General Partner deems necessary, appropriate or advisable to reflect the use by the Partnership of any name other than KCI Properties Limited; (iii) all instruments that the General Partner deems necessary, appropriate, or advisable to reflect any amendment, change, or modification of the Partnership in accordance with the terms of this Agreement; (iv) all conveyances and

18

other instruments or documents that the General Partner deems appropriate, necessary, or advisable to reflect the dissolution and termination of the Partnership pursuant to the terms of this Agreement; (v) instruments relating to the admission of additional or substituted Partners pursuant to the terms of this Agreement (including, without limitation, changes in the Partners’ Voting Interests resulting from the admission of such additional or substituted Partners); (vi) all documents that the General Partner deems appropriate, necessary or advisable to record or effectuate any vote that a Limited Partner is deemed to have cast pursuant to Section 15.14; and (vii) any other documents or instruments that the General Partner deems necessary, appropriate, or advisable in connection with the Partnership business.

14.2Power Declared Irrevocable.  The power of attorney set forth in Section 14.1 is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the subsequent death, dissolution, Bankruptcy, disability, incapacity, or mental incompetency of a Partner and shall extend to such Partner’s heirs, successors, and assigns.  Each Partner hereby agrees to be bound by any representations made by the General Partner and any such successor thereto, acting in good faith, pursuant to such power of attorney; and each Partner hereby waives any and all defenses that may be available to contest, negate, or disaffirm the action of the General Partner and any such successor thereto, taken in good faith, under such power of attorney.

ARTICLE XV

GENERAL

15.1Offset.  In the event that any sum is payable to any Partner pursuant to this Agreement, any amounts owed by said Partner to the Partnership shall be deducted from said sum before payment to said Partner.

15.2Choice of Law: Consent to Jurisdiction.  This Agreement shall be subject to and governed by the laws of the State of Texas, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state.  Each of the Partners hereby consents to the jurisdiction of the state and federal courts in the State of Texas.  Venue for its enforcement shall be in Bexar County, Texas.

15.3Notices.  All notices or requests or approvals provided for or permitted to be given pursuant to this Agreement must be in writing and may be given by depositing same in the United States mail, addressed to the Partner to be notified, postpaid, and registered or certified with return receipt requested or by prepaid telegram or by delivering such notice in person to such Partner.  Notices shall conclusively be deemed for all purposes of the Agreement to have been received and to be effective (i) if mailed in accordance with the provisions of the immediately preceding sentence, upon the expiration of five (5) business days after its deposit in the mail, (ii) if sent by prepaid telegram, upon the expiration of two (2) business days after its transmission, and (iii) if personally delivered, upon the actual receipt of such notice by the Partner to be notified.  For purposes of notice the address of each Partner shall be the address specified for such Partner in Exhibit A. Each Partner may change its address for notice by the giving of thirty (30) days notice thereof to the General Partner in the manner hereinabove stated.

15.4Entire Agreement.  This Agreement constitutes the entire agreement of the Partners relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written.

15.5Effect of Waiver of Consent.  No waiver or consent, express or implied, by any Partner to or of any breach or default by any Partner in the performance by such Partner of its obligations

19

hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such Partner of the same or any other obligations of such Partner hereunder.

15.6Amendment or Modification.  This Agreement may be amended or modified from time to time in the manner specified in this Section 15.6. With respect to amendments (i) permitting the General Partner to require the Limited Partners to contribute monies to the Partnership in addition to the contributions required pursuant to Section 6.1, or (ii) altering the Voting Interests of the Limited Partners (except changes in the Partners’ Voting Interests resulting from the admission of additional or substitute Partners or purchases or sales or other Dispositions of the Limited Partner interests pursuant to this Agreement), this Agreement may not be amended unless such amendment is approved by the General Partner and the Limited Partners owning at least sixty-six and two-thirds (66 2/3%) of the Voting Interest.  With respect to all amendments other than those specified in the second sentence of this Section 15.6, this Agreement can be amended if such amendment is approved by the General Partner and Limited Partners owning a majority of the Voting Interests.  Notwithstanding any other provision of this Agreement, without the approval of the Limited Partners (and, to the extent, if any, that such approval may be required by applicable law, each Limited Partner hereby irrevocably grants such approval), the General Partner may make (and file with the appropriate public officials) such amendments or modifications to this Agreement as may be necessary to effect changes resulting from the admission of additional or substitute Partners to the Partnership or purchases or sales or other Dispositions of the Limited Partner’s Partnership Interests pursuant to this Agreement.  Each such instrument shall be reduced to writing.

15.7Binding Effect.  Subject to the restrictions on transfers and encumbrances set forth herein, this Agreement shall be binding upon and shall inure to the benefit of the Partners and their respective heirs, legal representatives, successors, and permitted assigns.

15.8Counterparts.  This Agreement may be executed in any number of counterparts with the same effect as if all Partners had signed the same document.  All counterparts shall be construed together and shall constitute one and the same instrument.

15.9Severability.  If any provision of this Agreement or the application thereof to any Person or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

15.10Headings.  The headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provision hereof.

15.11Terminology.  Whenever the context requires, the gender of all words used in this Agreement shall include the masculine, feminine, and neuter, and the number of all words shall include the singular and the plural.  All references to Section and Article numbers refer to Sections and Articles in this Agreement.

15.12Additional Documents.  In connection with this Agreement, as well as all transactions contemplated by this Agreement, each Partner hereto agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out, and perform all of the terms, provisions, and conditions of this Agreement and all such transactions.

20

15.13Waiver of Certain Rights.  Each Partner irrevocably waives any right it might have to maintain any action for dissolution of the Partnership (except as specifically provided to the contrary in Article XIII) or to maintain any action for partition of the property of the Partnership.

15.14Deemed Assent.  The failure of a Limited Partner to respond, within the response period set forth in the request in question, either in the affirmative or in the negative to any request it receives from the General Partner relating to a proposed act in respect of which such Limited Partner is entitled to vote pursuant to this Agreement shall conclusively be deemed for all purposes to be a vote by such Limited Partner in favor of the act proposed by the General Partner.

15.15Exhibits.  Any reference made in this Agreement to an Exhibit is a reference to an Exhibit of this Agreement.

IN WITNESS WHEREOF, the General Partner and the Limited Partner have executed this Agreement effective as of the Effective Date.

GENERAL PARTNER
KCI USA REAL HOLDINGS, L.L.C.
By:
	Dennis E. Noll, Manager and Vice President
LIMITED PARTNER
KCI REAL HOLDINGS, L.L.C.
By:
Dennis E. Noll, Manager and Vice President

21

EXHIBIT A

NAME AND ADDRESS		PERCENTAGE INTEREST		VOTING INTEREST
KCI USA Real Holdings, L.L.C.		10	%	10	%
Address:	8023 Vantage Drive
	San Antonio, Texas 78230
KCI Real Holdings, L.L.C.		90	%	90	%
Address:	103 Foulk Road, Suite 202
	Wilmington, Delaware 19803

22

EX-3.14

Exhibit 3.14

CERTIFICATE OF LIMITED PARTNERSHIP

OF

KCI REAL PROPERTY LIMITED

1.The name of the Limited Partnership is KCI Real Property Limited.

2.The location of the Limited Partnership’s principal office where records are to be kept or made available is 8023 Vantage Drive, San Antonio, Texas 78230.

3.The registered office of the Limited Partnership is 8023 Vantage Drive, San Antonio, Texas 78230.  The registered agent at such address is Dennis E. Noll.

4.The name and mailing and street address of the General Partner of the Limited Partnership is as follows:

KCI USA Real Holdings, L.L.C.

8023 Vantage Drive

San Antonio, Texas 78230

5.The limited partnership is being formed pursuant to a Plan of Conversion under Section 2.15 of the Texas Revised Limited Partnership Act.

6.The following information relates to the converting entity:

Name:	KCI Real Property Limited
Address:	8023 Vantage Drive, San Antonio, Texas  78230
Date of formation:	June 15, 1992
Prior form of organization:	Limited liability company
Jurisdiction of organization:	Texas

IN WITNESS WHEREOF, the undersigned has hereunto set his hand to this Certificate this 14th day of December, 2001.

GENERAL PARTNER:
KCI USA REAL HOLDINGS, L.L.C.
By:
	Dennis E. Noll, Manager and Vice President

EX-3.15

Exhibit 3.15

LIMITED PARTNERSHIP AGREEMENT
OF
KCI REAL PROPERTY LIMITED

THIS LIMITED PARTNERSHIP AGREEMENT (this “Agreement”) is entered into by and between KCI USA Real Holdings, L.L.C., a Delaware limited liability company, as the general partner, and KCI Real Holdings, L.L.C., a Delaware limited liability company, as the sole limited partner.

RECITATIONS

KCI Real Property Limited, a Texas limited liability company (“KCIP”), has filed Articles of Conversion and executed a Plan of Conversion, pursuant to which KCIP has been converted into KCI Real Property Limited, a Texas limited partnership (the “Partnership”) effective on December 17, 2001 (the “Effective Date”).

The Partnership has been formed with KCI USA Real Holdings, L.L.C., a Delaware limited liability company (the “General Partner”), owning a 10% partnership interest and serving as the General Partner and KCI Real Holdings, L.L.C., a Delaware limited liability company (the “Original Limited Partner”) owning a 90% partnership interest and being a Limited Partner.

The General Partner and the Original Limited Partner desire to adopt this Partnership Agreement to read as hereinafter set forth.

NOW, THEREFORE, to reflect the foregoing, the parties hereto agree as follows:

1.The General Partner is hereby admitted to the Partnership as a general partner and the Original Limited Partner is hereby admitted to the Partnership as a limited partner.

2.The General Partner and the Limited Partners agree as follows:

ARTICLE I

DEFINITIONS

1.1Definitions.  As used in this Agreement, the following terms shall have the respective meanings indicated:

“Affiliate” shall mean, when used with reference to a specific Person, (a) any Person that directly or indirectly controls, is controlled by, or is under common control with the specified Person, (b) any Person that is an officer, director, partner, trustee, or serves in a similar capacity with respect to the specified Person, or for which the specified Person is an officer, partner, trustee, or serves in a similar capacity, and (c) any Person that, directly or indirectly, is the beneficial owner of ten percent (10%) or more of any class of equity securities of the specified Person, or of which the specified Person, directly or indirectly, is the owner of ten percent (10%) or more of any class of equity securities.

“Agreement” or “Partnership Agreement” shall mean this Limited Partnership Agreement of KCI Real Property Limited, as amended or restated from time to time.

“Available Cash” shall mean, at the time of determination, the amount of Partnership cash on hand that exceeds the amount necessary to meet the current costs, expenses, and liabilities of the Partnership and to provide for adequate reserves, as determined in the reasonable discretion of the

General Partner.  In determining the amount of Available Cash, the General Partner shall take into account, in addition to all other costs, expenses and liabilities, the amount required to (i) pay interest due and payable on any Partnership indebtedness, (ii) make principal payments on Partnership indebtedness as required or advisable, and (iii) pay the reimbursement of the costs and expenses set forth in Section 9.7 hereof.  For purposes of determining Available Cash, depreciation shall not be considered an expense of the Partnership.

“Bankrupt” or “Bankruptcy” shall mean, in respect of a Partner, the occurrence of any of the following with respect to such Partner:

(a)such Partner shall (i) voluntarily consent to an order for relief by filing a petition for relief under the laws of the United States codified as Title 11 of the United States Code, (ii) seek, consent to, or not contest the appointment of a receiver, custodian, or trustee for itself or for all or any part of its property, (iii) file a petition seeking relief under the bankruptcy, arrangement, reorganization, or other debtor relief laws of any state or other competent jurisdiction, (iv) make a general assignment for the benefit of creditors, or (v) admit in writing that it is generally not paying its debts as such debts become due;

(b)(i) a petition is filed against such Partner seeking an order for relief under the laws of the United States codified as Title 11 of the United States Code, or seeking relief under the bankruptcy, arrangement, reorganization, or other debtor relief laws of the United States or any state or other competent jurisdiction, or (ii) a court of competent jurisdiction enters an order, judgment, or decree appointing, without the consent of such Partner, a receiver, custodian, or trustee for it, or for all or any part of its property, and such petition, order, judgment, or decree shall not be and remain discharged or stayed within sixty (60) days after its entry; or

(c)the interest in the Partnership or any Partner is seized or subjected to a charging order by a creditor of such Partner and the same is not released from seizure or charging order or bonded out within thirty (30) days from the date of notice of such seizure or charging order.

“Capital Account” shall mean a separate account for each Partner which shall be maintained as follows:

(a)To each Partner’s Capital Account there shall be credited such Partner’s Capital Contributions, such Partner’s distributive share of Profits, and the amount of any Partnership liabilities assumed by such Partner or which are secured by any of the Partnership’s property Distributed to such Partner; and

(b)To each Partner’s Capital Account there shall be debited the amount of Distributions to such Partner pursuant to any provision of this Agreement, such Partner’s distributive share of Losses, and the amount of any liabilities of such Partner assumed by the Partnership or which are secured by any property contributed by such Partner to the Partnership.

In the event any interest in the Partnership is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest.

The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations.  In the event the General Partner shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits

2

thereto, are computed in order to comply with such Regulations, the General Partner may make such modification, provided that it is not likely to have a material effect on the amounts distributable to any Partner upon the dissolution of the Partnership.  The General Partner shall adjust the amounts debited or credited to Capital Accounts with respect to (i) any property contributed to the Partnership or distributed to the Partners, and (ii) any liabilities which are secured by such contributed or distributed property or which are assumed by the Partnership or the General Partner, in the event the General Partner shall determine such adjustments are necessary or appropriate pursuant to Regulations Section 1.704-1(b)(2)(iv).  The General Partner also shall make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).

“Capital Contribution” shall mean the amount of money and the fair market value of property contributed to the Partnership by a Partner.  The initial Capital Contributions of each Partner are set forth in Exhibit A.

“Certificate of Limited Partnership” shall mean a certificate in the form acceptable for filing with the Secretary of State of Texas under the Limited Partnership Act.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the corresponding provisions of any successor statute.

“Dispose,” “Disposing,” and “Disposition” shall mean a sale, assignment, transfer, exchange, mortgage, pledge, grant of a security interest, or other disposition or encumbrance or the acts thereof.

“Distributions” shall mean the amount of cash and the fair market value of any property distributed to a Partner, after appropriate reduction for any liabilities assumed by a Partner in connection with such Distribution.

“Effective Date” shall have the meaning set forth in the recitals.

“General Partner” shall mean KCI USA Real Holdings, L.L.C., a Delaware limited liability company, together with each other Person (if any) that subsequently becomes a General Partner in the Partnership pursuant to the provisions of this Agreement, but excludes any such Person that subsequently ceases to be a General Partner pursuant to the provisions of this Agreement.

“Independent Accountants” shall mean the independent accountants selected by the General Partner.

“Limited Partners” shall mean each Person set forth on Exhibit A hereto and that is designated on the signature pages hereof as, and that has executed this Agreement as a Limited Partner, but excludes any such Person that subsequently ceases to be a Limited Partner pursuant to the provisions of this Agreement, all as shown on the books and records of the Partnership.

“Limited Partnership Act” shall mean the Texas Revised Limited Partnership Act, Texas Civil Statutes, Article 6132a-1, adopted 1987, as amended from time to time, and any successor to said Act.

“Liquidator” shall have the meaning set forth in Section 13.2 hereof.

“Partners” or “Partner” shall mean the General Partner and the Limited Partners, or any one of them.

“Partnership” shall have the meaning attributed to it in Section 3.1.

3

“Partnership Interest” shall have the meaning set forth in Section 6.3 hereof.

“Partnership Year” shall mean the calendar year.

“Percentage Interest” shall have the meaning set forth in Section 6.3 hereof.

“Person” shall mean an individual, partnership, corporation, trust, unincorporated association, or other entity or association.

“Profits and Losses” shall mean for each Partnership Year or other period, an amount equal to the Partnership’s taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

(a)Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this Section shall be added to such taxable income or loss;

(b)Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses shall be subtracted from such taxable income or loss;

(c)Gain or loss resulting from any Disposition of Partnership property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the fair market value of the property Disposed of, notwithstanding that the adjusted tax basis of such property differs from its fair market value;

(d)In the event the Partnership makes a Distribution of Partnership property in kind, Profits and Losses shall include the amount of gain or loss which the Partnership would have recognized if the property distributed had been sold for its fair market value (after appropriate adjustment for liabilities) immediately prior to such Distribution.

“Regulations” shall mean the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Section 754 Election” shall have the meaning set forth in Section 8.5(a) hereof.

“Voting Interest” shall mean the interest of each Partner as set forth on Exhibit A, as said interests may be adjusted, from time to time, pursuant to this Agreement.

“Winding Up” shall mean the period following a dissolution of the Partnership.

4

ARTICLE II

FORMATION OF LIMITED PARTNERSHIP:
INITIAL CLOSING AND ORGANIZATIONAL CERTIFICATES

2.1Formation and Continuation of Limited Partnership.  The Partnership shall continue as the entity converted from KCI Real Property Limited, a Texas limited liability company, from which the Partnership was converted on December 17, 2001, under and pursuant to the Limited Partnership Act and the Certificate.  Except as provided to the contrary in this Agreement, the rights, duties, status, and liabilities of the Partners, and the formation, administration, dissolution, and continuation or termination of the Partnership, shall be as provided in the Limited Partnership Act.

2.2Organizational Certificates.  Upon the request of the General Partner, each Limited Partner shall promptly execute, acknowledge, swear to, and deliver all certificates and other instruments and perform such additional acts consistent with the terms of this Agreement as may be necessary to enable the General Partner to form, qualify and continue the Partnership as a limited partnership under the laws of the State of Texas.

ARTICLE III

PARTNERSHIP NAME, OFFICES, AND TERM

3.1Limited Partnership Name.  The name of the Partnership shall be “KCI Real Property Limited” and the business of the Partnership shall be conducted under such name or under such other assumed name as may be selected from time to time by the General Partner.

3.2Principal Place of Business.

(a)The address of the registered office of the Partnership in the State of Texas shall be 8023 Vantage Drive, San Antonio, Texas, 78230, and the name of the registered agent at such address is Dennis E. Noll.

(b)The principal place of business of the Partnership shall be 8023 Vantage Drive, San Antonio, Texas, 78230;

or such other place as may be designated by the General Partner.  The books and records of the Partnership shall be maintained at the Partnership’s principal place of business.  The Partnership shall have such other places of business as the General Partner deems necessary or desirable.  The General Partner shall notify the Limited Partners of any change in the principal place of business of the Partnership.

(c)The General Partner’s principal place of business is 8023 Vantage Drive, San Antonio, Texas, 78230.

3.3Term.  The Partnership shall continue, unless sooner terminated in accordance with any provision of this Agreement, until the close of Partnership business on December 31, 2051.

5

ARTICLE IV

PURPOSES

The purpose and intent of this Partnership will be as follows:

(a)To own, operate, invest, maintain, rent, lease, manage, develop, explore, or sell, whether as part or as whole, all or any portion of the Partnership’s assets;

(b)To produce income from the Partnership’s assets; and

(c)For any other lawful business which may be carried on by a limited partnership under the laws of the State of Texas.

ARTICLE V

DISPOSITION OF PARTNERSHIP INTERESTS

5.1Dispositions.  No Partner shall Dispose of any Partnership Interests it owns or may acquire except with the written consent of all of the Partners.

5.2Options on Assignment.  Except as provided in Section 5.1 of this Agreement and subject to the provisions of the remaining sentences of this Section 5.2, before any Partner (including any heir, devisee, legatee, personal representative, or assignee or transferee of any Partner) may assign or transfer all or any part of his or her Partnership Interests, he or she must first (i) notify each of the other Partners by United States Certified Mail, Return Receipt Requested, as to the Partnership Interests he or she intends to assign or transfer, the name of the proposed assignee or transferee, and the price and terms upon which the assignment or transfer is to be made (hereinafter referred to as “the Notice”) and (ii) obtain the unanimous written consent of the Partners, which consent may be granted or withheld in each said Partner’s sole discretion, to allow such assignment or transfer (hereinafter referred to as “Consent”).  If, within sixty (60) days of the date of such Notice to purchase, such assigning Partner has not received Consent, then it shall be presumed that the non-assigning Partners denied such assignment or transfer.  If the assigning Partner has received Consent, the Company shall have an exclusive option for a period of ninety (90) days after the date of such Notice to purchase, at the price and on the terms set out in the Notice, all (but not less than all) of the Partnership Interests to be Disposed of.  If Consent is received and the foregoing option is not exercised, each of the non-assigning Partners shall have an exclusive option for a period of thirty (30) days after (i) the primary option expires or (ii) notice of non-exercise of the primary option is given, whichever is first to occur, to purchase, at the price and on the terms set out in the Notice, all (but not less than all) of the Partnership Interests to be Disposed of.  The purchasing Partners shall have the right to exercise said option in such proportions as they agree upon among themselves or, in the absence of any such agreement, in proportion to their respective Partnership Interests as reflected by the Company books on the date such Notice is given.  If Consent is received and neither of the foregoing options are exercised, the selling Partner may assign or transfer his or her Partnership Interests at the price, on the terms, and to the assignee or transferee stated in the notice at any time within sixty (60) days after the foregoing option to the non-assigning Partners expires, but not thereafter unless and until he or she gives a new notice to the other Partners holding a majority of the total Partnership Interests (other than the assigning Partner’s Partnership Interests) again consent, and they and the Company again fail to exercise their respective options under the foregoing provisions.  Notwithstanding any provision in this Section to the contrary, with respect to any donative or testamentary transfer to a proposed transferee (other than as provided in Section 5.1 of this Agreement),

6

the Company or the purchasing Partner shall exercise their respective options upon the price as determined in Section 5.3 of the Agreement.

5.3Purchase by Partnership.  The Partnership may acquire a portion or all of a Limited Partner’s Partnership Interests, upon such terms, provisions, and conditions as may be agreed upon by the General Partner and such Limited Partner.  In the event of a default hereunder, which default is not cured within thirty (30) days after notice of said default, the Partnership shall have the option to purchase the defaulting Partner’s interest upon the price and terms as determined in Section 5.3 of this Agreement, as if said defaulting Partner was in Bankruptcy.

5.4Status After Disposition.  No Limited Partner shall have the right, without the consent of the General Partner, to constitute its assignee as a Limited Partner (whether or not such transfer is permitted under Article V).  In addition, no Disposition by a Limited Partner shall release such Limited Partner from any of its obligations under this Agreement without the written consent of the General Partner (which consent may be granted or withheld in the sole discretion of the General Partner).  A Person that receives an interest or right in or in respect of the Partnership but that is not admitted to the Partnership as a substituted or additional Partner shall not be entitled to vote, and the interest of such Person shall not be counted in determining, for voting or quorum purposes, the Voting Interests.  Any Person receiving an interest or right in or in respect of the Partnership (whether or not such Person becomes a Limited Partner) shall not be entitled to Dispose of its interest or right or any part thereof without fulfilling the conditions of Sections 5.1 and 5.2 to the same extent and in the same manner as any Limited Partner that desires to effect a Disposition of an interest in the Partnership.

5.5Disposition Documents.  Notwithstanding Sections 5.1 or 5.2, the Partnership shall not recognize, for any purpose, any purported Disposition of all or any portion of or interest in a Limited Partner’s Partnership Interests unless and until the provisions of this Article V have been satisfied and there shall have been delivered to the General Partner a dated notification of such Disposition (i) executed, acknowledged, and sworn to by both the Limited Partner effecting such Disposition and the Person to whom such interest is Disposed, (ii) if the assignee wishes to become a substituted Limited Partner, the acceptance by such assignee of all of the terms and provisions of this Agreement (including, without limitation, a grant by such assignee to the General Partner and any successors thereto and each of its officers of the power of attorney set forth in Article XIV), and (iii) containing a representation that such Disposition was made in accordance with all applicable laws and regulations.  Each Disposition shall be effective as of the first day of the calendar month immediately following the month in which the Partnership actually receives the aforesaid notification of Disposition.

5.6Disposition Costs.  All costs incurred by the Partnership in connection with the Disposition of an interest in the Partnership (including, without limitation, the fees incurred in connection with the obtaining of the legal opinions referred to in Section 5.1(c)) shall be borne and paid by the Partner effecting the Disposition within ten (10) days after the receipt by such Partner (or such Partner’s estate or legal representative, as applicable) of the Partnership’s invoice for the amount due.

5.7Admission of a Substituted Limited Partner.  The General Partner may, in its absolute discretion, and without the consent or agreement of any other Partner, admit an assignee of a Partnership Interest as a substituted Limited Partner.  Upon admission, a substituted Limited Partner shall be subject to all provisions of this Agreement as if originally a party hereto.

5.8Disposition of General Partner’s Interests.  The General Partner shall have the right, from time to time, with the approval of a majority of the Voting Interests to effect a Disposition of all or any portion of its interests in the Partnership to one or more Persons and to admit the Person or Persons to whom such interest or portion thereof is Disposed as an additional or substituted General Partner.  In

7

the event any Person is admitted as a substituted General Partner, such admission shall occur contemporaneously with the withdrawal of the General Partner that disposes of its interest.  Any additional or substituted General Partner shall continue the business of the Partnership.  Notwithstanding anything in this Agreement to the contrary, any General Partner who voluntarily or involuntarily for any reason withdraws from the Partnership (including, without limitation, a withdrawal by a General Partner pursuant to Section 13.1(b)), or sells, transfers, or assigns his interest in the Partnership, shall be and remain liable for all obligations and liabilities incurred by him as a General Partner prior to the time of such withdrawal, sale, transfer, or assignment, but he shall be free of any obligation or liability as a General Partner incurred as a result of the activities of the Partnership from and after the time of such withdrawal, sale, transfer, or assignment.

5.9Pledge of Partnership Interest.    Nothing in this Agreement including, without limitation, Sections 5.1 and 5.2 shall prevent any Partner from pledging its Partnership Interest to any financial institution, whether acting on its own behalf or as Collateral Trustee or Agent, to which such Partner or the Partnership has incurred or guaranteed any obligation, and neither any such financial institution which exercises its rights and remedies under any such pledge agreement nor any person who becomes a holder of Partnership Interests as the result thereof or its successors or assigns shall be bound by the restrictions set forth in Sections 5.1 and 5.2.

ARTICLE VI

CONTRIBUTIONS AND LOANS

6.1Capital Contributions.  Each Partner will be deemed to have contributed to the capital of the Partnership effective on the date hereof its proportionate share based upon its respective Partnership Interest, of the total capital of the Partnership.  Except as otherwise provided in this Agreement, no Partner shall have any obligation to make any additional contributions of capital to the Partnership or to make any loan to the Partnership, and no Partner shall have any liability to the Partnership or any other Partner by virtue of refusing to make any additional contributions of capital or loans to the Partnership.

6.2Return of Capital Contributions.  No Partner is entitled to the return of its Capital Contribution to the Partnership or to be paid interest in respect of either its Capital Account or any Capital Contribution made by it to the Partnership.  No unrepaid Capital Contribution shall be deemed or considered to be a liability of the Partnership or of any Partner.  No Partner shall be required to contribute or loan any cash or property to the Partnership to enable the Partnership to return any Partner’s Capital Contribution to the Partnership.

6.3Partnership Interests; Percentage Interests.

(a)The interest of each Partner in the Partnership (which shall include, without limitation, its rights as General Partner or Limited Partner, as the case may be, and its interest in revenues, income, gains, losses, deductions, Available Cash and Distributions pursuant to Section 13.3) shall be referred to as its “Partnership Interest.”

(b)The capital percentages (the “Percentage Interests”) of the Partners shall be as set forth opposite the name of each Partner in Exhibit A, as said interests may be adjusted, from time to time, pursuant to this Agreement.

6.4Computation of Capital Account.  The balance of the “Capital Account” of a Partner is initially zero and as of any date is increased by (i) the amount of cash contributed by that Partner to the Partnership on or prior to that date, (ii) the fair market value (as set forth in this Agreement, or if not set

8

forth in this Agreement, as determined by the General Partner) of any property (reduced by any liabilities which are assumed by the Partnership or to which such property is subject) which is contributed by that Partner to the Partnership on or prior to that date and (iii) any item of Partnership income or gain which is allocated to such Partner pursuant to Section 7.2 on or prior to that date; and is decreased by (iv) any Partnership deduction or loss which is allocated to such Partner pursuant to Section 7.2 on or prior to that date, (v) the amount of cash distributed by the Partnership to such Partner on or prior to that date and (vi) the fair market value (as set forth in this Agreement, or if not set forth in this Agreement, as determined by the General Partner) of any property (reduced by any liabilities which are assumed by the distributee Partner or to which the property is subject) which is distributed by the Partnership to the Partner on or prior to that date.  For Capital Account purposes, depreciation, cost recovery deductions and gain or loss on sale or other disposition shall take into account the book basis, and not the tax basis, of the assets of the Partnership.

ARTICLE VII

ALLOCATIONS AND DISTRIBUTIONS

7.1Capital Accounts.  A “Capital Account” shall be established and maintained for each Partner.  For purposes of this Article VII, the term “Partner” shall include any assignee of a Partnership Interest.

7.2Allocation of Profits and Losses.  All Profits and Losses realized or incurred in the business of the Partnership shall be allocated among the Partners in accordance with their respective Percentage Interests on the date of such allocation.  Notwithstanding the foregoing sentence, in accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the capital of the Partnership shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property and its initial fair market value.

7.3Distributions.  Distributions of Available Cash shall be made at such times and in such amounts as the General Partner, in its sole discretion, may determine, and shall be distributed among the Partners in accordance with their respective Percentage Interests immediately prior to Distribution.

7.4Qualified Income Offset.  Notwithstanding Section 7.2, in the event any Partner unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specifically allocated to such Partners in an amount and manner sufficient to eliminate the deficit balances in their Capital Accounts created by such adjustments, allocations, or distributions as quickly as possible.  Any special allocations of items of income or gain pursuant to this Section 7.4 shall be taken into account in computing subsequent allocations of Profits pursuant to this Article VII, so that the net amount of any items so allocated and the Profits, Losses and all other items allocated to each Partner pursuant to this Article VII shall, to the extent possible, be equal to the net amount that would have been allocated to each such Partner pursuant to the provisions of this Article VII if such unexpected adjustments, allocations or distributions had not occurred.

9

ARTICLE VIII

ADMINISTRATIVE AND TAX MATTERS

8.1Books and Records.  The books and records of the Partnership shall be kept, at the expense of the Partnership, by the General Partner at its principal places of business or at such other place as the General Partner may designate.  The books and records of the Partnership shall be maintained on a calendar year basis, using the accrual method and in accordance with this Agreement and reasonable accounting practices; provided, however, the General Partner may elect to keep books and records on the cash basis of accounting for income tax purposes.  The books and records of the Partnership shall reflect all Partnership transactions and shall be appropriate and adequate for conducting the Partnership business.  On or before March 15 (or as soon thereafter as may be practicable) of each year, each Partner shall receive a report indicating its share of Partnership income, credits, and deductions for income tax purposes during the immediately preceding year.

8.2Inspection.  Each Partner shall have the right, upon giving seven (7) business days prior written notice to the General Partner, to inspect the books and records of the Partnership during reasonable business hours at the principal place of business of the Partnership or such other location as the General Partner may designate.

8.3Bank Accounts: Investments.  All funds of the Partnership shall be deposited in its name in an account or accounts maintained in a national or state bank or banks or brokerage account or accounts designated from time to time by the General Partner.  The funds of the Partnership shall not be commingled with the funds of any other Person.  Checks shall be drawn upon the Partnership account or accounts only for the purposes of the Partnership and shall be signed by such signatory party or parties as may be designated from time to time by the General Partner.  The General Partner shall have the right to deposit Partnership funds that, from time to time, are not required for the operation of the business of the Partnership in interest bearing bank accounts or to purchase commercial paper, treasury bills, or other short-term instruments or interests as the General Partner deem necessary, appropriate, or advisable.

8.4Tax Matters Partner.  The Partners recognize that the General Partner will be treated as the tax matters partner of the Partnership pursuant to Section 6231(a)(7) of the Code.  The Tax Matters Partner shall use its best efforts to cause all Partners to become “notice partners” within the meaning of Section 6231(a)(8) of the Code.  The Tax Matters Partner shall keep all other Partners informed of all matters that may come to its attention in its capacity as Tax Matters Partner by giving the other Partners notice thereof within thirty (30) days after the Tax Matters Partner becomes informed of any such matter.  The Tax Matters Partner shall not take any action contemplated by Sections 6222 through 6232 of the Code unless the Tax Matters Partner has first given the other Partners notice of the contemplated action and received the approval to such contemplated action of Partners owning, in the aggregate, at least a majority of the Voting Interests.  This provision is not intended to authorize the Tax Matters Partner to take any action that is left to the determination of an individual Partner under Sections 6222 through 6232 of the Code.

8.5Tax Returns and Elections.

(a)Tax Returns.  The General Partner shall prepare and file (or cause to be prepared and filed) all income tax returns of the Partnership and shall furnish copies thereof to the Limited Partners.  The General Partner, on behalf of the Partnership and at the time and in the manner provided in Regulation Section 1.745-1(b), may make an election to adjust the basis of Partnership property in the manner provided in Sections 734(b) and 743(b) of the Code (a “Section 754 Election”).

10

(b)Income Tax Elections.  The General Partner shall have the right to make any applicable elections under the Code which, in its best judgment, are in the best interest of the Partnership, other than an election to treat the Partnership as other than a partnership for federal income tax purposes.

ARTICLE IX

MANAGEMENT; LIMITATIONS;
MEETINGS; STANDARD OF CARE; INDEMNIFICATION

9.1Management.  The management and control of the Partnership shall be vested solely in the General Partner, who shall have (subject to the limitations imposed by this Agreement) full, exclusive, and complete discretion in the management and control of, and in the making of all decisions affecting, the Partnership business.  Without limiting the generality of the preceding sentence, the General Partner shall have (subject to the aforesaid limitations) the authority, the right, and the power, on behalf of the Partnership:

(a)to enter into, execute, deliver, amend, and perform any and all agreements, contracts, documents, certifications, and instruments binding the Partnership as may be necessary or convenient in connection with the ownership, management, maintenance, and operation of Partnership property;

(b)to execute, in furtherance of any or all of the purposes of the Partnership, any lease, bill of sale, contract, or other instrument purporting to convey or encumber the real or personal property of the Partnership;

(c)to sell, transfer, exchange, or otherwise dispose of the assets of the Partnership;

(d)to establish reserves for working capital and for taxes, insurance, debt service, repairs, replacements or renewals, or other costs and expenses incident to the ownership of Partnership property and for other such purposes as the General Partner deems appropriate under the circumstances from time to time;

(e)to have the Partnership’s direct expenses billed directly to and paid by the Partnership;

(f)to pay all taxes, charges, and assessments against the Partnership and its property;

(g)to admit Partners as contemplated by Article V of this Agreement;

(h)to open, maintain, and close bank accounts, to designate and change signatories on such accounts, and to draw checks and other orders for the payment of monies;

(i)to settle claims, to prosecute, defend, and settle lawsuits, and to handle all matters with governmental agencies;

(j)to deposit Partnership funds that, from time to time, are not required for the operation of the business of the Partnership in interest bearing bank, brokerage or money market fund accounts or to purchase commercial paper, treasury bills, or other short-term instruments or interests as the General Partner deems necessary, appropriate, or advisable;

11

(k)to engage consultants, accountants, attorneys, managers, and any and all other agents and assistants, both professional and non-professional, as the General Partner may deem necessary, appropriate, or advisable in furtherance of the purposes of the Partnership, and to compensate such Persons for services rendered;

(l)to collect all sums due the Partnership;

(m)to prepare and file all Partnership tax returns and to make all elections for the Partnership thereunder;

(n)except as otherwise provided herein, to determine the timing and amount of any distributions to the Partners (whether for cash or property);

(o)to take any and all other action that the General Partner may deem necessary, appropriate, or desirable in furtherance of the purposes of the Partnership which is not inconsistent with Section 9.3; and

(p)to purchase such insurance as the General Partner, in its discretion, may determine.

No person dealing with the Partnership shall be required to inquire into the authority of the General Partner to take any action or make any decision hereunder, and every agreement, contract, undertaking, document, certification or instrument executed by the General Partner with respect to any business or property of the Partnership shall be conclusive evidence in favor of any and every person relying thereon or claiming thereunder that (i) at the time of the execution and/or delivery thereof, this Agreement was in full force and effect, (ii) such instrument was duly executed in accordance with the terms and provisions of this Agreement and is binding upon the Partnership, and (iii) the General Partner was duly authorized and empowered to execute and deliver any and every such agreement, contract, undertaking, document, certification or instrument for and on behalf of the Partnership.

9.2Authority of the General Partner.  Any person dealing with the Partnership or the General Partner may rely upon a certificate signed by the General Partner thereunto duly authorized, concerning:

(a)the identity of the General Partner or any other Partner;

(b)the existence or nonexistence of any fact or facts that constitute conditions precedent to acts by the General Partner or in any other manner germane to the affairs of the Partnership;

(c)the person or persons who are authorized to execute and deliver any instrument or document of the Partnership; or

(d)any act or failure to act by the Partnership or concerning any other matter whatsoever involving the Partnership or any Partner.

9.3Specific Limitations on the General Partner’s Authority.  Notwithstanding anything to the contrary contained in this Agreement, the General Partner shall have no right, power, or authority, without the prior approval (which shall not be unreasonably withheld or delayed) to the specific act in question by Partners owning, in the aggregate, at least two-thirds (2/3) of the Voting Interests, to effectuate any one or more of the following acts:

12

(a)to do any act in contravention of this Agreement;

(b)to possess Partnership property or assign, transfer, mortgage, pledge, or grant a security interest in and/or a deed of trust with respect to Partnership property for other than a Partnership purpose; or

(c)to sell, transfer or otherwise dispose of all or substantially all of the assets of the Partnership.

9.4Meetings of Partners.  Any matter requiring the approval of the Partners pursuant to this Agreement may be considered at a meeting of the Partners called by the General Partner or Partners owning fifteen percent (15%) of the Voting Interests and held not less than seven (7) nor more than forty-five (45) days after written notice of such meeting, stating the date, time, and place where such meeting is to be held and the purposes for which it is called, is delivered to the Partners in accordance with the provisions of Section 15.3. The presence at such meeting of the General Partner and Limited Partners owning, in the aggregate, a majority of the Voting Interests shall constitute a quorum for the transaction of business.  Any action required or permitted to be taken at any meeting of the Partners may, however, be taken (i) without a meeting by means of the General Partner’s submitting to the Limited Partners, in accordance with the provisions of Section 15.3, a statement of the matter to be voted on, the purpose thereof, and the period within which the Limited Partners must respond either in the affirmative or in the negative to the matter in respect of which the vote is requested or (ii) by means of a telephone conference in which all Partners participating in the meeting and constituting a quorum can hear and speak to each other.  Except as specifically provided to the contrary in this Agreement, all decisions of the Partners pursuant to this Section 9.4 shall be made by the concurring vote (whether by actual vote or deemed vote pursuant to Section 15.14) of Partners owning, in the aggregate, at least a majority of the Voting Interests including, without limitation, the termination of any management or similar agreements or contracts regarding the management of any properties owned by the Partnership.

9.5Standards of Care.  In the performance of its duties under this Agreement, the General Partner shall use reasonable efforts to conduct the business of the Partnership in a good and businesslike manner and in accordance with good business practice.  Neither the General Partner (or any Affiliate thereof) nor its shareholders, directors, officers, partners or employees shall be held liable or responsible to any Partner or to the Partnership, however, for any losses sustained or liabilities incurred, in connection with, or attributable to, errors in judgment, negligence, or other fault of the General Partner (or any Affiliate thereof) or its shareholders, directors, officers, partners or employees, except that which is attributable to the proven gross negligence or willful misconduct of such General Partner (or any Affiliate thereof) or its shareholders, directors, officers, or employees.  The Partners acknowledge that the General Partner and the Limited Partners and the Affiliates of the General Partner, are engaged in activities other than the activities of the Partnership and that the General Partner shall not be expected or required to devote their full time to the management of the Partnership.  Participation in the Partnership shall not in any way act as a restraint on the other present or future business activities or investments of any Partner (or any Affiliate of a Partner), or any employee, officer, director, or shareholder of any Partner, whether or not such activities are competitive with the business of the Partnership.  As a result of this Agreement, no Partner (or any Affiliate of a Partner) or any employee, officer, director, or shareholder of any Partner shall, under any circumstances, be obligated or bound to offer or present to the Partnership or any of the other Partners any business opportunity presented or offered to them or the Partnership as a prerequisite to the acquisition of or investment in such business opportunity by such Partner (or any Affiliate of such Partner) or any employee, officer, director, or shareholder of such Partner for its account or the account of others.  In furtherance thereof, each of the Partners hereby agrees that any business or activity in which a Partner (or any Affiliate of a Partner) or any employee, officer, director, or shareholder of a Partner engages, conducts, or participates outside the Partnership shall be

13

conclusively deemed not to be a business or activity in competition with or an opportunity of the Partnership.  Any such business or activity of a Partner (or any Affiliate of a Partner) or any employee, officer, director, or shareholder of a Partner may be undertaken with or without notice to or participation therein by the Partnership or the other Partners.  Each Partner and the Partnership hereby waive any right or claim that such Partner or the Partnership may have against a Partner (or any Affiliate of a Partner) or any employee, officer, director, or shareholder of a Partner with respect to any such business or activity or the income or profits therefrom.

9.6Indemnification of the General Partner.  The Partnership shall indemnify and hold harmless to the fullest extent permitted by law, the General Partner (or any Affiliate thereof) and its shareholders, directors, officers, partners, and employees (herein referred to in the aggregate as “Indemnified Parties”), to the extent that the Partnership assets are sufficient therefor, from and against any and all claims, demands, liabilities, costs (including reasonable attorney’s fees and court costs), damages, and causes of action arising out of, relating to, or which are or may be directly or indirectly attributable or incidental to actions or occurrences under this Agreement or which otherwise relate to the Partnership or occurrences during the term of the Partnership, whether or not arising out of the negligence of the Indemnified Party, except where the claim at issue is based upon the proven gross negligence, willful misconduct or fraud of the Indemnified Party or a breach of the Act or this Agreement by the Indemnified Party.  The indemnification rights herein contained shall be cumulative of, and in addition to, any and all rights, remedies, and recourses to which the Indemnified Party shall be entitled as against third parties.

9.7Reimbursement.  The General Partner shall be entitled to reimbursement out of Partnership funds for any and all actual costs and expenses, incurred by the General Partner on behalf of the Partnership, while acting on behalf of the Partnership.

9.8Removal of the General Partner.  The General Partner may be removed from the Partnership, with or without cause, by approval or written consent of Partners who own at least two-thirds (2/3) of the Voting Interests (excluding the Voting Interests of the General Partner).  Any action of the Limited Partners shall be reflected in a written instrument approved by the requisite percentage.  In the event of the removal of a General Partner as herein provided, the General Partner shall retain its interest in the Partnership; provided, however, that the foregoing shall not constitute a waiver or exculpation by the Partnership or any Partner of any liability which the General Partner may have to the Partnership or any Partner, and the General Partner, even though removed, shall remain entitled to indemnification from the Partnership pursuant to Section 9.6 with respect to any matter arising prior to its removal, and provided further that in the event of the removal of the sole remaining General Partner, the Partnership shall be dissolved and liquidated, unless reconstituted or continued by the selection of a substitute General Partner as provided in Article XIII.

ARTICLE X

STATUS AND LIABILITY OF LIMITED PARTNERS

10.1General.  Subject to the terms and conditions of this Agreement, each Limited Partner shall have all of the rights, and be afforded the status, of a limited partner as set forth in the Limited Partnership Act.  The Limited Partners shall not take part in the management or control of the Partnership business, transact any business for the Partnership, or have the power to sign for or bind the Partnership.

10.2Limitation of Liability.  The liability of each Limited Partner shall be limited as provided under the Limited Partnership Act to (i) its share of the assets and undistributed Profits of the Partnership, (ii) for a period of one (1) year following any such return, an amount equal to the amount of

14

any Capital Contribution rightfully returned to the Limited Partner necessary to discharge Partnership liabilities to all creditors who extended credit to the Partnership during the period the Capital Contribution was held by the Partnership, and (iii) any Partnership funds or property wrongfully distributed or returned to such Limited Partner.

ARTICLE XI

LIMITED PARTNER REPRESENTATIONS
AND WARRANTIES AND COVENANTS;
INDEMNIFICATION RIGHT OF RESCISSION

11.1Representations and Warranties and Covenants of the Limited Partners. Each Limited Partner hereby represents and warrants to the Partnership and all other Partners that:

(a)it has received written information concerning the Partnership, has thoroughly read the information and understands completely the nature of the risks involved in the proposed investment; has been advised that the General Partner is available to answer questions about the purchase of Partnership Interests and has asked any questions of the General Partner that it desires to ask and has received answers or other information from the General Partner with respect to all such questions;

(b)it understands that no state or Federal governmental authority has made or will make any finding, determination, recommendation, or endorsement relating to the fairness for investment of the Partnership Interests offered by the Partnership;

(c)it recognizes that prior to this offering there has been no public market for the interests in the Partnership offered by the Partnership and it is unlikely that after the offering there will be such market; it understands that the transferability of Partnership Interests is restricted and that it cannot expect to be able readily to liquidate its investment in case of emergency and that it may have to continue to bear the risk of holding the Partnership Interests for an indefinite period;

(d)it is making such investment for its own account and not for the account of others, and is not buying with the present intention of reselling, transferring, or subdividing all or any portion of the Partnership Interests purchased that would require registration under the Securities Act or any applicable state securities laws;

(e)it understands that in the absence of either an effective registration statement covering the Partnership Interests under the Securities Act and any applicable state securities laws, or an opinion of counsel satisfactory to the General Partner that registration is not required under said Act and securities laws, it may not Dispose of its Partnership Interests;

(f)it will take no action that subjects the Partnership or its Partners or any of their respective Affiliates to liability; and

(g)it is aware that the General Partner and Affiliates of the General Partner will engage in businesses that are competitive with that of the Partnership, and it agrees to such activities even though there are conflicts of interests inherent therein.

11.2Indemnification.  Each Limited Partner shall and does hereby agree to indemnify, defend, and hold harmless the Partnership, the General Partner and their representatives and agents and each

15

other Limited Partner from and against any damages, claims, expenses, losses, or actions resulting from (i) a breach by such Limited Partner of any of the representations and warranties and covenants contained in Section 11.1, or (ii) the untruth of any of the representations and warranties and covenants contained in Section 11.1. If the representations and warranties and covenants contained in Section 11.1 are either breached or not true, then such Limited Partner, as to whom the warranties and representations and covenants are not true or who breached the warranties and representations and covenants, shall, at the election of the General Partner, be subject to the right of rescission set forth in Section 11.3 and to all other rights and remedies available to the Partnership at law or in equity.

11.3Alternate Right of Rescission.  If the General Partner discovers any breach or untruth of any of the representations and warranties and covenants set forth in Section 11.1 by a Limited Partner, the General Partner may, at its election, rescind the sale of any interest in the Partnership to such Limited Partner by returning to such Limited Partner an amount equal to the excess of (i) the cash contributions made to the Partnership by the Limited Partner in question to the date that the right of rescission is exercised over (ii) the aggregate of all cash distributed to such Limited Partner by the Partnership to the date that the right of rescission is exercised.

ARTICLE XII

RELIANCE

12.1Reliance.  The Limited Partners acknowledge that the General Partner, in determining whether to execute this Agreement, have relied upon the representations, warranties, covenants, and agreements of the Limited Partners contained in this Agreement and would not have executed this Agreement but for such representations, warranties, covenants, and agreements.

ARTICLE XIII

DISSOLUTION:  WINDING UP

13.1Dissolution.  The Partnership shall be dissolved and its affairs shall be wound up upon the occurrence of any of the following:

(a)The expiration of the term provided in Section 3.3, unless extended by amendment of this Agreement approved by all of the Partners;

(b)The sole remaining General Partner’s Bankruptcy, dissolution, removal or withdrawal from the Partnership (including a Disposition by the sole remaining General Partner of his entire interest as General Partner in the Partnership pursuant to Section 5.9), unless the remaining Partners agree to continue the Partnership and its business and, if applicable, elect and approve a substitute general partner, it being agreed that the General Partner has the right to withdraw at any time by giving one hundred eighty (180) days prior written notice thereof to each of the Limited Partners;

(c)The sale, transfer, or other Disposition of all or substantially all of the assets of the Partnership;

(d)The approval of the Partners owning, in the aggregate, greater than fifty percent (50%) of the Voting Interests; or

(e)Any event that makes it unlawful for the Partnership business to be conducted.

16

Neither the death, dissolution, mental incompetency, or Bankruptcy of any Limited Partner nor the admission or substitution of a Person as a Limited Partner shall dissolve, or be deemed to dissolve, the Partnership or cause any interruption in or affect the continued existence of the Partnership and its business.  To the extent that any event other than those specifically set forth in clauses (a), (b), (c), (d) and (e) hereinabove is determined to cause, technically, a dissolution of the Partnership, the Partners hereby agree that upon the occurrence of any such event the Partnership shall automatically be reconstituted immediately as a new limited partnership on terms identical to those set forth in this Agreement which shall be composed of the remaining Partners who may continue the business of the Partnership, either alone or with other Persons, and who shall approve of the general partner of the new partnership.

13.2Liquidator.  If the Partnership is dissolved and is not automatically reconstituted pursuant to Section 13.1 or otherwise reconstituted by the affirmative vote of the General Partner and all Limited Partners, an accounting of the Partnership assets, liabilities, and operations through the last day of the month in which the dissolution occurs shall be made by the Independent Accountants and the affairs of the Partnership shall be wound up and terminated.  The General Partner shall serve as the Liquidator (unless dissolution is caused by the Bankruptcy of the General Partner, in which event the liquidating trustee shall be a Person approved of by the Limited Partners owning, in the aggregate, at least a majority of the Voting Interests).  The party actually conducting such liquidation in accordance with the foregoing sentence, whether the General Partner, a Limited Partner, or any other person approved by the remaining Partners, is herein referred to as the “Liquidator.”  The Liquidator, if a Person other than the General Partner, shall have sufficient business expertise and competence to conduct the Winding Up and termination of the Partnership and, in the course thereof, to cause the Partnership to perform any contracts which the Partnership has or thereafter enters into.  The Liquidator shall have full right and unlimited discretion to determine the time, manner and terms of any sale or sales of Partnership property pursuant to such liquidation, having due regard for the activity and condition of the relevant market and general financial and economic conditions.  The Liquidator (other than the General Partner) appointed as provided herein shall be entitled to receive such reasonable compensation for its services as shall be agreed upon by the Liquidator and the Partners owning, in the aggregate, at least a majority of the Voting Interests.

13.3Liquidation.

(a)Procedures.  In the course of Winding Up and terminating the business and affairs of the Partnership, its assets (other than cash) shall be sold, its liabilities and obligations to creditors (including any loan made by Partners) and all expenses incurred in its liquidation shall be paid, and all resulting revenues shall be credited or charged to the Capital Accounts of the Partners in accordance with Section 7.2.  All Partnership property shall be sold upon liquidation of the Partnership and no Partnership property shall be distributed in kind to the Partners except by agreement of all Partners.  If Partnership property is to be distributed in kind, the Liquidator shall determine the fair market value of such Partnership property and the Capital Accounts of the Partners shall be adjusted for the gain or loss that would have been recognized if the Partnership property to be distributed had been sold by the Partnership for such fair market value.

(b)Distribution.  The net proceeds from such sales (after deducting all selling costs and expenses in connection therewith), together with (at the expiration of the period referred to in Section 13.4) the balance in the reserve account referred to in Section 13.4 and any Partnership property that is to be distributed in kind shall be distributed among the remaining Partners in the following order and priorities:

17

(i)Partnership assets shall be distributed to the General Partner for any compensation, fees or unreimbursed costs and expenses owed by the Partnership to the General Partner;

(ii)Partnership assets shall be distributed to the Partners in an amount sufficient to discharge completely the principal and accrued interest owing to such Partners pursuant to any loans made to the Partnership by such Partners; and

(iii)Partnership assets shall be distributed among the Partners in accordance with their positive Capital Account balances, as determined after taking into account all Capital Account adjustments for the taxable year of the Partnership during which the liquidation of the Partnership occurs.

(c)Negative Capital Accounts.  No Partner shall be required to restore any deficit balance existing on its Capital Account upon the liquidation and termination of the Partnership.

(d)Miscellaneous.  The Liquidator shall be instructed to use all reasonable efforts to effect complete liquidation of the Partnership within one year after the date the Partnership is dissolved.  Each holder of a Partnership Interest shall look solely to the assets of the Partnership for all distributions and shall have no recourse therefor (upon dissolution or otherwise) against the Partnership, the General Partner or the Liquidator.  Upon the completion of the liquidation of the Partnership and the distribution of all Partnership funds, the Partnership shall terminate and the General Partner (or the Liquidator, as the case may be) shall have the authority to execute and record all documents required to effectuate the dissolution and termination of the Partnership.

13.4Creation of Reserves.  After making payment or provision for payment of all debts and liabilities of the Partnership and all expenses of liquidation, the Liquidator may establish, for a period not to exceed one year beginning on the date of dissolution, such cash reserves as the Liquidator may deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the Partnership.

13.5Final Audit.  Within a reasonable time following the completion of the liquidation, the Liquidator shall supply to each of the Partners a statement, certified by Independent Accountants if a Limited Partner shall so request, which shall set forth the assets and the liabilities of the Partnership as of the date of complete liquidation, each Partner’s pro rata portion of distributions pursuant to Section 13.3, and the amount retained as reserves by the Liquidator pursuant to Section 13.4.

ARTICLE XIV

POWER OF ATTORNEY

14.1Grant of Power.  Each Partner does hereby irrevocably make, constitute, and appoint the General Partner, each of their partners and any successors thereto, each with full power of substitution, as its true and lawful attorney and agent, with full power and authority in its name, place, and stead and to execute, swear to, acknowledge, deliver, file, and record in the appropriate public offices (i) all certificates and other instruments (including, without limitation, the Certificate of Limited Partnership and, at the option of the General Partner, counterparts of this Agreement) and all amendments thereto that the General Partner deems appropriate, necessary or advisable to form, qualify, reform, or continue the qualification of, the Partnership as a limited partnership (or a partnership in which the Limited Partners have limited liability) in the State of Texas and in each jurisdiction in which the Partnership conducts business; (ii) all instruments that the General Partner deems necessary, appropriate or advisable to reflect the use by the Partnership of any name other than KCI Real Property Limited; (iii) all instruments that the General Partner deems necessary, appropriate, or advisable to reflect any amendment, change, or modification of the Partnership in accordance with the terms of this Agreement;

18

(iv) all conveyances and other instruments or documents that the General Partner deems appropriate, necessary, or advisable to reflect the dissolution and termination of the Partnership pursuant to the terms of this Agreement; (v) instruments relating to the admission of additional or substituted Partners pursuant to the terms of this Agreement (including, without limitation, changes in the Partners’ Voting Interests resulting from the admission of such additional or substituted Partners); (vi) all documents that the General Partner deems appropriate, necessary or advisable to record or effectuate any vote that a Limited Partner is deemed to have cast pursuant to Section 15.14; and (vii) any other documents or instruments that the General Partner deems necessary, appropriate, or advisable in connection with the Partnership business.

14.2Power Declared Irrevocable.  The power of attorney set forth in Section 14.1 is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the subsequent death, dissolution, Bankruptcy, disability, incapacity, or mental incompetency of a Partner and shall extend to such Partner’s heirs, successors, and assigns.  Each Partner hereby agrees to be bound by any representations made by the General Partner and any such successor thereto, acting in good faith, pursuant to such power of attorney; and each Partner hereby waives any and all defenses that may be available to contest, negate, or disaffirm the action of the General Partner and any such successor thereto, taken in good faith, under such power of attorney.

ARTICLE XV

GENERAL

15.1Offset.  In the event that any sum is payable to any Partner pursuant to this Agreement, any amounts owed by said Partner to the Partnership shall be deducted from said sum before payment to said Partner.

15.2Choice of Law: Consent to Jurisdiction.  This Agreement shall be subject to and governed by the laws of the State of Texas, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state.  Each of the Partners hereby consents to the jurisdiction of the state and federal courts in the State of Texas.  Venue for its enforcement shall be in Bexar County, Texas.

15.3Notices.  All notices or requests or approvals provided for or permitted to be given pursuant to this Agreement must be in writing and may be given by depositing same in the United States mail, addressed to the Partner to be notified, postpaid, and registered or certified with return receipt requested or by prepaid telegram or by delivering such notice in person to such Partner.  Notices shall conclusively be deemed for all purposes of the Agreement to have been received and to be effective (i) if mailed in accordance with the provisions of the immediately preceding sentence, upon the expiration of five (5) business days after its deposit in the mail, (ii) if sent by prepaid telegram, upon the expiration of two (2) business days after its transmission, and (iii) if personally delivered, upon the actual receipt of such notice by the Partner to be notified.  For purposes of notice the address of each Partner shall be the address specified for such Partner in Exhibit A. Each Partner may change its address for notice by the giving of thirty (30) days notice thereof to the General Partner in the manner hereinabove stated.

15.4Entire Agreement.  This Agreement constitutes the entire agreement of the Partners relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written.

15.5Effect of Waiver of Consent.  No waiver or consent, express or implied, by any Partner to or of any breach or default by any Partner in the performance by such Partner of its obligations

19

hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such Partner of the same or any other obligations of such Partner hereunder.

15.6Amendment or Modification.  This Agreement may be amended or modified from time to time in the manner specified in this Section 15.6. With respect to amendments (i) permitting the General Partner to require the Limited Partners to contribute monies to the Partnership in addition to the contributions required pursuant to Section 6.1, or (ii) altering the Voting Interests of the Limited Partners (except changes in the Partners’ Voting Interests resulting from the admission of additional or substitute Partners or purchases or sales or other Dispositions of the Limited Partner interests pursuant to this Agreement), this Agreement may not be amended unless such amendment is approved by the General Partner and the Limited Partners owning at least sixty-six and two-thirds (66 2/3%) of the Voting Interest.  With respect to all amendments other than those specified in the second sentence of this Section 15.6, this Agreement can be amended if such amendment is approved by the General Partner and Limited Partners owning a majority of the Voting Interests.  Notwithstanding any other provision of this Agreement, without the approval of the Limited Partners (and, to the extent, if any, that such approval may be required by applicable law, each Limited Partner hereby irrevocably grants such approval), the General Partner may make (and file with the appropriate public officials) such amendments or modifications to this Agreement as may be necessary to effect changes resulting from the admission of additional or substitute Partners to the Partnership or purchases or sales or other Dispositions of the Limited Partner’s Partnership Interests pursuant to this Agreement.  Each such instrument shall be reduced to writing.

15.7Binding Effect.  Subject to the restrictions on transfers and encumbrances set forth herein, this Agreement shall be binding upon and shall inure to the benefit of the Partners and their respective heirs, legal representatives, successors, and permitted assigns.

15.8Counterparts.  This Agreement may be executed in any number of counterparts with the same effect as if all Partners had signed the same document.  All counterparts shall be construed together and shall constitute one and the same instrument.

15.9Severability.  If any provision of this Agreement or the application thereof to any Person or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

15.10Headings.  The headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provision hereof.

15.11Terminology.  Whenever the context requires, the gender of all words used in this Agreement shall include the masculine, feminine, and neuter, and the number of all words shall include the singular and the plural.  All references to Section and Article numbers refer to Sections and Articles in this Agreement.

15.12Additional Documents.  In connection with this Agreement, as well as all transactions contemplated by this Agreement, each Partner hereto agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out, and perform all of the terms, provisions, and conditions of this Agreement and all such transactions.

20

15.13Waiver of Certain Rights.  Each Partner irrevocably waives any right it might have to maintain any action for dissolution of the Partnership (except as specifically provided to the contrary in Article XIII) or to maintain any action for partition of the property of the Partnership.

15.14Deemed Assent.  The failure of a Limited Partner to respond, within the response period set forth in the request in question, either in the affirmative or in the negative to any request it receives from the General Partner relating to a proposed act in respect of which such Limited Partner is entitled to vote pursuant to this Agreement shall conclusively be deemed for all purposes to be a vote by such Limited Partner in favor of the act proposed by the General Partner.

15.15Exhibits.  Any reference made in this Agreement to an Exhibit is a reference to an Exhibit of this Agreement.

IN WITNESS WHEREOF, the General Partner and the Limited Partner have executed this Agreement effective as of the Effective Date.

GENERAL PARTNER
KCI USA REAL HOLDINGS, L.L.C.
By:
	Dennis E. Noll, Manager and Vice President
LIMITED PARTNER
KCI REAL HOLDINGS, L.L.C.
By:
	Dennis E. Noll, Manager and Vice President

21

EXHIBIT A

NAME AND ADDRESS		PERCENTAGE INTEREST		VOTING INTEREST
KCI USA Real Holdings, L.L.C.		10	%	10	%
Address:	8023 Vantage Drive
	San Antonio, Texas 78230
KCI Real Holdings, L.L.C.		90	%	90	%
Address:	103 Foulk Road, Suite 202
	Wilmington, Delaware 19803

22

EX-3.18

Exhibit 3.18

CERTIFICATE OF FORMATION

OF

KCI USA REAL HOLDINGS, L.L.C.

This Certificate of Formation of KCI USA REAL HOLDINGS, L.L.C. (the “Company”) is being executed by the undersigned for the purpose of forming a limited liability company pursuant to the Delaware Limited Liability Company Act.

1.The name of the limited liability company is KCI USA REAL HOLDINGS, L.L.C.

2.The address of the registered office of the Company in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle.  The name of the registered agent of the Company at such address is The Corporation Trust Company.

IN WITNESS WHEREOF, the undersigned, an authorized person of the Company, has caused this Certificate of Formation to be duly executed this 13th day of December, 2001.

Tobin E. Olson, Authorized Person

EX-3.19

Exhibit 3.19

LIMITED LIABILITY COMPANY AGREEMENT
OF
KCI USA REAL HOLDINGS, L.L.C.

Organized under the Delaware Limited Liability Company Act

THIS LIMITED LIABILITY COMPANY AGREEMENT (as amended from time to time, this “Agreement”) hereby is entered into and adopted effective as of December 13, 2001, by KCI USA, Inc., a Delaware corporation, as the initial Member (as defined below) of KCI USA Real Holdings, L.L.C., a Delaware limited liability company (the “Company”).

ARTICLE I

DEFINITIONS

1.1Definitions.  As used in this Agreement, the following terms have the following meanings:

“Act” means the Delaware Limited Liability Company Act and any successor statute, as amended from time to time.

“Agreement” has the meaning given to that term in the introductory paragraph.

“Capital Contribution” means the amount of money and the fair market value of any property contributed to the Company by a Member after appropriate reduction for liabilities assumed by the Company or otherwise burdening the Capital Contribution.  The initial Capital Contribution of each Member is set forth in Exhibit A.

“Certificate” has the meaning given to that term in Section 2.1.

“Company” means KCI USA Real Holdings, L.L.C, a Delaware limited liability company.

“DGCL” means the Delaware General Corporation Law, as amended.

“Manager” means a person that has been designated by the Members of the Company as a Manager of the Company pursuant to this Agreement.

“Member” means any Person executing this Agreement as of the date of this Agreement as a member or hereafter admitted to the Company as a member as provided in this Agreement, but does not include any Person who has ceased to be a member in the Company.

“Percentage Interest” means the interest of a Member in the Company, including, without limitation, rights to distributions (liquidating or otherwise), allocations, information, and to vote, consent or approve.

ARTICLE II

Name and Location

Section 2.1.  Formation.  The Company has been organized as a Delaware limited liability company by the filing of a Certificate of Formation (the “Certificate”) under and pursuant to the Act.

Section 2.2.  Name.  The name of this limited liability company is KCI USA Real Holdings, L.L.C and all Company business must be conducted in that name or such other names that comply with applicable law as the Managers may select from time to time.

Section 2.3.  Principal Office.  The principal office of the Company shall be located in the City of San Antonio, State of Texas.

Section 2.4.  Registered Office.  The address of the registered office of the Company in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle.  The name of the registered agent of the corporation at such address is The Corporation Trust Company.

Section 2.5. Other Offices.  Other offices and other facilities for the transaction of business shall be located at such places as the Managers may from time to time determine.

Section 2.6. Purposes.  The purposes of the Company are to engage in any business or activity that is not forbidden by the law of the State of Delaware and of the jurisdiction in which the Company engages in business.

ARTICLE III

MEMBERSHIP

Section 3.1.  Members’ Interests.  The sole Member of the Company is KCI USA, Inc. which owns 100% of the Percentage Interest of the Company.

Section 3.2.  Admission to Membership.  The admission of new Members shall be only by the unanimous vote of the Members.  If new members are admitted, this Agreement shall be amended to reflect each Member’s revised Percentage Interest.

Section 3.3.  Property Rights.  No Member shall have any right, title, or interest in any of the property or assets of the Company.

Section 3.4.  Liability of Members.  No Member of the Company shall be personally liable for any debts, liabilities, or obligations of the Company, including under a judgment decree, or order of court.

Section 3.5.  Transferability of Membership.  Membership in the Company is transferable only with the unanimous written consent of all Members.  If such unanimous written consent is not obtained, the transferee shall be entitled to receive only the share of profits or other compensation by way of income and the return of contributions to which the transferor Member otherwise would be entitled.

2

Section 3.6.  Resignation of Member.  A Member may not withdraw from the Company except on the unanimous consent of the remaining Members.  The terms of a Member’s withdrawal shall be determined by agreement between the remaining Members and the withdrawing Member.

ARTICLE IV

MEMBERS’ MEETINGS

Section 4.1.  Time and Place of Meeting.  All meetings of the Members shall be held at such time and at such place within or without the State of Delaware as shall be determined by the Managers.

Section 4.2.  Annual Meetings.  In the absence of an earlier meeting at such time and place as the Managers shall specify, annual meetings of the Members shall be held at the principal office of the Company on the date which is thirty (30) days after the end of the Company’s fiscal year if not a legal holiday, and if a legal holiday, then on the next full business day following, at 10:00 a.m., at which the Members may transact such business as may properly be brought before the meeting.

Section 4.3.  Special Meetings.  Special meetings of the Members may be called at any time by any Member.  Business transacted at special meetings shall be confined to the purposes stated in the notice of the meeting.

Section 4.4.  Notice.  Written or printed notice stating the place, day and hour of any Members’ meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the person calling the meeting, to each Member entitled to vote at such meeting.  If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, to the Member at his address as it appears on the records of the Company at the time of mailing.

Section 4.5.  Quorum.  Members present in person or represented by proxy, holding a majority of the total votes which may be cast at any meeting shall constitute a quorum at all meetings of the Members for the transaction of business.  If, however, such quorum shall not be present or represented at any meeting of the Members, the Members entitled to vote, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented.  When any adjourned meeting is reconvened and a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed.  Once a quorum is constituted, the Members present or represented by proxy at a meeting may continue to transact business until adjournment, notwithstanding the subsequent withdrawal therefrom of such number of Members as to leave less than a quorum.

Section 4.6.  Voting.  When a quorum is present at any meeting, the vote of the Members, whether present or represented by proxy at such meeting, holding a majority of the total votes which may be cast at any meeting shall be the act of the Members, unless the vote of a different percentage is required by the Act, the Articles of Organization or this Agreement.  Each Member shall be entitled to one vote for each percentage point represented by their Percentage Interest.  Fractional percentage interests shall be entitled to a corresponding fractional vote.

Section 4.7.  Proxy.  Every proxy must be executed in writing by the Member or by his duly authorized attorney-in-fact, and shall be filed with the Secretary of the Company prior to or at the time of

3

the meeting.  No proxy shall be valid after eleven (11) months from the date of its execution unless otherwise provided therein.  Each proxy shall be revocable unless expressly provided therein to be irrevocable and unless otherwise made irrevocable by law.

Section 4.8.  Action by Written Consent.  Any action required or permitted to be taken at any meeting of the Members may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the Members entitled to vote with respect to the subject matter thereof, and such consent shall have the same force and effect as a unanimous vote of Members.

Section 4.9.  Meetings by Conference Telephone.  Members may participate in and hold meetings of Members by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

ARTICLE V

MEMBERSHIP CAPITAL CONTRIBUTIONS

Section 5.1.  Capital Contributions.  The initial capital contribution of each Member shall be set forth on Exhibit A attached hereto.

Section 5.2.  Additional Contributions.  No additional capital contributions shall be required of any Member.

Section 5.3.  Loans from Members.  Upon the approval of the Managers, any Member may (but shall not be obligated to) advance funds in the form of a loan to the Company.

ARTICLE VI

DISTRIBUTION TO MEMBERS

The Managers shall determine, in their sole discretion, the amount and timing of all distributions from the Company.  Distributions shall be divided among the Members in accordance with their Percentage Interests.  Distributions in kind shall be made on the basis of agreed value as determined by the Managers.  Notwithstanding the foregoing, the Company may not make a distribution to its Members to the extent that, immediately after giving effect to the distribution, the liabilities of the Company, other than liabilities to Members with respect to their interests and liabilities for which the recourse of creditors is limited to specified property of the Company, exceed the fair value of the Company assets, except that the fair value of property that is subject to liability for which recourse of creditors is limited, shall be included in the Company assets only to the extent that the fair value of the property exceeds that liability.

4

ARTICLE VII

ALLOCATION OF NET PROFITS AND LOSSES FOR TAX PURPOSES

For accounting and income tax purposes, all items of income, gain, loss, deduction, and credit of the Company for any taxable year shall be allocated among the Members in accordance with their respective Percentage Interests, except as may be otherwise required by Section 704(c) of the Internal Revenue Code of 1986, as amended.

ARTICLE VIII

DISSOLUTION AND WINDING UP

Section 8.1.  Dissolution.  The Company shall be dissolved upon the first of the following to occur:

(a)Thirty (30) years from the date of filing the Articles of Organization of the Company;

(b)Written consent of all Members to dissolution;

(c)The bankruptcy, retirement, resignation, expulsion or dissolution of a Member, unless there is at least one remaining Member and such Member or Members unanimously agree to continue the Company and its business.

Section 8.2.  Winding Up.  Unless the Company is continued pursuant to Section 1(c) of this Article VIII, in the event of dissolution of the Company, the Managers shall wind up the Company’s affairs as soon as reasonably practicable.  On the winding up of the Company, the Managers shall pay and/or transfer the assets of the Company in the following order:

(a)In discharging liabilities (including loans from Members) and the expenses of concluding the Company’s affairs;

(b)The balance, if any, shall be divided between the Members in accordance with the Members’ Percentage Interests.

ARTICLE IX

MANAGERS

Section 9.1.  Selection of Managers.  Management of the Company shall be vested in the Managers.  The Managers of the Company shall be appointed by the Members.  Each Manager shall serve as a Manager until removed pursuant to Sections 9.2 or 9.3.  Managers need not be residents of the State of Delaware.  The initial Managers of the Company shall be the following named persons:

Dennert O. Ware

Dennis E. Noll

Section 9.2.  Resignations.  Each Manager shall have the right to resign at any time upon written notice of such resignation to the President or Secretary of the Company.  Unless otherwise specified in such written notice, the resignation shall be effective upon the receipt by the Company.

5

Section 9.3.  Removal of Manager.  Any Manager may be removed, for or without cause, though his term may not have expired, by the vote of a majority of the Percentage Interests of the Members at a special meeting called for that purpose.

Section 9.4.  General Powers.  The business of the Company shall be managed by its Managers, which may exercise any and all powers of the Company and do any and all such lawful acts and things as are not reserved under the Act, the Articles of Organization or by this Agreement directly to the Members.

Section 9.5.  Place of Meetings.  The Managers of the Company may hold their meetings, both regular and special, either within or without the State of Delaware.

Section 9.6.  Annual Meetings.  The annual meeting of the Managers shall be held without further notice immediately following the annual meeting of the Members, and at the same place, unless such time or place shall be changed by unanimous consent of the Managers.

Section 9.7.  Regular Meetings.  Regular meetings of the Managers may be held without notice at such time and place as shall from time to time be determined by the Managers.

Section 9.8.  Special Meetings.  Special meetings of the Managers may be called by any Manager on two (2) days notice to each Manager, with such notice to be given personally, by mail, or by facsimile.

Section 9.9.  Quorum and Voting.  At all meetings of the Managers the presence of at least a majority of the number of Managers shall be necessary and sufficient to constitute a quorum for the transaction of business, and the affirmative vote of at least a majority of the Managers present at any meeting at which there is a quorum shall be the act of the Managers, except as may be otherwise specifically provided by the Act, the Articles of Organization or this Agreement.  If a quorum shall not be present at any meeting of Managers, the Managers present may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present.

Section 9.10.  Committees.  The Managers may, by resolution passed by a majority of the Managers, designate committees, each of which shall consist of one or more Managers and shall have such power and authority and shall perform such functions as may be provided in such resolution.  Such committee or committees shall have such name or names as may be designated by the Managers and shall keep regular minutes of their proceedings and report the same to the Managers when required.

Section 9.11.  Compensation of Managers.  The Members shall have the authority to fix the compensation of Managers and to provide for the reimbursement of reasonable expenses incurred by the Managers on behalf of the Company.

Section 9.12.  Action by Written Consent.  Any action required or permitted to be taken at any meeting of the Managers or of any committee designated by the Managers may be taken without a meeting if a written consent, setting forth the action so taken, is signed by all the Managers or of such committee.  Such consent shall have the same force and effect as a unanimous vote at a meeting.

Section 9.13.  Meetings by Conference Telephone.  Managers or members of any committee designated by the Managers may participate in and hold a meeting of the Managers or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other.  Participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of

6

objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

Section 9.14.  Liability of Managers.  No Manager of the Company shall be personally liable for any debts, liabilities, or obligations of the Company, including under a judgment decree, or order of court.

ARTICLE X

NOTICES

Section 10.1.  Form of Notice.  Whenever under the provisions of the Act, the Articles of Organization or this Agreement notice is required to be given to any Manager or Member, and no provision is made as to how such notice shall be given, notice shall not be construed to mean personal notice.  Any such notice may be given in writing, by mail, postage prepaid, addressed to such Manager or Member at such address as appears on the books of the Company, or by telex, telegraph or mailgram.  Any notice required or permitted to be given by mail shall be deemed to be given at the time the same is deposited, postage prepaid, in the United States mail as aforesaid.

Section 10.2.  Waiver.  Whenever any notice is required to be given to any Manager or Member of the Company under the provisions of the Act, the Articles of Organization or this Agreement, a waiver thereof in writing signed by the person or persons entitled to such notice, whether signed before or after the time stated in such waiver, shall be deemed equivalent to the giving of such notice.

ARTICLE XI

OFFICERS

Section 11.1.  In General.  The officers of the Corporation shall be elected by the Managers and shall be a Chairman, a President, a Secretary and a Treasurer.  The Managers may also elect Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers, all of whom shall also be officers.  Two or more offices may be held by the same person.  Managers may be officers.

Section 11.2.  Election.  The Managers at their first meeting after each annual meeting of the Members shall elect a Chairman, a President, a Secretary and a Treasurer and may appoint such other officers and agents as it shall deem necessary, and may determine the salaries of all officers and agents from time to time.  The officers shall hold office until their successors are duly elected and qualified.  Any officer elected or appointed by the Managers may be removed, for or without cause, at any time by a majority vote of the Managers.  Election or appointment of an officer or agent shall not of itself create contract rights.

Section 11.3.  Chairman.  The Chairman of the Managers, if there be a Chairman, shall preside at all meetings of the Members and the Managers shall have such other powers as may from time to time be assigned by the Managers.

Section 11.4.  President.  The President shall be the chief executive officer of the Company, shall have authority and responsibility for the general and active management of the business of the Company and shall see that all orders and resolutions of the Managers are carried into effect.  Subject to the prior approval of the Managers, the President shall execute all contracts, mortgages, conveyances or other legal

7

instruments in the name of and on behalf of the Company, but this provision shall not prohibit the delegation of such powers by the Managers to some other officer, agent or attorney-in-fact of the Company.

Section 11.5.  Vice Presidents.  The Vice President or, if there be more than one, the Vice Presidents in the order of their seniority or in any other order determined by the Managers, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President, and shall generally assist the President and perform such other duties as the Managers shall prescribe.

Section 11.6.  Secretary.  The Secretary shall attend all sessions of the Managers and all meetings of the Members and shall record all votes and the minutes of all such proceedings in a book to be kept for that purpose, and shall perform like duties for any other committees of the Managers when required.  The Secretary shall give, or cause to be given, notice of all meetings of the Members and special meetings of the Managers, and shall perform such other duties as may be prescribed by the Managers or President, under whose supervision he shall be.

Section 11.7.  Assistant Secretaries.  Any Assistant Secretary shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as may be prescribed by the Managers or the President.

Section 11.8.  Treasurer.  The Treasurer shall have the custody of all corporate funds and securities, shall keep full and accurate accounts of receipts and disbursements of the Company, and shall deposit all moneys and other valuable effects in the name of and to the credit of the Company in such depositories as may be designated by the Managers.  The Treasurer shall disburse the funds of the Company as may be ordered by the Managers, taking proper vouchers for such disbursements, shall render to the President and Managers, at the regular meetings of the Managers or whenever they may otherwise require, an account of all his transactions as Treasurer and of the financial condition of the Company, and shall perform such other duties as may be prescribed by the Managers or the President.

Section 11.9.  Assistant Treasurers.  Any Assistant Treasurer shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as may be prescribed by the Managers or the President.

ARTICLE XII

INDEMNITY

Section 12.1.  Indemnification. The Company shall indemnify its Managers, officers, employees, agents and others as fully as, and to the same extent a corporation may indemnify its directors, officers, employees and agents under the Delaware General Corporation Law, as now in effect or hereafter amended.  The Company shall have the power to purchase and maintain liability insurance coverage for those persons as, and to the fullest extent, permitted by the Act, as presently in effect and as may be hereafter amended.

Section 12.2.  Indemnification Not Exclusive.  The rights of indemnification and reimbursement provided for in Section 12.1 shall not be deemed exclusive of any other rights to which any such Manager, officer, employee or agent may be entitled under the Statement of Formation, any agreement or vote of Members, or as a matter of law or otherwise.

8

ARTICLE XIII

MISCELLANEOUS

Section 13.1.  Fiscal Year.  The fiscal year of the Company shall end on December 31st.

Section 13.2.  Records.  The Managers shall maintain records and accounts of all operations of the Company.  At a minimum, the Company shall keep at its principal place of business the following records:

(a)A current list of the name and last known mailing address of each Member;

(b)A current list of each Member’s Percentage Interest;

(c)A copy of the Articles of Organization and Agreement of the Company, and all amendments thereto, together with executed copies of any powers of attorney;

(d)Copies of the Federal, state, and local income tax returns and reports for the Company’s six most recent tax years; and

(e)Correct and complete books and records of account of the Company; and

(f)Minute books which accurately reflect the meetings of the Members and Managers.

Section 13.3.  Seal.  The Company may by resolution of the Managers adopt and have a seal, and said seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.  Any officer of the Company shall have authority to affix the seal to any document requiring it.

Section 13.4.  Checks.  All checks, drafts or orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Company shall be signed by such officer or officers, agent or agents of the Company and in such manner as shall from time to time be determined by resolution of the Managers.  In the absence of such determination by the Managers, such instruments shall be signed by the Treasurer or the Secretary and countersigned by the President or a Vice President of the Company.

Section 13.5.  Deposits.  All funds of the Company shall be deposited from time to time to the credit of the Company in such banks, trust companies or other depositories as the Managers may select.

Section 13.6.  Annual Statement.  The Managers shall present at each annual meeting, and, when called for by vote of the Members, at any special meeting of the Members, a full and clear statement of the business and condition of the Company.

Section 13.7.  Financial Statements.  As soon as practicable after the end of each fiscal year of the Company, a balance sheet as at the end of such fiscal year, and a profit and loss statement for the period ended, shall be distributed to the Members, along with such tax information (including all information returns) as may be necessary for the preparation of each Member of its federal, state and local income tax returns.  The balance sheet and profit and loss statement referred to in the previous sentence may be as shown on the Company’s federal income tax return.

9

ARTICLE XIV

AMENDMENTS

Section 14.1.  Amendments.  This Agreement may be altered, amended or repealed and a new Agreement may be adopted by the vote of a majority of the Percentage Interests of the Members, at any regular meeting or at any special meeting called for that purpose.

Section 14.2.  When Regulations Silent.  It is expressly recognized that when this Agreement is silent as to the manner of performing any Company function, the provisions of the Act shall control.

Executed and adopted as the Limited Liability Agreement of the Company by the undersigned sole member of the Company as of the 13th day of December, 2001.

KCI USA, INC.
By:
	Dennis E. Noll, Vice President

10

EXHIBIT A

Member	Initial Capital Contribution	Percentage Interest
KCI USA, Inc.	Contribution of KCI USA, Inc.’s 10% membership interests in each of KCI Properties Limited and KCI Real Property Limited	100	%

EX-3.20

Exhibit 3.20

ARTICLES OF INCORPORATION

OF

MEDCLAIM, INC.

The undersigned submits these Articles of Incorporation for the purpose of forming a business corporation under Chapter 55 of the North Carolina General Statutes:

1.The name of the corporation is Medclaim, Inc.

2.The corporation shall have the authority to issue 100,000 shares of common stock.

3.The street address of the initial registered office of the corporation is 600 South College Street, Mecklenburg County, North Carolina 28202. The mailing address of the initial registered office of the corporation is 600 South College Street, Charlotte, Mecklenburg County, North Carolina 28202. The name of the initial registered agent at such address is John W. Beddow.

4.The number of directors constituting the initial board of directors shall be one. The name and address of the persons to serve as the directors until the first meeting of the shareholders is:

Name	Address
John W. Beddow	600 South College Street Charlotte, NC 28202

5.The name and address of the incorporator is John W. Beddow, James, McElroy & Diehl, P.A., 600 South College Street, Charlotte, Mecklenburg County North Carolina 28202.

IN TESTIMONY WHEREOF, I have hereunto set my hand this 31st day of May, 2000

John Beddow, Incorporator

EX-3.21

Exhibit 3.21

INDEX OF BYLAWS

OF

MEDCLAIM, INC.

ARTICLE I.

OFFICES
Section 1.1.	Principal office.
Section 1.2.	Registered office.
Section 1.3.	Other offices.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 2.1.	Place of meetings.
Section 2.2.	Annual meetings.
Section 2.3.	Substitute annual meeting.
Section 2.4.	Special meetings.
Section 2.5.	Notice of meetings.
Section 2.6.	Waiver of notice.
Section 2.7.	Shareholders’ list.
Section 2.8.	Voting group.
Section 2.9.	Quorum.
Section 2.10.	Proxies.
Section 2.11.	Voting of shares.
Section 2.12.	Informal action by shareholders.
Section 2.13.	Participation in meeting by telephone.
ARTICLE III.
BOARD OF DIRECTORS
Section 3.1.	General powers.
Section 3.2.	Number and qualifications.
Section 3.3.	Election.
Section 3.4.	Term of directors.
Section 3.5.	Removal.
Section 3.6.	Vacancies.
Section 3.7.	Chairman of Board.
Section 3.8.	Compensation.

ARTICLE IV.
MEETINGS OF DIRECTORS
Section 4.1.	Regular meetings.
Section 4.2.	Special meetings.
Section 4.3.	Notice of meetings.
Section 4.4.	Waiver of notice.
Section 4.5.	Quorum.
Section 4.6.	Manner of acting.
Section 4.7.	Presumption of assent.
Section 4.8.	Action without meeting.
Section 4.9.	Committees of the Board.
ARTICLE V
OFFICERS
Section 5.1.	Officers of the corporation.
Section 5.2.	Appointment and term.
Section 5.3.	Compensation of officers.
Section 5.4.	Removal.
Section 5.5.	Resignation.
Section 5.6.	Bonds.
Section 5.7.	President.
Section 5.8.	Vice-President.
Section 5.9.	Secretary.
Section 5.10.	Treasurer.
ARTICLE VI.
CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section 6.1.	Contracts.
Section 6.2.	Loans.
Section 6.3.	Checks and drafts.
Section 6.4.	Deposits.
ARTICLE VII.
SHARES AND THEIR TRANSFER
Section 7.1.	Certificates for shares.
Section 7.2.	Stock transfer books.
Section 7.3.	Lost certificate.
Section 7.4.	Fixing record date.

2

Section 7.5.	Holder of record.
Section 7.6.	Shares held by nominees.
ARTICLE VIII.
INDEMNIFICATION
ARTICLE IX.
GENERAL PROVISIONS
Section 9.1.	Distributions.
Section 9.2.	Seal.
Section 9.3.	Fiscal year.
Section 9.4.	Amendments.
Section 9.5.	Definitions.
ARTICLE X.
EMERGENCY BY-LAWS
Section 10.1.	Effectiveness.
Section 10.2.	Board Meetings.
Section 10.3.	Principal Office.
Section 10.4.	Specific Powers.
Section 10.5.	Nonexclusive Powers.

3

BYLAWS

OF

MEDCLAIM, INC.

Section 1.

LOCATION OF OFFICES

Section 1.1Principal office.  The principal office of the corporation shall be located at such place as the Board of Directors may fix from time to time.

Section 1.2Registered office.  The registered office of the corporation required by law to be maintained in the State of North Carolina may be, but need not be, identical with the principal office.

Section 1.3Other offices.  The corporation may have offices at such other places, either within or without the State of North Carolina, as the Board of Directors may designate or as the affairs of the corporation may require from time to time.

Section 2.

MEETINGS OF THE SHAREHOLDERS

Section 2.1Place of meetings.  All meetings of the shareholders shall be held at the principal office of the corporation, or at such other place, either within or without the State of North Carolina, as shall in each case be (i) fixed by the President, the Secretary, or the Board of Directors and designated in the notice of meeting or (ii) agreed upon by a majority of the shareholders entitled to vote at the meeting.

Section 2.2Annual meetings.  The annual meeting of the shareholders shall be held at ten o’clock a.m. on the 2nd Tuesday in March of each year, at the principal office of the Corporation, for the purpose of electing directors of the corporation and for the transaction of such other business as may be properly brought before the meeting.  If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day.

Section 2.3Substitute annual meeting.  If the President determines that an annual meeting shall not be held upon the date or at the place set forth in Section 2.2, the annual meeting may be moved to such time and place as provided by notice in accordance with the provisions of Section 2.5.  A meeting so called shall be designated and treated for all purposes as the annual meeting.

Section 2.4Special meetings.  Special meetings of the shareholders may be called at any time by the President, the Secretary, or the Board of Directors, and shall be called pursuant to the written request of the holders of not less than one-third of all the votes entitled to be cast on any issue proposed to be considered at the meeting.

Section 2.5Notice of meetings.  Written notice stating the time, and place of the meeting shall be given not less than ten or more than sixty days before the date of any

4

shareholders’ meeting, either by personal delivery, or by facsimile transmission or by mail or private carrier, by or at the direction of the Board of Directors, the President, the Secretary, or other person calling the meeting, to each shareholder entitled to vote at such meeting; provided that such notice must be given to all shareholders with respect to any meeting at which a merger or share exchange is to be considered and in such other instances as required by law.  If mailed, such notice shall be deemed to be effective when deposited in the United States mail, correctly addressed to the shareholder at the shareholder’s address as it appears on the current record of shareholders of the corporation, with postage thereon prepaid.  The address of any notice sent to a shareholder shall be presumed correct unless he has submitted to the Secretary of the Corporation a notice, in writing, stating his correct address.

In the case of a special meeting, the notice of meeting shall include a description of the purpose or purposes for which the meeting is called; but, in the case of an annual or substitute annual meeting, the notice of meeting need not include a description of the purpose or purposes for which the meeting is called unless such a description is required by the provisions of the North Carolina Business Corporation Act.

When a meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time, or place if the new date, time, or place is announced at the meeting before adjournment and if a new record date is not fixed for the adjourned meeting; but if a new record date is fixed for the adjourned meeting (which must be done if the new date is more than 120 days after the date of the original meeting), notice of the adjourned meeting must be given as provided in this section to persons who are shareholders as of the new record date.

Section 2.6Waiver of notice.  Any shareholder may waive notice of any meeting before or after the meeting.  The waiver must be in writing, signed by the shareholder, and delivered to the corporation for inclusion in the minutes or filing with the corporate records.  A shareholder’s attendance, in person or by proxy, at a meeting (a) waives objection to lack of notice or defective notice of the meeting, unless the shareholder or his proxy at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (b) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder or his proxy objects to considering the matter before it is voted upon.

Section 2.7Shareholders’ List Before each meeting of shareholders, the Secretary of the corporation shall prepare an alphabetical list of the shareholders entitled to notice of such meeting.  The list shall be arranged by voting group (and within each voting group by class or series of shares) and show the address of and number of shares held by each shareholder.  The list shall be kept on file at the principal office of the corporation, or at a place identified in the meeting notice in the city where the meeting is held, for the period beginning two business days after notice of the meeting is given and continuing through the meeting, and shall be available for inspection by any shareholder, his agent or attorney, at any time during regular business hours.  The list shall also be available at the meeting and shall be subject to inspection by any shareholder, his agent

5

or attorney, at any time during the meeting or any adjournment thereof.  Only shareholders of record, as determined pursuant to Section 7.4, and their proxies shall be entitled to vote at the meeting.

Section 2.8Voting Group.  All shares of one or more classes or series that under the Articles of Incorporation or the North Carolina Business Corporation Act are entitled to vote and be counted together collectively on a matter at a meeting of shareholders constitute a voting group.  All shares entitled by the Articles of Incorporation or the North Carolina Business Corporation Act to vote generally on a matter are for that purpose a single voting group.  Classes or series of shares shall not be entitled to vote separately by voting group unless expressly authorized by the Articles of Incorporation or specifically required by law.

Section 2.9Quorum.  Shares entitled to vote as a separate voting group may take action on a matter at the meeting only if a quorum of those shares exists.  A majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter.

Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting.

If the absence of a quorum at the opening of any meeting of the shareholders, such meeting may be adjourned from time to time by the vote of a majority of the votes cast on the motion to adjourn; and, subject to the provisions of Section 2.5 of this Article Il, at any adjourned meeting any business may be transacted that might have been transacted at the original meeting if a quorum exists with respect to the matter proposed.

Section 2.10Proxies.  Shares may be voted either in person or by one or more proxies authorized by a written appointment of proxy signed by the shareholder or by his duly authorized attorney in fact.  An appointment of proxy is valid for eleven months from the date of its execution, unless a different period is expressly provided in the appointment form.

Section 2.11Voting of shares.  Subject to the provisions of the Articles of Incorporation, each outstanding share shall be entitled to one vote on each matter voted on at a meeting of the shareholders.

Except in the election of directors as governed by the provisions of Section 3.3, if a quorum exists, action on a matter by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless a greater vote is required by law or the Articles of Incorporation or these bylaws.

Absent special circumstances, shares of the corporation are not entitled to vote if they are owned, directly or indirectly, by another corporation in which the corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the second corporation; provided that this provision does not limit the power of the corporation to vote its own shares held by it in a fiduciary capacity.

6

Section 2.12Informal action by shareholders.  Any action that is required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if one or more written consents, describing the action so taken, shall be signed by all of the shareholders who would be entitled to vote upon such action at a meeting, and delivered to the corporation for inclusion in the minutes or filing with the corporation records.  The written consents required hereunder may be transmitted by electronic facsimile, and a signature given by such facsimile transmission shall be valid

If the corporation is required by law to give notice to nonvoting shareholders of action to be taken by unanimous written consent of the voting shareholders, then the corporation shall give the nonvoting shareholders, if any, written notice of the proposed action at least ten days before the action is taken.

Section 2.13Participation in Meeting by Telephone.  Unless shareholders representing a majority of shareholders object, a shareholder may participate in a meeting by telephone.

Section 3.

BOARD OF DIRECTORS

Section 3.1General powers.  All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the Board of Directors.

Section 3.2Number and qualifications.  The number of directors constituting the Board of Directors shall be one.  The shareholders or Board of Directors may from time to time change the number of directors by amendment of these bylaws.  Directors need not be residents of the State of North Carolina or shareholders of the corporation.

Section 3.3Election.  Except as provided in Section 3.6, the directors shall be elected at the annual meeting of Shareholders.  Those persons who receive the highest number of votes at a meeting at which a quorum is present shall be deemed to have been elected.  Each “seat” on the Board of Directors shall be separately voted upon, and there shall be no right to cumulative voting.

Section 3.4Term of directors.  Each initial director shall hold office until the first shareholders’ meeting at which directors are elected, or until such director’s death, resignation, or removal.  The term of every other director shall expire at the next election of directors following the director’s election or upon such director’s death, resignation, or removal.  The term of a director elected to fill a vacancy expires at the next shareholders’ meeting at which directors are elected.  A decrease in the number of directors does not shorten an incumbent director’s term.  Despite the expiration of a director’s term, such director shall continue to serve until a successor shall be elected and qualifies or until there is a decrease in the number of directors.

Section 3.5Removal.  Any director may be removed at any time with or without cause by a vote of the shareholders if the number of votes cast to remove such

7

director exceeds the number of votes cast not to remove him.  If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove him.  A director may not be removed by the shareholders at a meeting (other than an annual meeting or substitute annual meeting) unless the notice of the meeting states that the purpose, or one of the purposes, of the meeting is removal of the director.  If any directors are so removed, new directors may be elected at the same meeting.

Section 3.6Vacancies.  Any vacancy occurring in the Board of Directors, including without limitation a vacancy resulting from an increase in the number of directors or from the failure by the shareholders to elect the full authorized number of directors, may be filled by the shareholders or by the Board of Directors, whichever group shall act first.  If the directors remaining in office do not constitute a quorum, the directors may fill the vacancy by the affirmative vote of a majority of the remaining directors.  If the vacant office was held by a director elected by a voting group, only the remaining director or directors elected by that voting group or the holders of shares of that voting group are entitled to fill the vacancy.

Section 3.7Chairman of Board.  There may be a Chairman of the Board of Directors elected by the shareholders or by directors from their number at any meeting of the Board.  The Chairman shall preside at all meetings of the Board of Directors and perform such other duties as may be directed by the Board.

Section 3.8Compensation.  The Board of Directors may provide for the compensation of directors for their services as such and for the payment or reimbursement of any or all expenses incurred by them in connection with such services.

Section 4.

MEETINGS OF DIRECTORS

Section 4.1Regular meetings.  A regular meeting of the Board of Directors shall be held immediately after, and at the same place as, the annual meeting or substitute annual meeting of shareholders.  In addition, the Board of Directors may provide, by resolution, the time and place, either within or without the State of North Carolina, for the holding of additional regular meetings.

Section 4.2Special meetings.  Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, if any, by the President or by any director.  Such a meeting may be held either within or without the State of North Carolina, as fixed by the person or persons calling the meeting.

Section 4.3Notice of meetings.  Regular meetings of the Board of Directors may be held without notice.  The person or persons calling a special meeting of the Board of Directors shall, at least two days before the meeting, give or cause to be given notice thereof by any usual means of communication.  Such notice need not specify the purpose for which the meeting is called any duly convened regular or special meeting may be adjourned by the directors to a later time without further notice.

8

Section 4.4Waiver of notice.  Any director may waive notice of any meeting before or after the meeting.  The waiver must be in writing, signed by the director entitled to the notice, and delivered to the corporation for inclusion in the minutes or filing with the corporate records.  A director’s attendance at or participation in a meeting waives any required notice of such meeting unless the director at the beginning of the meeting, or promptly upon arrival, objects to holding the meeting or to transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

Section 4.5Quorum.  Unless the Articles of Incorporation or these bylaws provide otherwise, a majority of the number of directors fixed by or pursuant to these bylaws shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, or if no number is so fixed, the number of directors in office immediately before the meeting begins shall constitute a quorum.

Section 4.6Manner of acting.  Except as otherwise provided in the Articles of Incorporation or these bylaws, including Section 4.9, the affirmative vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 4.7Presumption of assent.  A director who is present at a meeting of the Board of Directors or a committee of the Board of Directors when corporate action is taken is deemed to have assented to the action taken unless (a) he objects at the beginning of the meeting, or promptly upon his arrival, to holding it or to transacting business at the meeting, or (b) his dissent or abstention from the action taken is entered in the minutes of the meeting, or (c) he files written notice of his dissent or abstention with the presiding officer of the meeting before its adjournment or with the corporation immediately after the adjournment of the meeting.  Such right of dissent or abstention is not available to a director who votes in favor of the action taken.

Section 4.8Action without meeting.  Action required or permitted to betaken at a meeting of the Board of Directors may be taken without a meeting if the action is taken by all members of the Board.  The action must be evidenced by one or more written consents signed by each director before or after such action, describing the action taken, and included in the minutes or filed with the corporate records.  The written consents required hereunder may be transmitted by electronic facsimile, and a signature given by such facsimile transmission shall be valid.

Section 4.9Committees of the Board.  The Board of Directors may create an Executive Committee and other committees of the board and appoint members of the Board of Directors to serve on them.  The creation of a committee of the board and appointment of members to it must be approved by the greater of (a) a majority of the number of directors in office when the action is taken or (b) the number of directors required to take action pursuant to Section 4.6.  Each committee of the board must have two or more members and, to the extent authorized by law and specified by the Board of Directors, shall have and may exercise all of the authority of the Board of Directors in the management of the corporation.  Each committee member serves at the pleasure of the Board of Directors.  The provisions in these bylaws governing meetings, action without

9

meetings, notice and waiver of notice, and quorum and voting requirements of the Board of Directors apply to committees of the board established under this section.

Section 5.

OFFICERS

Section 5.1Officers of the corporation.  The officers of the corporation shall consist of a President, a Secretary, and such other officers as may from time to time be appointed by or under the authority of the Board of Directors.  Any two or more offices may be held by the same person, but no officer may act in more than one capacity where action of two or more officers is required.

Section 5.2Appointment and term.  The officers of the corporation shall be appointed by the Board of Directors or by a duly appointed officer authorized by the Board of Directors to appoint one or more officers or assistant officers.  Each officer shall hold office until his death, resignation, retirement, removal, disqualification, or his successor shall have been appointed.

Section 5.3Compensation of officers.  The compensation of all officers of the corporation shall be fixed by or under the authority of the Board of Directors, and no officer shall serve the corporation in any other capacity and receive compensation therefor unless such additional compensation shall be duly authorized.  The appointment of an officer does not itself create contract rights.

Section 5.4Removal.  Any officer may be removed by the Board at any time with or without cause; but such removal shall not itself affect the officer’s contract rights, if any, with the corporation.

Section 5.5Resignation.  An officer may resign at anytime by communicating his resignation to the corporation, orally or in writing.  A resignation is effective when communicated unless it specifies in writing a later effective date.  If a resignation is made effective at a later date that is accepted by the corporation, the Board of Directors may fill the pending vacancy before the effective date if the Board provides that the successor does not take office until the effective date.  An officer’s resignation does not affect the corporation’s contract rights, if any, with the officer.

Section 5.6Bonds.  The Board of Directors may by resolution require any officer, agent, or employee of the corporation to give bond to the corporation, with sufficient sureties, conditioned on the faithful performance of these duties of his respective office or position, and to comply with such other conditions as may from time to time be required by the Board of Directors.

Section 5.7President.  The President shall be the principal executive officer of the corporation and, subject to the control of the Board of Directors, shall in general supervise and control all of the business and affairs of the corporation.  He shall, when present, preside at all meetings of the shareholders.  He shall sign, with the Secretary, an Assistant Secretary, or any other proper officer of the corporation thereunto authorized by

10

the Board of Directors, certificates for shares of the corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general he shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time.  Nothing in these bylaws shall require the President to perform any function or duty of another officer or verify its performance.  The President shall not be responsible for, or have any involvement in, the payment of wages or taxes, or the selection of obligations to be paid, such authority being reserved exclusively for the Treasurer and his designees.

Section 5.8Vice President.  In the absence or disability of the President or in the event of his death or inability or refusal to act, the Vice President, shall perform the duties and exercise the powers of the President.  In addition, the Vice President shall perform such other duties and have such other powers as the Board shall prescribe.

Section 5.9Secretary.  The Secretary shall: (a) keep the minutes of the meetings of shareholders, of the Board of Directors, and of all committees in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; (c) maintain and authenticate the records of the corporation (other than financial records) and be custodian of the seal of the corporation and see that the seal of the corporation is affixed to all documents the execution of which on behalf of the corporation under its seal is duly authorized; (d) sign with the President, or a Vice-President, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (e) maintain and have general charge of the stock transfer books of the corporation; (f) prepare or cause to be prepared shareholder lists prior to each meeting of the shareholders as required by law; (g) attest the signature or certify the incumbency or signature of any officer of the corporation; and (h) in general perform all duties incident to the office of secretary and such other duties as from time to time may be prescribed by the President or by the Board of Directors.

Section 5.10Treasurer.  The Treasurer shall receive and have custody of all the funds and securities belonging to the Corporation, and shall receive, deposit or disburse the same at the direction of the Board of Directors.  He shall keep full and accurate accounts of the finances of the Corporation in books especially provided for that purpose.  He shall prepare and file all reports and returns required by Federal, State or local law and shall generally perform all other duties incident to his office and such other duties as may be assigned to him from time to time by the President or the Board of Directors.

Section 6.

CONTRACTS, LOANS, CHECKS, AND DEPOSITS

Section 6.1Contracts.  The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument

11

in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.

Section 6.2Loans.  No loans shall be contracted on behalf of the corporation and no evidence of indebtedness shall be issued in its name unless authorized by the Board of Directors.  Such authority may be general or confined to specific instances.

Section 6.3Checks and drafts.  All checks, drafts, or other orders for the payment of money, issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by the Board of Directors.

Section 6.4Deposits.  All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such depositories as may be selected by or under the authority of the Board of Directors.

Section 7.

SHARES AND THEIR TRANSFER

Section 7.1Certificates for shares.  The Board of Directors may authorize the issuance of some or all of the shares of the corporation’s classes or series without issuing certificates to represent such shares.  If shares are represented by certificates, the certificates shall be in such form as required by law and as determined by the Board of Directors.  Certificates shall be signed, either manually or in facsimile, by the President or a Vice-President and by the Secretary or Treasurer or an Assistant Secretary or Assistant Treasurer.  All certificates for shares shall be consecutively numbered or otherwise identified and entered into the stock transfer books of the corporation.  When shares are represented by certificates, the corporation shall issue and deliver, to each shareholder to whom such shares have been issued or transferred, certificates representing the shares owned by him.  When shares are not represented by certificates, then within a reasonable time after the issuance or transfer of such shares, the corporation shall send the shareholder to whom such shares have been issued or transferred a written statement of the information required by law to be on certificates.

Section 7.2Stock transfer books.  The corporation shall keep a book or set of books, to be known as the stock transfer books of the corporation, containing the name of each shareholder of record, together with such shareholder’s address and the number and class or series of shares held by him.  Transfers of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney authorized to effect such transfer by power of attorney duly executed and filed with the Secretary, and on surrender for cancellation of the certificate for such shares (if the shares are represented by certificates).

Section 7.3Lost certificate.  The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the corporation

12

claimed to have been lost or destroyed, upon receipt of an affidavit of such fact from the person claiming the certificate to have been lost or destroyed.  When authorizing such issue of a new certificate, the Board of Directors shall require that the owner of such lost or destroyed certificate, or his legal representative, give the corporation a bond in such sum and with such surety or other security as the Board of Directors may direct as indemnity against any claim that may be made against the corporation with respect to the certificate claimed to have been lost or destroyed, except where the Board of Directors by resolution finds that in the judgment of the Board of Directors the circumstances justify omission of a bond.

Section 7.4Fixing record date.  The Board of Directors may fix a future date as the record date for one or more voting groups in order to determine the shareholders entitled to notice of a shareholders’ meeting, to demand a special meeting, to vote, or to take any other action.  Such record date may not be more than seventy days before the meeting or action requiring a determination of shareholders.  A determination of shareholders entitled to notice of or to vote at a shareholders’ meeting is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.

If no record date is fixed by the Board of Directors for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, the close of business on the day before the first notice of the meeting is delivered to shareholders shall be the record date for such determination of shareholders.

The Board of Directors may fix a date as the record date for determining shareholders entitled to a distribution or share dividend.  If no record date is fixed by the Board of Directors for such determination, it is the date the Board of Directors authorizes the distribution or share dividend.

Section 7.5Holder of record.  Except as otherwise required by law, the corporation may treat the person in whose name the shares stand of record on its books as the absolute owner of the shares and the person exclusively entitled to receive notification and distributions, to vote, and to otherwise exercise the rights, powers, and privileges of ownership of such shares.

Section 7.6Shares held by nominees.  The corporation shall recognize the beneficial owner of shares registered in the name of a nominee as the owner and shareholder of such shares for certain purposes if the nominee in whose name such shares are registered files with the Secretary a written certificate in a form prescribed by the corporation, signed by the nominee, indicating the following: (i) the name, address, and taxpayer identification number of the nominee; (ii) the name, address, and taxpayer identification number of the beneficial owner; (iii) the number and class or series of shares registered in the name of the nominee as to which the beneficial owner shall be recognized as the shareholder; and (iv) the purposes for which the beneficial owner shall be recognized as the shareholder.  The purposes for which the corporation shall recognize the beneficial owner as the shareholder may include the following: (i) receiving notice of,

13

voting at, and otherwise participating in shareholders’ meetings; (ii) executing consents with respect to the shares; (iii) exercising dissenters’ rights under Article 13 of the Business Corporation Act; (iv) receiving distributions and share dividends with respect to the shares; (v) exercising inspection rights; (vi) receiving reports, financial statements, proxy statements, and other communications from the corporation; (vii) making any demand upon the corporation required or permitted by law; and (viii) exercising any other rights or receiving any other benefits of a shareholder with respect to the shares.  The certificate shall be effective ten (10) business days after its receipt by the corporation and until it is changed by the nominee, unless the certificate specifies a later effective time or an earlier termination date.

If, at any time, the shareholder of record whose rights are claimed by the nominee objects to the nominee exercising such rights, the Corporation shall, immediately upon receipt of written notice of such objection, upon assertion by the shareholder of record at a meeting, cease to recognize the nominees.

If the certificate affects less than all of the shares registered in the name of the nominee, the corporation may require the shares affected by the certificate to be registered separately on the books of the corporation and be represented by a share certificate in effect with respect to the shares represented by the share certificate.

Section 8.

INDEMNIFICATION

Section 8.1Any person who at any time serves or has served as a director or offer of the corporation, or who, while serving as a director of the corporation, serves or has served, at the request of the corporation, as a director, officer, partner, trustee, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, or as a trustee or administrator under an employee benefit plan, shall have a right to be indemnified by the corporation to the fullest extent permitted by law against (a) reasonable expenses, including attorneys’ fees, incurred by him in connection with any threatened, pending, or completed civil, criminal, administrative, investigative, or arbitrative action, suit, or proceeding (and any appeal therein), whether or not brought by or on behalf of the corporation, seeking to hold him liable by reason of the fact that he is or was acting in such capacity, and (b) reasonable payments made by him in satisfaction of any judgment, money decree, fine (including an excise tax assessed with respect to an employee benefit plan), penalty, or settlement for which he may have become liable in any such action, suit, or proceeding.  Payment upon such indemnification may be made at the time the expense is incurred or the liability accrues unless applicable law prohibits such payment.

The Board of Directors of the corporation shall take all such action as may be necessary and appropriate to authorize the corporation to pay the indemnification required by this bylaw, including, without limitation, making a determination that indemnification is permissible under the circumstances and a good faith evaluation of the manner in which the claimant for indemnity acted and of the reasonable amount of indemnity due him.  The Board of Directors may appoint a committee or special counsel

14

to make such determination and evaluation.  To the extent needed, the Board of Directors shall give notice to, and obtain approval by, the shareholders of the corporation for any decision to indemnify.

Any person who at any time after the adoption of this bylaw serves or has served in the aforesaid capacity for or on behalf of the corporation shall be deemed to be doing or to have done so in reliance upon, and as consideration for, the right of indemnification provided herein.  Such right shall inure to the benefit of the legal representatives of any such person and shall not be exclusive of any other rights to which such person may be entitled apart from’ the provision of this bylaw.

Section 9.

GENERAL PROVISIONS

Section 9.1Distributions.  The Board of Directors may from time to time authorize, and the corporation may grant, distributions and share dividends to its shareholders pursuant to law and subject to the provisions of its Articles of Incorporation.

Section 9.2Seal.  The corporate seal of the corporation shall consist of two concentric circles between which is the name of the corporation and in the center of which is inscribed SEAL; and such seal, as impressed or affixed on the margin hereof, is hereby adopted as the corporate seal of the corporation.

Section 9.3Fiscal year.  The fiscal year of the corporation shall be fixed by the Board of Directors.

Section 9.4Amendments.  Except as otherwise provided in the Articles of Incorporation or by law, these bylaws may be amended or repealed and new bylaws may be adopted by the Board of Directors.

No bylaw adopted, amended, or repealed by the shareholders shall be readopted, amended, or repealed by the Board of Directors, unless the Articles of Incorporation or by a bylaw adopted by the shareholders authorizes the Board of Directors to adopt, amend, or repeal that particular bylaw or the bylaws generally.

Section 9.5Definitions.  Unless the context otherwise requires, terms used in these bylaws shall have the meanings assigned to them in the North Carolina Business Corporation Act to the extent defined therein.

Section 10.

EMERGENCY BYLAWS

Section 10.1Effectiveness.  Notwithstanding any other provisions in the bylaws or the Articles of Incorporation of the corporation, the emergency bylaws provided in this Article shall be effective during any emergency resulting from a military attack on the United States or on a locality in which the corporation conducts it principal business or customarily holds meetings of its Board of Directors or its shareholders, or during any

15

nuclear or atomic disaster, or during the existence of any other catastrophic event or similar emergency, as a result of which a quorum of the Board of Directors, or of the executive committee of the Board of Directors, if any, cannot readily be assembled for action.  To the extent not inconsistent with the provisions of these emergency bylaws, the provisions of the regular bylaws shall remain in effect during such emergency.  Upon termination of the emergency, the emergency bylaws shall cease to be effective.

Section 10.2Board Meetings.  During any such emergency, a meeting of the Board of Directors may be called by any officer or director of the corporation.  Notice of the time and place of the meeting shall be given by the person calling the meeting to such of the directors as it may be feasible to reach at the time by any available means of communication, including publication or radio.  Such advance notice shall be given as, in the judgment of the person calling the meeting, circumstances permit.  At any such meeting of the Board of Directors, a quorum shall consist of one.  To the extent required to constitute a quorum at the meeting, the officers present shall be deemed, in order of rank and within the same rank in order of seniority, directors for the meeting.  The Board of Directors may take any action at any such meeting which it deems necessary for managing the corporation during the emergency.

Section 10.3Principal Office.  During the emergency, the Board of Directors may change the principal office of the corporation or designate several alternative principal offices, or authorize the officers to do so, which change or designation shall last for the duration of the emergency.

Section 10.4Specific Powers.  Without limiting the generality of the foregoing, the Board of Directors, acting pursuant to Section 10.2 of this Article, is authorized to make all necessary determinations of the fact regarding the extent and severity of the emergency and the availability of members of the board; to designate and replace officers, agents, and employees of the corporation and otherwise provide for continuity of management; and to adopt rules of procedure and fill vacancies of the Board of Directors.

Section 10.5Nonexclusive Powers.  The emergency powers provided in this Article shall be in addition to any powers provided by law.

16

EX-4.1

Exhibit 4.1

KINETIC CONCEPTS, INC.,
as Issuer

and

The GUARANTORS named herein,

and

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

Indenture

Dated as of August 11, 2003

$205,000,000

7³/₈% Senior Subordinated Notes due 2013

CROSS-REFERENCE TABLE

TO TRUST INDENTURE ACT (“TIA”)

TIA	Indenture Section
310(a)(1) & (a)(2)	7.10
(a)(3)	N.A.
(a)(4)	N.A.
(a)(5)	7.10; 7.11
(b)	7.08; 7.10; 13.02
(c)	N.A.
311(a) & (b)	7.11
(c)	N.A.
312(a)	2.05
(b) & (c)	13.03
313(a), (b)(1) & (b)(2)	7.06
(c)	7.06; 13.02
(d)	7.06
314(a)	4.06; 4.08; 13.02
(b)	N.A.
(c)(1) & (c)(2)	7.02; 13.04
(c)(3)	N.A.
(d)	N.A.
(e)	13.05
(f)	N.A.
315(a)	7.01(2)
(b)	7.05; 13.02
(c)	7.01(1)
(d)	6.05; 7.01(3)
(e)	6.11
316(a)(last sentence)	2.09
(a)(1)(A)	6.05
(a)(1)(B)	6.04
(a)(2)	N.A.
(b)	6.07
(c)	9.04
317(a)(1)	6.08
(a)(2)	6.09
(b)	2.04
318(a) & (c)	13.01

N.A. means Not Applicable

NOTE:This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture.

i

TABLE OF CONTENTS

ii

iii

iv

v

vi

INDENTURE, dated as of August 11, 2003, among Kinetic Concepts, Inc., a Texas corporation (the “Company”), each of the Guarantors listed on the signature pages hereto, as guarantors, and U.S. Bank National Association as Trustee (the “Trustee”).

The Company has duly authorized the creation of an issue of 7³/₈% Senior Subordinated Notes due 2013, Series A, to be issued and, to provide therefor, the Company has duly authorized the execution and delivery of this Indenture.  The Guarantors have duly authorized the guarantee of the Notes (as defined herein) jointly and severally on an unsecured senior subordinated basis.

All things necessary to make the Notes, when duly issued and executed by the Company, and authenticated and delivered hereunder, the valid obligations of the Company, and to make this Indenture a valid and binding agreement of the Company and each of the Guarantors, have been done.

Each party hereto agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders (as defined herein) of the Company’s 7³/₈% Senior Subordinated Notes due 2013.

ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01.  Definitions.

“Acceleration Notice” has the meaning provided in Section 6.02.

“Acquired Indebtedness” means Indebtedness of a Person or any of its Subsidiaries (1) existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time it merges or consolidates with the Company or any of its Restricted Subsidiaries or (2) which becomes Indebtedness of the Company or a Restricted Subsidiary in connection with the acquisition of assets from such Person, and in each case not incurred by such Person or its Subsidiary in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition, merger or consolidation.

“Additional Interest” shall have the meaning set forth in the Registration Rights Agreement.

“Additional Notes” means Notes having identical terms and conditions to the Initial Notes, which may be issued in one or more series from time to time, subject to Section 4.12.

“Affiliate” means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person.  The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative of the foregoing.

1

“Affiliate Transaction” has the meaning provided in Section 4.11.

“Agent” means any Registrar, Paying Agent or co-Registrar.

“Agent Members” has the meaning provided in Section 2.16.

“Asset Acquisition” means (1) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall be merged with or into the Company or any Restricted Subsidiary of the Company, or (2) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person (other than a Restricted Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprises any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business.

“Asset Sale” means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by the Company or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Company or a Restricted Subsidiary of the Company of (1) any Capital Stock of any Restricted Subsidiary of the Company; or (2) any other property or assets of the Company or any Restricted Subsidiary of the Company other than in the ordinary course of business; provided, however, that Asset Sales shall not include (A) a transaction or series of related transactions for which the Company or its Restricted Subsidiaries receive aggregate consideration of less than $5.0 million, (B) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under Section 5.01 or any such disposition that constitutes a Change of Control, (C) sales of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of “Qualified Securitization Transaction” to a Securitization Entity for the fair market value thereof, including cash in an amount at least equal to 75% of the fair market value thereof, (D) transfers of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of “Qualified Securitization Transaction” (or a fractional undivided interest therein) by a Securitization Entity in a Qualified Securitization Transaction, (E) Investments and Restricted Payments that are not otherwise prohibited by this Indenture, or (F) the distribution of any Equity Interests of any Subsidiary of the Company for the purpose of establishing a holding company structure in compliance with Section 5.01.

“Authenticating Agent” has the meaning provided in Section 2.02.

“Bankruptcy Law” means Title 11, U.S. Code or any similar federal, state or foreign law for the relief of debtors.

“Blockage Period” has the meaning provided in Section 10.02.

“Board of Directors” means, as to any Person, the board of directors of such Person or any duly authorized committee thereof, provided that as the term “Board of Directors” is used in the definition of “Continuing Directors” it shall refer only to the board of directors and not to any committee thereof.

2

“Board Resolution” means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

“Business Day” means any day other than a Saturday, Sunday or any other day on which banking institutions in the city of New York are required or authorized by law or other governmental action to be closed.

 “Capital Contribution” means any contribution to the equity of the Company from a direct or indirect parent of the Company for which no consideration is given.

“Capital Stock” means (1) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether voting or nonvoting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person and (2) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person.

“Capitalized Lease Obligation” means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP.

“Cash Equivalents” means (1) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (2) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the four highest ratings obtainable from either Standard & Poor’s Corporation (“S&P”) or Moody’s Investors Service, Inc.  (“Moody’s”); (3) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-2 from S&P or at least P-2 from Moody’s; (4) certificates of deposit or bankers’ acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $100.0 million; (5) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (1) of this definition entered into with any bank meeting the qualifications specified in clause (4) of this definition; (6) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (1) through (5) of this definition; and (7) investments made by Foreign Subsidiaries in local currencies in instruments issued by or with entities of such jurisdiction having correlative attributes to the foregoing.

3

“Change of Control” means the occurrence of one or more of the following events:  (1) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company or, after a Holding Company Merger, Parent to any Person (other than to the Company or a Guarantor) or group of related Persons (other than the Company and the Guarantors) for purposes of Section 13(d) of the Exchange Act (a “Group”), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of this Indenture); (2) the approval by the holders of Capital Stock of the Company or, after a Holding Company Merger, Parent of any plan or proposal for the liquidation or dissolution of the Company or, after a Holding Company Merger, Parent (whether or not otherwise in compliance with the provisions of this Indenture); (3) any Person or Group (other than any of the Permitted Holders(s) or any underwriters in connection with an offering of Qualified Capital Stock registered under the Securities Act) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company or, after a Holding Company Merger, Parent; or (4) the first day on which a majority of the members of the Board of Directors of the Company or, after a Holding Company Merger, Parent are not Continuing Directors.

“Change of Control Offer” has the meaning provided in Section 4.15.

“Change of Control Payment Date” has the meaning provided in Section 4.15.

“Collateral” means (1) the Secured Proceeds Account, (2) the Proceeds and all other cash or Cash Equivalents deposited in the Secured Proceeds Account from time to time pursuant to Section 4.23, (3) all of the Company’s and the Guarantors’ rights, title, interest and privileges with respect to the Secured Proceeds Account and such cash and Cash Equivalents, (4) all dividends, interest and other payments and distributions made on or with respect to such Cash Equivalents or the Secured Proceeds Account and (5) all proceeds of any of the foregoing.

“Commission” means the Securities and Exchange Commission.

“Common Stock” of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock.

“Company” means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means such successor and also includes for the purposes of any provision contained herein and required by the TIA any other obligor on the Notes.

“Comparable Treasury Issue” means the U.S. Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Notes that would be utilized at the time of selection and in accordance with customary financial practice in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes.  “Independent Investment Banker” means Morgan Stanley & Co.

4

Incorporated or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an investment banking firm of national reputation selected by the Company.

“Comparable Treasury Price” means, with respect to a redemption date, (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations for such redemption date, or (2) if the Company obtains fewer than three such Reference Security Dealer Quotations, the average of all such quotations.

“Consolidated EBITDA” means, with respect to any Person, for any period, the sum (without duplication) of (1) Consolidated Net Income, and (2) to the extent Consolidated Net Income has been reduced thereby, (A) all income taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary, unusual or nonrecurring gains or losses or taxes attributable to sales or dispositions outside the ordinary course of business) and any payments to the Parent pursuant to clause (10) of the last paragraph of Section 4.10, (B) Consolidated Interest Expense, (C) the aggregate charges for depreciation, amortization and impairment of goodwill or intangible assets of such Person and its Restricted Subsidiaries for such period, (D) the unrealized foreign currency losses of such Person and it Restricted Subsidiaries for such period, (E) other non-cash charges of such Person and its Restricted Subsidiaries for such period, less (i) any non-cash charges increasing Consolidated Net Income during such period and (ii) the amount of all cash payments made by such Person or any of its Restricted Subsidiaries during such period, to the extent such payments relate to non-cash charges that were added back in determining Consolidated EBITDA for such period or any prior period, (F) for purposes of determining the Company Consolidated Fixed Charge Coverage Ratio (and the components thereof) for any Four Quarter Period that includes the Issue Date, the Transaction Expenses, (G) management fees paid pursuant to the Management Agreement paid within the twelve-month period immediately prior to the Issue Date; provided that the obligation to pay management fees under the Management Agreement is terminated prior to August 31, 2003 and no further payments are made after August 2003, or required to be made, thereunder, (H) cash expenses for stock option and stock repurchase for the twelve month period immediately prior to the Issue Date and cash expenses related thereto incurred on or after the Issue Date, and (I) research and development expense write-offs during the twelve-month period immediately prior to the Issue Date; in each case as determined on a consolidated basis for such Person and its Restricted Subsidiaries in accordance with GAAP.

“Consolidated Fixed Charge Coverage Ratio” means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the “Four Quarter Period”) ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the “Transaction Date”) to Consolidated Fixed Charges of such Person for the Four Quarter Period.  In addition to and without limitation of the foregoing, for purposes of this definition, “Consolidated EBITDA” and “Consolidated Fixed Charges” shall be calculated after giving effect on a pro forma basis for the period of such calculation to: (1) the incurrence or repayment of any Indebtedness of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness

5

in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period and (2) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (provided that such Consolidated EBITDA shall be included only to the extent includable pursuant to the definition of “Consolidated Net Income”) attributable to the assets which are the subject of the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period.  If such Person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness.  Furthermore, in calculating “Consolidated Fixed Charges” for purposes of determining the denominator (but not the numerator) of this “Consolidated Fixed Charge Coverage Ratio,” (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four Quarter Period; and (3) notwithstanding clause (1) of this definition, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements.

“Consolidated Fixed Charges” means, with respect to any Person for any period, the sum, without duplication, of (1) Consolidated Interest Expense, plus (2) the product of (A) the amount of all dividend payments on any series of Preferred Stock of such Person (other than (i) dividends paid in Qualified Capital Stock and (ii) dividends on the Preferred Stock, the net proceeds of which will be used for the Distribution, to the extent they are paid in kind or accrete, except to the extent they constitute Disqualified Capital Stock) paid, accrued or scheduled to be paid or accrued during such period times (B) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal.

“Consolidated Interest Expense” means, with respect to any Person for any period, the sum of, without duplication:  (1) the aggregate of the interest expense of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including without limitation, (A) any amortization of debt discount, (B) the net

6

costs under Interest Swap Obligations, (C) all capitalized interest, and (D) the interest portion of any deferred payment obligation, but excluding amortization or write-off of deferred financing costs; but, in all cases, excluding dividends on the Preferred Stock, the net proceeds of which will be used for the Distribution, to the extent that they are paid in kind or accrete, except to the extent they constitute Disqualified Capital Stock; and (2) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP.

“Consolidated Net Income” means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP minus, after the Holding Company Merger, any payments to the Parent pursuant to clause (10) of Section 4.10; provided that there shall be excluded therefrom (1) after-tax gains from Asset Sales or abandonments or reserves relating thereto, (2) after-tax items classified as extraordinary or nonrecurring gains, (3) the net income (but not loss) of any Restricted Subsidiary of the referent Person to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is restricted by a contract, operation of law or otherwise, (4) the net income of any Person in which the referant Person has an interest, other than a Restricted Subsidiary of the referent Person, except to the extent of cash dividends or distributions paid to the referent Person or to a Restricted Subsidiary of the referent Person by such Person, (5) any restoration to income of any contingency reserve in accordance with GAAP, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following the Issue Date, (6) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued), (7) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person’s assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets, (8) after-tax gains from the installment payment due in January 2004 in connection with the antitrust litigation settlement with Hillenbrand Industries, Inc., and (9) tax benefits from the exercise of employee stock options to the extent proceeds from such exercise are used to fund the Distribution.

“consolidation” means, with respect to any Person, the consolidation of the accounts of the Restricted Subsidiaries of such Person with those of such Person, all in accordance with GAAP; provided, however, that “consolidation” will not include consolidation of the accounts of any Unrestricted Subsidiary of such Person with the accounts of such Person.  The term “consolidated” has a correlative meaning to the foregoing.

“Continuing Directors” means, as of the date of determination, any member of the Board of Directors of the Company, or, after a Holding Company Merger, Parent who (1) was a member of the Board of Directors of the Company on the date hereof or (2) was nominated for election or elected to the Board of Directors of the Company, or, after a Holding Company Merger, Parent, with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election.

“Corporate Trust Office” means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the

7

date of execution of this Indenture is located at 60 Livingston Ave., St. Paul, Minnesota 55107-2292.

“Covenant Defeasance” has the meaning set forth in Section 8.01.

“Credit Agreement” means the Credit Agreement to be dated on or about the Issue Date, among the Company, the lenders party thereto in their capacities as lenders thereunder, Morgan Stanley Senior Funding Inc. as Administrative Agent, and Credit Suisse First Boston, acting through its Cayman Islands branch, as Syndication Agent, together with the documents related thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented, replaced, restated or otherwise modified from time to time, including any agreement and related documents (including, without limitation, any loan agreement, note, note purchase agreement and indenture) extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder (provided that such increase in borrowings is permitted by Section 4.12) or adding Restricted Subsidiaries of the Company as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement and related documents or any successor or replacement agreement and related documents and whether by the same or any other agent, lender, group of lenders or otherwise and whether through any credit facilities or other borrowing or lending arrangements, including through issuing senior or subordinated notes.

“Currency Agreement” means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary of the Company against fluctuations in currency values.

“Custodian” means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law.

“Default” means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default.

“Default Notice” has the meaning provided in Section 10.02.

“Depository” means The Depository Trust Company, its nominees and successors.

“Designated Guarantor Senior Debt” means (1) Indebtedness of any Guarantor under the Credit Agreement and (2) any other Indebtedness constituting Guarantor Senior Debt which, at the time of determination, has an aggregate principal amount of at least $25.0 million and is specifically designated in the instrument evidencing such Guarantor Senior Debt as “Designated Guarantor Senior Debt” by the Guarantor incurring said Guarantor Senior Debt.

“Designated Senior Debt” means (1) Indebtedness under or in respect of the Credit Agreement and (2) any other Indebtedness constituting Senior Debt which, at the time of determination, has an aggregate principal amount of at least $25.0 million and is specifically designated in the instrument evidencing such Senior Debt as “Designated Senior Debt” by the Company.

8

“Disqualified Capital Stock” means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof on or prior to the final maturity date of the Notes; provided that any Capital Stock that would not constitute Disqualified Capital Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an “asset sale” or “change of control” occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Capital Stock if the “asset sale” or “change of control” provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Section 4.16 and Section 4.15 and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Company’s repurchase of such Notes as are required to be repurchased pursuant to Section 4.16 and Section 4.15.

“Distribution”means one or more dividends on, or repurchases or redemptions of, Equity Interests (including the cash settlement of employee stock options or other employee incentive plans) prior to March 31, 2004 in an aggregate amount not to exceed $300.0 million plus (1) net cash proceeds from the sale of Preferred Stock completed prior to March 31, 2004, (2) the net cash proceeds (on an after tax basis) received from the installment payment due in January 2004 in connection with the antitrust litigation settlement with Hillenbrand Industries, Inc., which amount shall not exceed $47.0 million, (3) the estimated tax benefit to the Company from the recapitalization, including the exercise or repurchase of stock options in connection therewith, which amount shall not exceed $40.0 million and (4) the cash proceeds received from the exercise of stock options repurchased in connection with the recapitalization.

“Eligible Investments” has the meaning set forth in Section 4.23.

“Equity Interests”of a Person means Capital Stock or partnership, participation or membership interests of such Person and all warrants, options or other rights to acquire Capital Stock or partnership, participation or membership interests of such Person (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock or partnership, participation or membership interests of such Person).

“Equity Offering”means any offering of Qualified Capital Stock of the Company.

“Event of Default” has the meaning provided in Section 6.01.

“Event of Failure” has the meaning provided in Section 4.23.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto.

“Exchange Notes” means the 7³/₈% Senior Subordinated Notes due 2013 to be issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement.

“Exchange Offer” has the meaning provided in the Registration Rights Agreement.

9

“Existing Credit Agreement” means the Credit Agreement dated November 3, 1997, among the Company, certain subsidiary borrowers party thereto and the financial institutions named therein, as amended from time to time.

“Existing Notes” means the Company’s 9⁵/₈% Senior Subordinated Notes due 2007, Series A and the 9⁵/₈% Senior Subordinated Notes due 2007, Series B and the related guarantees with respect to each such series.

“fair market value” means, with respect to any asset or property, the price which could be negotiated in an arm’s-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction.  Fair market value shall be determined by the Board of Directors of the Company acting reasonably and in good faith.

“Final Offering Memorandum” means the Company’s final offering memorandum with respect to the Notes, dated July 23, 2003.

“Fremont” means Fremont Partners, L.P. and its Affiliates.

“Foreign Subsidiary” means any Restricted Subsidiary of the Company which (1)(A) is not organized under the laws of the United States, any state thereof or the District of Columbia and (B) conducts substantially all of its business operations in a country other than the United States of America or (2) is a holding company whose only assets are Investments in Person or Persons which meet the criteria specified in clause (1) of this definition and assets which are incidental to ownership of such Investment.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect on the Issue Date unless otherwise stated.

“Global Note” has the meaning provided in Section 2.01.

“guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part) (but if in part, only to the extent thereof); provided, however, that the term “guarantee” shall not include (A) endorsements for collection or deposit in the ordinary course of business and (B) guarantees (other than guarantees of Indebtedness) by the Company in respect of assisting one or more Subsidiaries in the ordinary course of their respective

10

businesses, including without limitation guarantees of trade obligations and operating leases, on ordinary business terms.  The term “guarantee” used as a verb has a corresponding meaning.

“Guarantee” means the guarantee of the obligations under this Indenture and the Notes by each of the Guarantors as set forth in Article Eleven.

“Guarantor” means (1) each of the domestic Subsidiaries of the Company on the Issue Date that has guaranteed the Notes under this Indenture and (2) each of the Company’s Restricted Subsidiaries that in the future executes a supplemental indenture in which such Restricted Subsidiary agrees to be bound by the terms of this Indenture as a Guarantor; provided that any Person constituting a Guarantor as described in this definition shall cease to constitute a Guarantor when its respective Guarantee is released in accordance with the terms of this Indenture.

“Guarantor Senior Debt” means, with respect to any Guarantor, the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy or the commencement of any bankruptcy, insolvency, reorganization, receivership or other similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) and fees and expenses (including costs of collection), indemnity obligations on, and all other amounts and obligations owing in respect of, any Indebtedness (other than guarantees of the Existing Notes) of a Guarantor, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Guarantee of such Guarantor.  Without limiting the generality of the foregoing, “Guarantor Senior Debt” shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy or the commencement of any bankruptcy, insolvency, reorganization, receivership or other similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of, (1) all monetary obligations of every nature of the Company or such Guarantor under the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, commissions, expenses and indemnities, (2) all Interest Swap Obligations of such Guarantor, and (3) all obligations of such Guarantor under Currency Agreements, in each case whether outstanding on the Issue Date or thereafter incurred.  Notwithstanding the foregoing, “Guarantor Senior Debt” shall not include: (1) any Indebtedness of such Guarantor to a Subsidiary of such Guarantor or any Affiliate of such Guarantor or any of such Affiliate’s Subsidiaries, (2) Indebtedness of such Guarantor to, or guaranteed by such Guarantor on behalf of, any shareholder, director, officer or employee of such Guarantor or any Restricted Subsidiary of such Guarantor (including, without limitation, amounts owed for compensation), (3) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services, (4) Indebtedness represented by Disqualified Capital Stock, (5) any liability for federal, state, local or other taxes owed or owing by such Guarantor, (6) Indebtedness incurred in violation of the Indenture provisions set forth under Section 4.12 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such Indebtedness or their representative and the Trustee shall have received an Officers’ Certificate of the Company to the effect that the

11

incurrence of such Indebtedness does not (or, in the case of revolving credit Indebtedness or other Indebtedness available to be borrowed under the Credit Agreement after the date of the initial borrowing thereunder, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of this Indenture), (7) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company or any Guarantor and (8) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of such Guarantor.

“Holder” means any holder of Notes.

“Holding Company Merger” has the meaning set forth in Section 5.01.

“incur” has the meaning set forth in Section 4.12.

“Indebtedness” means with respect to any Person, without duplication, (1) all Obligations of such Person for borrowed money, (2) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (3) all Capitalized Lease Obligations of such Person, (4) all Obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not overdue by 90 days or more or are being contested in good faith by appropriate proceedings), (5) all Obligations for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction, (6) guarantees and other contingent obligations in respect of Indebtedness of other Persons of the type referred to in clauses (1) through (5) in this definition and clause (8) of this definition, (7) all Obligations of any other Person of the type referred to in clauses (1) through (6) which are secured by any Lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the Obligation so secured, (8) all Obligations under Currency Agreements and Interest Swap Obligations of such Person, and (9) all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any.  For purposes hereof, the “maximum fixed repurchase price” of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock.  For purposes hereof, the amount of any Indebtedness referred to in clause (8) of this paragraph shall be the net amounts (including by offset of amounts payable thereunder), including any net termination payments, required to be paid to a counterparty rather than any notional amount with regard to which payments may be calculated.

“Indenture” means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof.

12

“Independent Financial Advisor” means a firm (1) which does not, and whose directors, officers and employees or Affiliates do not, have a direct or indirect material financial interest in the Company and (2) which, in the judgment of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged, and may include a commercial or investment banking, appraisal or accounting firm.

“Initial Notes” means the 7³/₈% Senior Subordinated Notes due 2013, Series A, of the Company issued on the Issue Date for so long as such securities constitute Restricted Securities.

“Institutional Accredited Investor” means an institution that is an “accredited investor” as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

“interest” means, when used with respect to any Note, the amount of all interest accruing on such Note, including any applicable defaulted interest pursuant to Section 2.12 and any Additional Interest pursuant to the Registration Rights Agreement.

“Interest Payment Date” means the stated maturity of an installment of interest on the Notes.

“Interest Swap Obligations” means the obligations of any Person pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements.

“Investment” means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or Capital Contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person.  “Investment” shall exclude extensions of trade credit by the Company and its Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company or such Restricted Subsidiary, as the case may be.  For the purposes of Section 4.10, (1) “Investment” shall include and be valued at the fair market value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary (proportionate to the Company’s equity interest in such Subsidiary) and shall exclude, and the aggregate amount of all Restricted Payments made as Investments since the Issue Date shall exclude and be reduced by, the fair market value of the net assets of any Unrestricted Subsidiary (proportionate to the Company’s equity interest in such Subsidiary) at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary, such exclusion and reduction not to exceed the amount of Investments previously made by the referant person and its Restricted Subsidiaries and treated as Restricted Payments, and (2) the amount of any Investment shall be the original cost of such Investment, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment,

13

reduced by the payment of dividends or distributions in connection with such Investment or any other amounts received in respect of such Investment; provided that no such payment of dividends or distributions or receipt of any such other amounts shall reduce the amount of any Investment if such payment of dividends or distributions or receipt of any such amounts would be included in Consolidated Net Income. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, it ceases to be a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Capital Stock of such Restricted Subsidiary not sold or disposed of.

“Issue Date” means the date of original issuance of the Notes.

“Legal Defeasance” has the meaning set forth in Section 8.01.

“Legal Holiday” has the meaning provided in Section 13.07.

“Lien” means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest).

“Make-Whole Premium”means, with respect to a Note, the sum of the present values of the remaining scheduled payments of interest, principal and premium thereon (not including any portion of such payments of interest accrued as of the date of redemption) as if the Notes were redeemed on May 15, 2008 pursuant to the first paragraph of Section 3.03 on such date, discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points.

“Management Agreement” means the management agreement among the Company, Fremont and RCBA, in effect on the Issue Date and includes the amendment expected to be entered into as described in the Company’s Final Offering Memorandum and which provides for the payment or accrual of not more than $2,000,000 of compensation annually beginning on November 1 and ending on October 31 of the following year.

“Management Equity Plan” means the Company’s Management Equity Plan in effect on the Issue Date, as the same may be amended from time to time, or any successor stock option plan which governs the terms of stock options which were initially granted under the Management Equity Plan.

“Maturity Date” means May 15, 2013.

“Marketable Securities” means any security listed for trading on any U.S. national securities exchange or listed for quotation on the NASDAQ National Market.

“Minimum Tax Withholding” means the amount which the Company or any of its Restricted Subsidiaries is required to withhold in connection with employers’ minimum statutory withholding of taxes, including without limitation, federal and state withholding requirements, and FICA and Medicare taxes.

14

“Money Market Funds” means money market funds having a rating in the highest investment category granted thereby by a recognized credit rating agency at the time of acquisition, including any fund for which the Trustee or an Affiliate of the Trustee serves as an investment advisor, administrator, shareholder servicing agent, custodian or subcustodian, notwithstanding that (A) the Trustee or an Affiliate of the Trustee charges and collects fees and expenses from such funds for services rendered (provided that such charges, fees and expenses are on terms consistent with terms negotiated at arm’s length) and (B) the Trustee charges and collects fees and expenses for services rendered, pursuant to this Agreement.

“Net Cash Proceeds” means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents, including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest), received by the Company or any of its Restricted Subsidiaries from such Asset Sale net of: (1) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions), (2) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements, (3) repayment of Indebtedness that is required to be repaid in connection with such Asset Sale, and (4) appropriate amounts (determined by the Company in good faith) to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve, against any post closing adjustments or liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale.

“Net Proceeds Offer” has the meaning provided in Section 4.16.

“Net Proceeds Offer Amount” has the meaning provided in Section 4.16.

“Net Proceeds Offer Payment Date” has the meaning provided in Section 4.16.

“Net Proceeds Offer Trigger Date” has the meaning provided in Section 4.16.

“Non-Recourse Indebtedness” means Indebtedness secured only by an asset and which is expressly stated to be without recourse to the Company or its Restricted Subsidiaries from the date of incurrence of such Indebtedness.

“Notes” means, collectively, the Initial Notes and the Exchange Notes, treated as a single class of securities, as amended or supplemented from time to time in accordance with the terms of this Indenture, that are issued pursuant to this Indenture.

“Obligations” means all obligations for principal, premium, interest, penalties, fees, commissions, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Officer” means, with respect to any Person, the Chairman of the Board of Directors, the Chief Executive Officer, the President, any Vice President, the Chief Financial

15

Officer, the Treasurer, the Controller, or the Secretary of such Person, or any other officer designated by the Board of Directors serving in a similar capacity and with respect to the Trustee or any agent of the Trustee, a Trust Officer.

“Officers’ Certificate” means a certificate signed by two Officers of the Company.

“Opinion of Counsel” means a written opinion from legal counsel who is reasonably acceptable to the Trustee complying with the requirements of Sections 13.04 and 13.05, as they relate to the giving of an Opinion of Counsel.

“Parent”means, after the Holding Company Merger, any Person that, directly or indirectly, holds all or substantially all of the Qualified Capital Stock of the Company.

“Paying Agent” has the meaning provided in Section 2.03.

“Permanent Disability,” (1) with respect to any person who is an employee of the Company or any of its Restricted Subsidiaries, means, and is defined in the same manner as, such term or similar term is defined in an employment agreement applicable to the employee, or (2) in the case of a person who does not have an employment agreement that defines such term or a similar term, means that the person is unable to perform substantially all of his or her duties as an employee of the Company or any of its Restricted Subsidiaries by reason of illness or incapacity for a period of more than six consecutive months, or six months in the aggregate during any 12-month period, established by medical evidence reasonably satisfactory to the Company or any of its Restricted Subsidiaries.

“Permitted Holder(s)”means RCBA, Fremont, James R. Leininger, M.D. and his Affiliates and, after the Holding Company Merger, any Parent.

“Permitted Investments” means (1) Investments by the Company or any Restricted Subsidiary of the Company in any Person that is or will become immediately after such Investment a Restricted Subsidiary of the Company or that will merge or consolidate into the Company or a Restricted Subsidiary of the Company; (2) Investments in the Company by any Restricted Subsidiary of the Company; provided that any Indebtedness evidencing such Investment is unsecured and subordinated, pursuant to a written agreement, to the Company’s obligations under the Notes and this Indenture; (3) investments in cash and Cash Equivalents; (4) loans and advances to employees and officers of the Company and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of $10.0 million at any one time outstanding pursuant to this clause (4); (5) Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Company’s or its Restricted Subsidiaries’ businesses and otherwise in compliance with this Indenture; (6) Investments in Unrestricted Subsidiaries not to exceed $10.0 million at any one time outstanding pursuant to this clause (6); (7) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (8) Investments made by the Company or its Restricted Subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with Section 4.16; (9) Investments existing on the date of this Indenture; (10) accounts receivable,

16

advances, loans, guarantees or extensions of credit created or acquired in the ordinary course of business, consistent with past or industry practice; (11) any Investment by the Company or a Wholly Owned Restricted Subsidiary of the Company in a Securitization Entity or any Investment by a Securitization Entity in any other Person in connection with a Qualified Securitization Transaction; provided that any Investment in a Securitization Entity is in the form of a Purchase Money Note or an equity interest; (12) Investments committed to by the Company or its Restricted Subsidiaries on the Issue Date not to exceed $1.5 million in the aggregate pursuant to this clause (12); (13) Investments in Strategic Joint Ventures not to exceed $20.0 million outstanding at any one time pursuant to this clause (13); and (14) any Investment in any Person solely in exchange for Qualified Capital Stock or, after the Holding Company Merger, Capital Stock of the Parent, or from a Capital Contribution or the net cash proceeds of any substantially concurrent sale of the Company’s Qualified Capital Stock.

“Permitted Liens” means the following types of Liens:

(1)Liens for taxes, assessments or governmental charges or claims either (A) not delinquent or (B) contested in good faith by appropriate proceedings and as to which the Company or its Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP;

(2)statutory, contractual and common law Liens of landlords to secure rent payments and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof;

(3)Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money);

(4)judgment Liens securing judgments not giving rise to an Event of Default;

(5)easements, rights-of-way, zoning restrictions, restrictive covenants, minor imperfections in title and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries;

(6)any interest or title of a lessor under any Capitalized Lease Obligation; provided that such Liens do not extend to any property or assets which is not leased property subject to such Capitalized Lease Obligation;

(7)purchase money Liens to finance property or assets (including the cost of construction) of the Company or any Restricted Subsidiary of the Company acquired in

17

the ordinary course of business; provided, however, that (A) the related purchase money Indebtedness shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Company or any Restricted Subsidiary of the Company other than the property and assets so acquired or constructed and (B) the Lien securing such Indebtedness shall be created within 180 days of such acquisition or construction;

(8)Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(9)Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof;

(10)Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Restricted Subsidiaries, including, without limitation, liability to insurance carriers under insurance or self-insurance arrangements, including rights of offset and set-off;

(11)Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under this Indenture;

(12)Liens securing Indebtedness under Currency Agreements;

(13)Liens securing Acquired Indebtedness incurred in accordance with Section 4.12; provided that (A) such Liens secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company and (B) such Liens do not extend to or cover any property or assets of the Company or of any of its Restricted Subsidiaries other than the property or assets (or the proceeds thereof) that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Restricted Subsidiary of the Company and are no more favorable to the lienholders than those securing the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company;

(14)Liens arising under this Indenture;

(15)leases or subleases granted to others that do not materially interfere with the business of the Company and its Restricted Subsidiaries;

(16)Liens in connection with any filing of Uniform Commercial Code financing statements regarding leases;

(17)Liens securing Non-Recourse Indebtedness incurred pursuant to this Indenture;

18

(18)Liens arising from a bank or financial institution honoring a check or draft inadvertently drawn against insufficient funds in the ordinary course of business; and

(19)Liens on assets transferred to a Securitization Entity or on assets of a Securitization Entity, in either case incurred in connection with a Qualified Securitization Transaction.

“Person” means an individual, partnership, corporation, unincorporated organization, limited liability company, trust or joint venture, or a governmental agency or political subdivision thereof.

“Physical Notes” has the meaning provided in Section 2.01.

“Placement Agents” means Morgan Stanley & Co. Incorporated, Credit Suisse First Boston LLC, Goldman, Sachs & Co., J.P. Morgan Securities Inc., Scotia Capital (USA) Inc. and Wells Fargo Securities, LLC.

“Preferred Stock” of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation.

“principal” of any Indebtedness (including the Notes) means the principal amount of such Indebtedness plus the premium, if any, on such Indebtedness.

“Private Placement Legend” means the legend initially set forth on the Initial Notes in the form set forth in Exhibit A.

“Proceeds” has the meaning set forth in Section 4.23.

“pro forma” means, with respect to any calculation made or required to be made pursuant to the terms of this Indenture, a calculation in accordance with Article 11 of Regulation S-X under the Securities Act.

“Property” means, with respect to any Person, any interests of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, Capital Stock, partnership interests and other equity or ownership interests in any other Person.

“Purchase Money Indebtedness” means Indebtedness the net proceeds of which are used to finance the cost (including the cost of construction) of property or assets acquired in the normal course of business by the Person incurring such Indebtedness.

“Purchase Money Note” means a promissory note of a Securitization Entity evidencing a line of credit, which may be irrevocable, from the Company or any Subsidiary of the Company in connection with a Qualified Securitization Transaction to a Securitization Entity, which note shall be repaid from cash available to the Securitization Entity, other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest, principal and other amounts owing to such investors, amounts paid in

19

connection with the purchase of newly generated receivables or newly acquired equipment and amounts paid for administrative costs in the ordinary course of business.

“Rule 144A Global Note” has the meaning provided in Section 2.01.

“Qualified Capital Stock” means any Capital Stock that is not Disqualified Capital Stock.

“Qualified Institutional Buyer” or “QIB” shall have the meaning specified in Rule 144A.

“Qualified Securitization Transaction” means any transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant to which the Company or any of its Subsidiaries may sell, convey or otherwise transfer to (1) a Securitization Entity (in the case of a transfer by the Company or any of its Subsidiaries) and (2) any other Person (in the case of a transfer by a Securitization Entity), or may grant a security interest in, any accounts receivable or equipment (whether now existing or arising or acquired in the future) of the Company or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable and equipment, all contracts and contract rights and all guarantees or other obligations in respect of such accounts receivable and equipment, proceeds of such accounts receivable and equipment and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable and equipment.

“RCBA” means Blum Capital Partners, L.P. and its Affiliates.

“Record Date” means the Record Dates specified in the Notes.

“Redemption Date” means, when used with respect to any Note to be redeemed, the date fixed for such redemption pursuant to this Indenture and the Notes.

“Redemption Disbursement Request” has the meaning set forth in Section 4.23.

“Redemption Notice” means with respect to any note to be redeemed, a notice of redemption issued in accordance with the terms of this Indenture.

“Redemption Price” means, when used with respect to any Note to be redeemed, the price fixed for such redemption, including principal and premium, if any, pursuant to this Indenture and the Notes.

“Reference Date” has the meaning set forth in Section 4.10.

“Reference Treasury Dealer” means (1) Morgan Stanley & Co. Incorporated and its successors; provided, however, that if the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a “Primary Treasury Dealer”), the Company is required to substitute therefor another Primary Treasury Dealer, and (2) any other Primary Treasury Dealer selected by the Company.

20

“Reference Treasury Dealer Quotations”means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by the Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date.

“Refinance” means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. “Refinanced” and “Refinancing” shall have correlative meanings.

“Refinancing Indebtedness” means any Indebtedness that is the result of any Refinancing by the Company or any Restricted Subsidiary of the Company of Indebtedness incurred in accordance with Section 4.12 (other than pursuant to clause (B), (C), (E), (F), (G), (H), (I), (J), (K), (M), (N) or, with respect to the Existing Notes and Indebtedness under the Existing Credit Agreement, clause (D), of subsection (1) of Section 4.12, in each case that does not: (1) result in an increase in the aggregate principal amount of Indebtedness of such Person as of the date of such proposed Refinancing (other than increases from capitalized interest, any premium required to be paid under the terms of the instrument governing such Indebtedness or the amount of any premium reasonably determined to be necessary to accomplish such refinancing and the amount of reasonable expenses incurred by the Company and any Restricted Subsidiary in connection with such Refinancing, all of which are included in the term “Refinancing Indebtedness”), or (2) create Indebtedness with (A) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; provided that (i) if such Indebtedness being Refinanced is Indebtedness solely of the Company or any Restricted Subsidiary or is Indebtedness solely of the Company and any Restricted Subsidiary or Restricted Subsidiaries, then such Refinancing Indebtedness shall be Indebtedness solely of the Company or such Restricted Subsidiary or the Company and such Restricted Subsidiary or Restricted Subsidiaries, as the case may be, and (ii) if such Indebtedness being Refinanced is subordinate or junior to the Notes, then such Refinancing Indebtedness shall be subordinate to the Notes at least to the same extent and in the same manner as the Indebtedness being Refinanced.

“Registrar” has the meaning provided in Section 2.03.

“Registration Rights Agreement” means the Registration Rights Agreement dated as of the Issue Date among the Company, the Guarantors and the Placement Agents.

“Regulation S” means Regulation S under the Securities Act.

“Regulation S Global Note” has the meaning provided in Section 2.01.

“Replacement Assets” shall have the meaning set forth in Section 4.16.

“Representative” means the indenture trustee or other trustee, agent or representative in respect of any Designated Senior Debt; provided that (1) if, and for so long as,

21

any Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority of such Designated Senior Debt and (2) the administrative agent (or any successor thereto) shall be a Representative of the lenders under the Credit Agreement.

“Restricted Payment” shall have the meaning set forth in Section 4.10.

“Restricted Security” has the meaning assigned to such term in Rule 144(a)(3) under the Securities Act; provided, however, that the Trustee shall be entitled to request and conclusively rely on an Opinion of Counsel with respect to whether any Note constitutes a Restricted Security.

“Restricted Subsidiary” of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary.

“Rule 144A” means Rule 144A under the Securities Act.

“Sale and Leaseback Transaction” means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Restricted Subsidiary of any property, whether owned by the Company or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such Property.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

“Securitization Entity” means a Wholly Owned Restricted Subsidiary of the Company (or another Person in which the Company or any Subsidiary of the Company makes an Investment and to which the Company or any Subsidiary of the Company transfer accounts receivable or equipment and related assets) which engages in no activities other than in connection with the financing of accounts receivable or equipment and which is designated by the Board of Directors of the Company (as provided in this definition) as a Securitization Entity (1) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which (A) is guaranteed by the Company or any Subsidiary of the Company (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings), (B) is recourse to or obligates the Company or any Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings or (C) subjects any property or asset of the Company or any Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings, (2) with which neither the Company nor any Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Company or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity, and (3) to which neither the Company nor any Subsidiary of the Company has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of

22

operating results. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors of the Company giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing conditions.

“Secured Proceeds Account” has the meaning set forth in Section 4.23.

“Securities Intermediary” means U.S. Bank National Association.

“Security Agreement” means the Security Agreement dated as of the Closing Date among the Company, the Guarantors, the Placement Agents, the Trustee and the Securities Intermediary.

“Senior Debt” means the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy or the commencement of any bankruptcy, insolvency, reorganization, receivership or other similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) and fees and expenses (including costs of collection), indemnity obligations on, and all other amounts and obligations owing in respect of, any Indebtedness (other than the Existing Notes) of the Company, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes.  Without limiting the generality of the foregoing, “Senior Debt” shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy or the commencement of any bankruptcy, insolvency, reorganization, receivership or other similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of, (1) all monetary obligations of every nature of the Company under the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, guaranteed obligations, fees, commissions, expenses and indemnities, (2) all Interest Swap Obligations and (3) all obligations under Currency Agreements, in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, “Senior Debt” shall not include (1) any Indebtedness of the Company to a Subsidiary of the Company or any Affiliate of the Company or any of such Affiliate’s Subsidiaries, (2) Indebtedness of the Company to, or guaranteed by the Company on behalf of, any shareholder, director, officer or employee of the Company or any Subsidiary of the Company (including, without limitation, amounts owed for compensation), (3) Indebtedness to trade creditors and other trade payables incurred in connection with obtaining goods, materials or services, (4) Indebtedness represented by Disqualified Capital Stock, (5) any liability for federal, state, local or other taxes owed or owing by the Company, (6) Indebtedness incurred in violation of the provisions set forth under Section 4.12 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such Indebtedness or their representative and the Trustee shall have received an Officers’ Certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit Indebtedness or other Indebtedness available to be borrowed under the Credit Agreement after the date of the initial borrowing thereunder, that the incurrence of the entire committed amount

23

thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of this Indenture), (7) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company and (8) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of the Company.

“Significant Subsidiary” means a Restricted Subsidiary or a group of Restricted Subsidiaries that would be considered a “significant subsidiary” of the Company pursuant to Rule 1.02(w) of Regulation S-X under the Securities Act, as in effect on the Issue Date.

“Special Redemption” has the meaning provided in Section 3.01.

“Special Redemption Offer” has the meaning provided in Section 4.23.

“Special Redemption Offer Date” has the meaning provided in Section 4.23.

“Special Redemption Payment Date” has the meaning provided in Section 4.23.

“Standard Securitization Undertakings” means representations, warranties, covenants and indemnities entered into by the Company or any Subsidiary of the Company which are reasonably customary in an accounts receivable or equipment securitization transaction.

“Stated Maturity” means, (1) with respect to any debt security, the date specified in such debt security as the fixed date on which the final installment of principal of such debt security is due and payable and (2) with respect to any scheduled installment of principal of or interest on any debt security, the date specified in such debt security as the fixed date on which such installment is due and payable.

“Strategic Joint Venture” means a corporation, partnership or other entity engaged in a business which is related to that of the Company or any of its Restricted Subsidiaries or which provides services, products or intellectual property to the Company or any of its Restricted Subsidiaries or uses the products, services or intellectual property of the Company or any of its Restricted Subsidiaries.

“Subsidiary,” with respect to any Person, means (1) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person or (2) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person.

“Surviving Entity” shall have the meaning provided in Section 5.01.

“TIA” means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except as otherwise provided in Section 9.03.

24

“Transaction Expenses” means the expenses relating to the offering of the Notes, execution and initial borrowings under the Credit Agreement, the redemption of the Existing Notes, the sale of the Preferred Stock the net proceeds of which are used in connection with the Distribution, the Distribution and the interest expense on the Existing Notes after the Issue Date.

“Transferred Reduction Amount” has the meaning provided in Section 4.12.

“Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semiannual yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

“Trustee” means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor.

“Trust Officer” means any officer or assistant officer of the Trustee assigned by the Trustee to administer this Indenture, or in the case of a successor trustee, an officer assigned to the department, division or group performing the corporation trust work of such successor and assigned to administer this Indenture.

“U.S. Government Obligations” means securities that are (1) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof at any time prior to the Stated Maturity of the Notes and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt.

“U.S. Legal Tender” means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.

“Unrestricted Subsidiary” means (1) any Subsidiary of the Company designated as such pursuant to and in compliance with Section 4.14 and (2) any Subsidiary of a Subsidiary of the Company described in clause (1).  Any such designation may be revoked by a Board Resolution of the Company delivered to the Trustee, subject to the provisions of Section 4.14.  Notwithstanding the foregoing, to the extent Federal Express Trust No. 1991-B and Federal Express Trust No. 1991-A are Subsidiaries of the Company, each such entity will be an Unrestricted Subsidiary of the Company unless and until the Board of Directors of the Company designates it to be a Restricted Subsidiary in accordance with Section 4.14.

25

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing (1) the then outstanding aggregate principal amount of such Indebtedness into (2) the sum of the total of the products obtained by multiplying (A) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (B) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment; provided that the final maturity for purposes of any security which is puttable to the issuer by the holder thereof upon a date certain without need for the occurrence of a contingent event (e.g., a change of control) shall be the next such put date.

“Wholly Owned Restricted Subsidiary” of any Person means any Restricted Subsidiary of such Person of which all the outstanding voting securities (other than, in the case of a foreign Restricted Subsidiary, directors’ qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Restricted Subsidiary of such Person.

SECTION 1.02.  Incorporation by Reference of TIA.  Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in, and made a part of, this Indenture.  The following TIA terms used in this Indenture have the following meanings:

“indenture securities” means the Notes.

“indenture security holder” means a Holder.

“indenture to be qualified” means this Indenture.

“indenture trustee” or “institutional trustee” means the Trustee.

“obligor” on the Indenture securities means the Company or any other obligor on the Notes.

All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule and not otherwise defined herein have the meanings assigned to them therein.

SECTION 1.03.  Rules of Construction.  Unless the context otherwise requires:

(1)a term has the meaning assigned to it;

(2)an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(3)“or” is not exclusive;

(4)words in the singular include the plural, and words in the plural include the singular;

26

(5)“herein,” “hereof” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and

(6)any reference to a statute, law or regulation means that statute, law or regulation as amended and in effect from time to time and includes any successor statute, law or regulation; provided, however, that any reference to the Bankruptcy Law shall mean the Bankruptcy Law as applicable to the relevant case.

ARTICLE TWO
THE NOTES

SECTION 2.01.  Form and Dating.  The Initial Notes, the notation thereon relating to the Guarantees, if any, and the Trustee’s certificate of authentication relating thereto shall be substantially in the form of Exhibit A hereto.  The Exchange Notes, the notation thereon relating to the Guarantees, if any, and the Trustee’s certificate of authentication relating thereto shall be substantially in the form of Exhibit B hereto.  The Notes may have notations, legends or endorsements required by law, stock exchange rule or depository rule or usage.  The Company and the Trustee shall approve the form of the Notes and any notation, legend or endorsement on them.  Each Note shall be dated the date of its issuance and shall show the date of its authentication.  Each Note shall have an executed Guarantee endorsed thereon substantially in the form of Exhibit F hereto.

The terms and provisions contained in the Notes and the Guarantees, if any, annexed hereto as Exhibits A, B and F, shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company, the Guarantors, if any, and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby.

Notes offered and sold (1) in reliance on Rule 144A or (2) in reliance on Regulation S shall, unless the applicable Holder requests Notes in the form of Certificated Notes in registered form (“Physical Notes”), which shall be in substantially the form set forth in Exhibit A, be issued initially in the form of one or more permanent global Notes in registered form, substantially in the form set forth in Exhibit A (the “Global Note”), deposited with the Trustee, as custodian for the Depository, duly executed by the Company (and having an executed Guarantee endorsed thereon) and authenticated by the Trustee as hereinafter provided, and shall bear the legend set forth in Exhibit C.  One or more separate Global Notes shall be issued to represent Notes held by (1) Qualified Institutional Buyers (a “Rule 144A Global Note”), and (2) Persons acquiring Notes in reliance on Regulation S (a “Regulation S Global Note”).  The Company shall cause the Rule 144A Global Notes and Regulation S Global Notes to have separate CUSIP numbers.  The aggregate principal amount of any Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided.

All Notes offered and sold in reliance on Regulation S shall remain in the form of a Global Note until the consummation of the Exchange Offer pursuant to the Registration Rights Agreement; provided, however, that all of the time periods specified in the Registration Rights

27

Agreement to be complied with by the Company and the Guarantors have been so complied with.

SECTION 2.02.  Execution and Authentication; Aggregate Principal Amount.  One Officer of the Company and each Guarantor shall sign the Notes for the Company and the Guarantees for the Guarantors by manual or facsimile signature.

If an Officer whose signature is on a Note or a Guarantee was an Officer at the time of such execution but no longer holds that office or position at the time the Trustee authenticates the Note, the Note shall nevertheless be valid.

A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note.  The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.

The Trustee shall authenticate the Notes upon a written order of the Company in the form of an Officers’ Certificate of the Company.  Each such written order shall specify the amount of Notes to be authenticated and the date on which the Notes are to be authenticated, whether the Notes are to be Initial Notes or Exchange Notes and whether the Notes are to be issued as Physical Notes or Global Notes or such other information as the Trustee may reasonably request.

In the event that the Company shall issue and the Trustee shall authenticate any Notes issued under this Indenture subsequent to the Issue Date, the Company shall use its reasonable efforts to obtain the same “CUSIP” number for such Notes as is printed on the Notes outstanding at such time; provided, however, that if any series of Notes issued under this Indenture subsequent to the Issue Date is determined, pursuant to an Opinion of Counsel of the Company in a form reasonably satisfactory to the Trustee to be a different class of security than the Notes outstanding at such time for federal income tax purposes, the Company may obtain a “CUSIP” number for such Notes that is different than the “CUSIP” number printed on the Notes then outstanding.  Notwithstanding the foregoing, all Notes issued under this Indenture shall vote and consent together on all matters as one class and no series of Notes will have the right to vote or consent as a separate class on any matter.

The Trustee may appoint an authenticating agent (the “Authenticating Agent”) reasonably acceptable to the Company to authenticate Notes.  Unless otherwise provided in the appointment, an Authenticating Agent may authenticate Notes whenever the Trustee may do so.  Each reference in this Indenture to authentication by the Trustee includes authentication by such Authenticating Agent.  An Authenticating Agent has the same rights as an Agent to deal with the Company or with any Affiliate of the Company.

The Trustee is authorized to enter into a letter of representation with the Depository in the form provided to the Trustee by the Company and to act in accordance with such letter.  The Trustee is authorized to enter into the Security Agreement and to act in accordance therewith.

Subject to Article Four, the aggregate principal amount of Notes of any series which may be authenticated by the Trustee and delivered under this Indenture is unlimited. The

28

Notes shall be issuable in fully registered form only, without coupons, in denominations of $1,000 and any integral multiple thereof.

SECTION 2.03.  Registrar and Paying Agent.  The Company shall maintain an office or agency (which shall be located in the Borough of Manhattan in the City of New York, State of New York) where (1) Notes may be presented or surrendered for registration of transfer or for exchange (“Registrar”), (2) Notes may be presented or surrendered for payment (“Paying Agent”) and (3) notices and demands to or upon the Company in respect of the Notes and this Indenture may be served.  The Registrar shall keep a register of the Notes and of their transfer and exchange.  The Company may have one or more Co-Registrars and one or more additional Paying Agents reasonably acceptable to the Trustee.  The term “Paying Agent” or “Registrar” includes any additional Paying Agent or Registrar, as the case may be.  The Company may act as its own Paying Agent, except that for the purposes of payments on the Notes pursuant to Sections 4.15 and 4.16, neither the Company nor any Affiliate of the Company may act as Paying Agent.

The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall incorporate the provisions of the TIA and implement the provisions of this Indenture that relate to such Agent.  The Company shall notify the Trustee of the name and address of any such Agent.  If the Company shall fail to maintain a Registrar or Paying Agent the Trustee shall act as such.

The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of demands and notices in connection with the Notes, until such time as the Trustee has resigned or a successor has been appointed.  Any of the Registrar, the Paying Agent or any other agent may resign upon 30 days’ notice to the Company.  The Company may change any Paying Agent and Registrar without notice to the Holders.

SECTION 2.04.  Paying Agent To Hold Assets in Trust.  The Company shall require each Paying Agent other than the Trustee to agree in writing that such Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, premium, if any, or interest on, the Notes (whether such assets have been distributed to it by the Company or any other obligor on the Notes), and the Company and the Paying Agent shall notify the Trustee of any Default by the Company (or any other obligor on the Notes) in making any such payment.  The Company at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed.  Upon distribution to the Trustee of all assets that shall have been delivered by the Company to the Paying Agent, the Paying Agent shall have no further liability for such assets.

SECTION 2.05.  Holder Lists.  The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders and shall otherwise comply with TIA Section 312(a).  If the Trustee is not the Registrar, the Company shall furnish or cause the Registrar to furnish to the Trustee three (3) Business Days (or such shorter period as the Trustee may expressly agree to) before each Record Date and

29

at such other times as the Trustee may request in writing a list as of such date and in such form as the Trustee may reasonably require of the names and addresses of the Holders, which list may be conclusively relied upon by the Trustee, and the Company shall otherwise comply with TIA Section 312(a).

SECTION 2.06.  Transfer and Exchange.  Subject to Sections 2.16 and 2.17, when Notes are presented to the Registrar or a Co-Registrar with a request to register the transfer of such Notes or to exchange such Notes for an equal principal amount of Notes or other authorized denominations, the Registrar or Co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that the Notes presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company, the Trustee and the Registrar or Co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing.  To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Notes and the Guarantors shall execute Guarantees thereon at the Registrar’s or Co-Registrar’s request.  No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, fee or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchanges or transfers pursuant to Section 2.10, 3.07, 4.15, 4.16 or 9.05, in which event the Company shall be responsible for the payment of such taxes).

The Registrar or Co-Registrar shall not be required to register the transfer of or exchange of any Note (1) during a period beginning at the opening of business on the day which is 15 days before the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing and (2) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Note being redeemed in part.

Any Holder of a beneficial interest in a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Notes may be effected only through a book entry system maintained by the Holder of such Global Note (or its agent), and that ownership of a beneficial interest in the Note shall be required to be reflected in a book entry system.

All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.

SECTION 2.07.  Replacement Notes.  If a mutilated Note is surrendered to the Trustee or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Note and the Guarantors shall execute a Guarantee thereon if the Trustee’s requirements are met.  If required by the Trustee or the Company, such Holder must provide an indemnity bond or other indemnity of reasonable tenor, sufficient in the reasonable judgment of the Company, the Guarantors and the Trustee, to protect the Company, the Guarantors, the Trustee or any Agent from any loss which any of them may suffer if a Note is replaced.  Every replacement Note shall constitute an additional obligation of the Company and the Guarantors.

30

SECTION 2.08.  Outstanding Notes.  Notes outstanding at any time are all the Notes that have been authenticated by the Trustee except those canceled by it, those delivered to it for cancellation and those described in this Section 2.08 as not outstanding.  Subject to the provisions of Section 2.09, a Note does not cease to be outstanding because the Company or any of its Affiliates holds the Note.

If a Note is replaced pursuant to Section 2.07 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser.  A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.07.

If on a Redemption Date or the Maturity Date the Paying Agent holds U.S. Legal Tender sufficient to pay all of the principal, premium, if any, and interest due on the Notes payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Notes shall be deemed not to be outstanding and interest on them shall cease to accrue.

SECTION 2.09.  Treasury Notes.  In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver, consent or notice, Notes owned by the Company or an Affiliate of the Company shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which a Trust Officer of the Trustee actually knows are so owned shall be so considered.  The Company shall notify the Trustee, in writing, when either it or, to its knowledge, any of its Affiliates repurchases or otherwise acquires Notes, of the aggregate principal amount of such Notes so repurchased or otherwise acquired and such other information as the Trustee may reasonably request and the Trustee shall be entitled to rely thereon.

SECTION 2.10.  Temporary Notes.  Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes upon receipt of a written order of the Company in the form of an Officers’ Certificate.  The Officers’ Certificate shall specify the amount of temporary Notes to be authenticated and the date on which the temporary Notes are to be authenticated.  Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company consider appropriate for temporary Notes and so indicate in the Officers’ Certificate.  Without unreasonable delay, the Company shall prepare, the Trustee shall authenticate and the Guarantors shall execute Guarantees on, upon receipt of a written order of the Company pursuant to Section 2.02, definitive Notes in exchange for temporary Notes.

SECTION 2.11.  Cancellation.  The Company at any time may deliver Notes to the Trustee for cancellation.  The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment.  The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent, and no one else, shall cancel and, at the written direction of the Company, shall dispose, in its customary manner, of all Notes surrendered for transfer, exchange, payment or cancellation.  Subject to Section 2.07, the Company may not issue new Notes to replace Notes that it has paid for or delivered to the Trustee for cancellation.  If the Company shall acquire any of the Notes, such acquisition shall

31

not operate as a redemption or satisfaction of the Indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11.

SECTION 2.12.  Defaulted Interest.  The Company will pay interest on overdue principal from time to time on demand at the rate of interest then borne by the Notes.  The Company shall, to the extent lawful, pay interest on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the rate of interest then borne by the Notes.  Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months, and, in the case of a partial month, the actual number of days elapsed.

If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest, to the Persons who are (1) Holders on a subsequent special record date, if it so elects, which special record date shall be the fifteenth day next preceding the date fixed by the Company for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day, or (2) if the Company does not elect a special record date, Holders on the next Record Date, which payment shall be made on the next regular Interest Payment Date.  The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment (a “Default Interest Payment Date”), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such defaulted interest as provided in this Section; provided, however, that in no event shall the Company deposit monies proposed to be paid in respect of defaulted interest later than 10:30 a.m. New York City time on the proposed Default Interest Payment Date.  At least 15 days before the subsequent special record date, the Company shall mail (or cause to be mailed) to each Holder, as of a recent date selected by the Company, with a copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid.  Notwithstanding the foregoing, any interest which is paid prior to the expiration of the 30-day period set forth in Section 6.01(1) shall be paid to Holders as of the regular record date for the Interest Payment Date for which interest has not been paid.  Notwithstanding the foregoing, the Company may make payment of any defaulted interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange.

SECTION 2.13.  CUSIP Number.  The Company in issuing the Notes of any series may use “CUSIP”, “CINS” or “ISIN” numbers (if then generally in use), and, if so, the Trustee shall use the CUSIP, CINS or ISIN numbers, as the case may be, in notices of redemption or exchange as a convenience to Holders; provided, however, that no representation is hereby deemed to be made by the Trustee as to the correctness or accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption or exchange, and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers.  The Company shall promptly notify the Trustee of any change in CUSIP, CINS or ISIN numbers for the Notes of any series.

32

SECTION 2.14.  Deposit of Monies.  Prior to 10:30 a.m. New York City time on each Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Offer Payment Date, the Company shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Offer Payment Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Offer Payment Date, as the case may be.

SECTION 2.15.  Restrictive Legends.  Each Global Note and Physical Note that constitutes a Restricted Security shall bear the legend (the “Private Placement Legend”) as set forth in Exhibit A on the face thereof until after the second anniversary of the later of the Issue Date and the last date on which the Company or any Affiliate of the Company was the owner of such Note (or any predecessor security) (or such shorter period of time as permitted by Rule 144 under the Securities Act or any successor provision thereunder, unless otherwise agreed by the Company and the Holder thereof) (or such longer period of time as may be required under the Securities Act or applicable state securities laws in the opinion of counsel for the Company).

Each Global Note shall also bear the legend as set forth in Exhibit C.

SECTION 2.16.  Book-Entry Provisions for Global Note.

(1) The Global Notes initially shall (A) be registered in the name of the Depository or the nominee of such Depository, (B) be delivered to the Trustee as custodian for such Depository and (C) bear the legend as set forth in Exhibit C.

Members of, or participants in, the Depository (“Agent Members”) shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Notes, and the Depository may be treated by the Company, the Trustee and any Agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever.  Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any Agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note.

(2) Transfers of a Global Note shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees.  Interests of beneficial owners in a Global Note may be transferred or exchanged for Physical Notes in accordance with the rules and procedures of the Depository and the provisions of Section 2.17.  In addition, Physical Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in a Global Note in accordance with the rules and procedures of the Depositary and the provisions of Section 2.17 if (A) the Depository notifies the Company that it is unwilling or unable to continue as Depository for the Global Notes and a successor depositary is not appointed by the Company within 90 days of such notice, (B) the Depository ceases to be registered as a “clearing agency” under the Exchange Act and a successor depository is not

33

appointed by the Company within 90 days of such notice, (C) an Event of Default has occurred and is continuing and the Registrar has received a written request from the Depository to issue Physical Notes.

(3) Any beneficial interest in one of the Global Notes that is transferred to a person who takes delivery in the form of an interest in another Global Note will, upon transfer, cease to be an interest in such Global Note and become an interest in such other Global Note and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest.

(4) In connection with any transfer of a portion of the beneficial interest in a Global Note to beneficial owners pursuant to paragraph (2) of this Section 2.16, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of such Global Note in an amount equal to the principal amount of the beneficial interest in such Global Note to be transferred, and the Company shall execute, the Guarantors shall execute Guarantees on, and the Trustee shall authenticate and deliver, one or more Physical Notes of like tenor and amount.

(5) In connection with the transfer of an entire Global Note to beneficial owners pursuant to paragraph (2) of this Section 2.16, such Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, the Guarantors shall execute Guarantees on and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in the Global Note, an equal aggregate principal amount of Physical Notes of authorized denominations.

(6) Any Physical Note constituting a Restricted Security delivered in exchange for an interest in a Global Note pursuant to paragraph (2) or (3) of this Section 2.16 shall, except as otherwise provided by paragraphs in Section 2.17, bear the Private Placement Legend.

(7) The registered holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

(8) Holders of Exchange Notes held in the form of permanent certificated notes may exchange such Notes for beneficial interests in the Exchange Global Note at any time.  Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel such permanent certificated Note and increase or cause to be increased the aggregate principal amount of the Exchange Global Note.

SECTION 2.17.  Registration of Transfers and Exchanges.

(1) Transfer and Exchange of Physical Notes.  When Physical Notes are presented to the Registrar or Co-Registrar with a request:

(A) to register the transfer of the Physical Notes; or

34

(B) to exchange such Physical Notes for an equal number of Physical Notes of other authorized denominations, the Registrar or Co-Registrar shall register the transfer or make the exchange as requested if the requirements under this Indenture as set forth in this Section 2.17 for such transactions are met; provided, however, that the Physical Notes presented or surrendered for registration of transfer or exchange:

(i)shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Registrar or Co-Registrar, duly executed by the Holder thereof or his attorney-in-fact duly authorized in writing; and

(ii)in the case of Physical Notes the offer and sale of which have not been registered under the Securities Act, such Physical Notes shall be accompanied, in the sole discretion of the Company, by the following additional information and documents, as applicable:

(iii)if such Physical Note is being delivered to the Registrar or Co-Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (substantially in the form of Exhibit G hereto); or

(iv)if such Physical Note is being transferred to a Qualified Institutional Buyer in accordance with Rule 144A, a certification to that effect (substantially in the form of Exhibit G hereto); or

(v)if such Physical Note is being transferred to an Institutional Accredited Investor, delivery of a certification to that effect (substantially in the form of Exhibit G hereto) and a Transferee Certificate for Institutional Accredited Investors substantially in the form of Exhibit D hereto; or

(vi)if such Physical Note is being transferred in reliance on Regulation S, delivery of a certification to that effect (substantially in the form of Exhibit G hereto) and a Transferee Certificate for Regulation S Transfers substantially in the form of Exhibit E hereto and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or

(vii)if such Physical Note is being transferred in reliance on Rule 144 under the Securities Act, delivery of a certification to that effect (substantially in the form of Exhibit G hereto) and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or

(viii)if such Physical Note is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect (substantially in the form of Exhibit G

35

hereto) and an Opinion of Counsel reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act.

(2) Restrictions on Transfer of a Physical Note for a Beneficial Interest in a Global Note.  Unless otherwise agreed to by the Company, a Physical Note may not be exchanged for a beneficial interest in a Global Note except upon satisfaction of the requirements set forth in this Section 2.17.  Upon receipt by the Registrar or Co-Registrar of a Physical Note, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Registrar or Co-Registrar, together with:

(A)certification, substantially in the form of Exhibit G hereto, that such Physical Note is being transferred (i) to a Qualified Institutional Buyer, (ii) to an Institutional Accredited Investor or (iii) in reliance on Regulation S and, in the case of (ii), a Transferee Certificate for Institutional Accredited Investors substantially in the form of Exhibit D hereto and, in the case of (iii), a Transferee Certificate for Regulation S Transfers substantially in the form of Exhibit E hereto and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; and

(B)written instructions directing the Registrar or Co-Registrar to make, or to direct the Depository to make, an endorsement on the applicable Global Note to reflect an increase in the aggregate amount of the Notes represented by the Global Note, then the Registrar or Co-Registrar shall cancel such Physical Note and cause, or direct the Depository to cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar or Co-Registrar, the principal amount of Notes represented by the applicable Global Note to be increased accordingly.  If no Global Note representing Notes held by Qualified Institutional Buyers, Institutional Accredited Investors or Persons acquiring Notes in reliance on Regulation S, as the case may be, is then outstanding, the Company shall issue and the Trustee shall, upon written instructions from the Company in accordance with Section 2.02, authenticate such a Global Note in the appropriate principal amount.

(3) Transfer and Exchange of Global Notes.  The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depository in accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of the Depository therefor.  Upon receipt by the Registrar or Co-Registrar of written instructions, or such other instruction as is customary for the Depository, from the Depository or its nominee, requesting the registration of transfer of an interest in a Rule 144A Global Note or a Regulation S Global Note, as the case may be, to another type of Global Note, together with the applicable Global Notes (or, if the applicable type of Global Note required to represent the interest as requested to be transferred is not then outstanding, only the Global Note representing the interest being transferred), the Registrar or Co-Registrar shall cause, or direct the Depository to cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar or Co-Registrar, the principal amount of Notes represented by the applicable Global Notes involved in such transfer or exchange to be adjusted accordingly to reflect the applicable increase and decrease of the principal amount of Notes represented by such types of Global

36

Notes, giving effect to such transfer.  If the applicable type of Global Note required to represent the interest as requested to be transferred is not outstanding at the time of such request, the Company shall issue and the Trustee shall, upon written instructions from the Company in accordance with Section 2.02, authenticate a new Global Note of such type in principal amount equal to the principal amount of the interest requested to be transferred.  Any such transfer or exchange of Global Notes or beneficial interests therein shall be effected through the Depository in accordance with this Indenture (including the restrictions on transfer as contemplated herein) and the procedure of the Depository therefor.  Unless otherwise agreed to by the Company, any request for the registration of the transfer of an interest in a Rule 144A Global Note or a Regulation S Global Note to another type of Global Note must be accompanied by a certificate from the transferor, substantially in the form of Exhibit G hereto, that the transferee is either (A) a Qualified Institutional Buyer in accordance with Rule 144A, (B) an Institutional Accredited Investor, or (C) relying on Regulation S, and in the case of (B), a Transferee Certificate for Institutional Accredited Investors substantially in the form of Exhibit D hereto and, in the case of (C), a Transferee Certificate for Regulation S Transfers substantially in the form of Exhibit E hereto and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act.

(4) Transfer of a Beneficial Interest in a Global Note for a Physical Note.  Any Person having a beneficial interest in a Global Note may upon request exchange such beneficial interest for a Physical Note.  Upon receipt by the Registrar or Co-Registrar of written instructions, or such other form of instructions as is customary for the Depository, from the Depository or its nominee on behalf of any Person having a beneficial interest in a Global Note and upon receipt by the Trustee of a written order or such other form of instructions as is customary for the Depository or the Person designated by the Depository as having such a beneficial interest containing registration instructions and, in the case of any such transfer or exchange of a beneficial interest in Notes the offer and sale of which have not been registered under the Securities Act, the following additional information and documents:

(A)if such beneficial interest is being transferred to the Person designated by the Depository as being the beneficial owner, a certification from such Person to that effect (substantially in the form of Exhibit G hereto); or

(B)if such beneficial interest is being transferred to a Qualified Institutional Buyer in accordance with Rule l44A, a certification to that effect (substantially in the form of Exhibit G hereto); or

(C)if such beneficial interest is being transferred to an Institutional Accredited Investor, delivery of a certification to that effect (substantially in the form of Exhibit G hereto) and a Certificate for Institutional Accredited Investors substantially in the form of Exhibit D hereto; or

(D)if such beneficial interest is being transferred in reliance on Regulation S, delivery of a certification to that effect (substantially in the form of Exhibit G hereto) and a Transferee Certificate for Regulation S Transfers substantially in the form of Exhibit E hereto and an Opinion of Counsel

37

reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or

(E)if such beneficial interest is being transferred in reliance on Rule 144 under the Securities Act, delivery of a certification to that effect (substantially in the form of Exhibit G hereto) and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or

(F)if such beneficial interest is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect (substantially in the form of Exhibit G hereto) and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act, then the Registrar or Co-Registrar will cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar or Co-Registrar, the aggregate principal amount of the applicable Global Note to be reduced and, following such reduction, the Company will execute and, upon receipt of an authentication order in the form of an Officers’ Certificate in accordance with Section 2.02, the Trustee will authenticate and deliver to the transferee a Physical Note.

(i) Notes issued in exchange for a beneficial interest in a Global Note pursuant to this Section 2.17(4)(F) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Registrar or Co-Registrar in writing.  The Registrar or Co-Registrar shall deliver such Physical Notes to the Persons in whose names such Physical Notes are so registered.

(5) Restrictions on Transfer and Exchange of Global Notes.  Notwithstanding any other provisions of this Indenture, a Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or any such nominee to a successor Depository or a nominee of such successor Depository.

(6) Private Placement Legend.  Upon the transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar or Co-Registrar shall deliver Notes that do not bear the Private Placement Legend.  Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar or Co-Registrar shall deliver only Notes that bear the Private Placement Legend unless (A) the requested transfer is after the second anniversary of the Issue Date (provided, however, that neither the Company nor any Affiliate of the Company has held any beneficial interest in such Note, or portion thereof, at any time prior to or on the second anniversary of the Issue Date unless otherwise agreed by the Company), or (B) there is delivered to the Registrar or Co-Registrar a certificate and/or, if requested, an Opinion of Counsel, each reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act.

38

(7) General.  By its acceptance of any Note bearing the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture.

The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.16 or this Section 2.17.  The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time during the Registrar’s normal business hours upon the giving of reasonable written notice to the Registrar.

(8) Transfers of Notes Held by Affiliates.  Any certificate (A) evidencing a Note that has been transferred to an Affiliate of the Company within two years after the Issue Date, as evidenced by a notation on the Assignment Form for such transfer or in the representation letter delivered in respect thereof or (B) evidencing a Note that has been acquired from an Affiliate (other than by an Affiliate) in a transaction or a chain of transactions not involving any public offering, shall, until two years after the last date on which the Company or any Affiliate of the Company was an owner of such Note, in each case, bear the Private Placement Legend, unless otherwise agreed by the Company (with written notice thereof to the Trustee).

SECTION 2.18.  Liquidated Damages Under Registration Rights Agreement.  Under certain circumstances, the Company shall be obligated to pay certain liquidated damages to the Holders, all as set forth in Section 2 of the Registration Rights Agreement.  The terms thereof are hereby incorporated herein by reference.

ARTICLE THREE
REDEMPTION

SECTION 3.01.  Notices to Trustee.  If the Company elects to redeem Notes pursuant to Section 3.03, it shall notify the Trustee and the Paying Agent in writing of the Redemption Date and the principal amount of the Notes to be redeemed.

The Company shall give each notice to the Trustee provided for in this Section 3.01 45 days before the Redemption Date (unless a shorter notice period shall be satisfactory to the Trustee or is called for pursuant to the next paragraph), together with an Officers’ Certificate stating that such redemption shall comply with the conditions contained herein and in the Notes.  Any such notice may be cancelled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect.

The Company shall give notice of a redemption pursuant to Section 4.23 (“Special Redemption”) to the Paying Agent and the Trustee at least ten days before the Redemption Date with respect to the Special Redemption (unless a shorter notice period shall be agreed to by the Trustee in writing), together with an Officers’ Certificate stating that such redemption will comply with the conditions contained herein.

SECTION 3.02.  Selection of Notes To Be Redeemed.  In the event that less than all of the Notes are to be redeemed at any time, selection of such Notes, or portions thereof, for redemption will be made by the Trustee in compliance with the requirements of the principal

39

national securities exchange, if any, on which such Notes are listed or, if such Notes are not then listed on a national securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that no Notes of a principal amount of $1,000 or less shall be redeemed in part; provided, further, that if a partial redemption is made with the proceeds of an Equity Offering, selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to DTC procedures), unless such method is otherwise prohibited.

Notice of redemption shall be mailed by first-class mail at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address.  If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed.  A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note.  On and after the Redemption Date, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Company has deposited with the Paying Agent funds in satisfaction of the applicable Redemption Price pursuant to this Indenture.

SECTION 3.03.  Optional Redemption.  The Notes will be redeemable, at the Company’s option, in whole at any time or in part from time to time, on and after May 15, 2008, upon not less than 30 nor more than 60 day’s notice, at the following Redemption Prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on May 15 of the year set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption:

Year	Redemption Price
2008	103.688	%
2009	102.458	%
2010	101.229	%
2011 and thereafter	100.000	%

In addition, at any time prior to May 15, 2008, the Company may, at its option, redeem the Notes, in whole or in part, from time to time, upon not less than 30 nor more than 60 days’ notice at a Redemption Price equal to the greater of (1) 101% of the principal amount of the Notes so redeemed, plus accrued and unpaid interest, and (2) the Make-Whole Premium with respect to the Notes, or the portions thereof, to be redeemed, plus, to the extent not included in the Make-Whole Premium, accrued and unpaid interest to the date of redemption.

At any time, or from time to time, on or prior to May 15, 2006, the Company may, at its option, on one or more occasions use all or a portion of the net cash proceeds of one or more Equity Offerings to redeem the Notes issued under this Indenture at a Redemption Price equal to 107.375% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of redemption; provided that at least 65% of the principal amount of Notes originally issued remains outstanding immediately after any such redemption.  In order to effect the foregoing redemption with the proceeds of any Equity Offering, the Company shall make such redemption not more than 90 days after the consummation of any such Equity Offering.

40

SECTION 3.04.  Notice of Redemption.  At least 30 days but not more than 60 days before a Redemption Date (other than with respect to a Special Redemption), the Company shall mail or cause to be mailed a notice of redemption by first class mail to each Holder of Notes to be redeemed at its registered address, with a copy to the Trustee and any Paying Agent.  At the Company’s request, the Trustee shall give the notice of redemption in the Company’s name and at the Company’s expense.  The Company shall provide such notices of redemption to the Trustee at least five days before the intended mailing date (unless a shorter period shall be satisfactory to the Trustee) (other than with respect to a Special Redemption).

Each notice of redemption shall identify (including the CUSIP number) the Notes to be redeemed and shall state:

(1)the Redemption Date;

(2)the Redemption Price and the amount of accrued interest, if any, to be paid;

(3)the name and address of the Paying Agent;

(4)the subparagraph of the Notes pursuant to which such redemption is being made;

(5)that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price plus accrued interest, if any;

(6)that, unless the Company defaults in making the redemption payment, interest on Notes or applicable portions thereof called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Notes is to receive payment of the Redemption Price plus accrued interest as of the Redemption Date, if any, upon surrender to the Paying Agent of the Notes redeemed;

(7)if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the Redemption Date, and upon surrender of such Note, a new Note or Notes in the aggregate principal amount equal to the unredeemed portion thereof will be issued; and

(8)if fewer than all the Notes are to be redeemed, the identification of the particular Notes of such Holder (or portion thereof) to be redeemed, as well as the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption.

The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Notes.

SECTION 3.05.  Effect of Notice of Redemption.  Once notice of redemption is mailed in accordance with Section 3.04, such notice of redemption shall be irrevocable and Notes called for redemption become due and payable on the Redemption Date and at the

41

Redemption Price plus accrued interest as of such date, if any.  Upon surrender to the Trustee or Paying Agent, such Notes called for redemption shall be paid at the Redemption Price plus accrued interest thereon to the Redemption Date, but installments of interest, the maturity of which is on or prior to the Redemption Date, shall be payable to Holders of record at the close of business on the relevant record dates referred to in the Notes.  Interest shall accrue on or after the Redemption Date and shall be payable only if the Company defaults in payment of the Redemption Price.

SECTION 3.06.  Deposit of Redemption Price.  On or before the Redemption Date and in accordance with Section 2.14, the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus accrued interest, if any, of all Notes to be redeemed on that date.  The Paying Agent shall promptly return to the Company any U.S. Legal Tender so deposited which is not required for that purpose, except with respect to monies owed as obligations to the Trustee pursuant to Article Seven.

Unless the Company fails to comply with the preceding paragraph and defaults in the payment of such Redemption Price plus accrued interest, if any, interest on the Notes to be redeemed will cease to accrue on and after the applicable Redemption Date, whether or not such Notes are presented for payment.

SECTION 3.07.  Notes Redeemed in Part.  Upon surrender of a Note that is to be redeemed in part, the Trustee shall authenticate for the Holder a new Note or Notes equal in principal amount to the unredeemed portion of the Note surrendered.

ARTICLE FOUR
COVENANTS

SECTION 4.01.  Payment of Notes.

(1)  The Company shall pay the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes and in this Indenture.

(2)  An installment of principal of or interest on the Notes shall be considered paid on the date it is due if the Trustee or Paying Agent (other than the Company or any of its Affiliates) holds, prior to 10:30 a.m. New York City time on that date, U.S. Legal Tender designated for and sufficient to pay the installment in full and is not prohibited from paying such money to the Holders pursuant to the terms of this Indenture or the Notes.

(3)  Notwithstanding anything to the contrary contained in this Indenture, the Company may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America from principal or interest payments hereunder.

SECTION 4.02.  Maintenance of Office or Agency.  The Company shall maintain the office or agency required under Section 2.03.  The Company shall give prior written notice to the Trustee of the location, and any change in the location, of such office or agency.  If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish

42

the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 13.02.

SECTION 4.03.  Corporate Existence.  Except as otherwise permitted by Article Five, the Company shall do or cause to be done, at its own cost and expense, all things necessary to preserve and keep in full force and effect its corporate existence and the corporate existence of each of its Restricted Subsidiaries in accordance with the respective organizational documents of each such Restricted Subsidiary and the material rights (charter and statutory) and franchises of the Company and each such Restricted Subsidiary; provided, however, that the Company shall not be required to preserve, with respect to itself, any material right or franchise and, with respect to any of its Restricted Subsidiaries, any such existence, material right or franchise, if the Board of Directors of the Company (or if such existence is with respect to any Restricted Subsidiary which is not a Significant Subsidiary, by the appropriate officers of the Company) shall determine in good faith that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole.

SECTION 4.04.  Payment of Taxes and Other Claims .  The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all material taxes, assessments and governmental charges (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon it or any of its Restricted Subsidiaries or properties of it or any of its Restricted Subsidiaries and (2) all material lawful claims for labor, materials and supplies that, if unpaid, might by law become a Lien upon the property of the Company or any of its Restricted Subsidiaries; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate negotiations or proceedings properly instituted and conducted for which adequate reserves, to the extent required under GAAP as it exists at such time, have been taken.

SECTION 4.05.  Maintenance of Properties and Insurance.

(1)  The Company shall, and shall cause each of the Restricted Subsidiaries to, maintain all properties used or useful in the conduct of its business in good working order and condition (subject to ordinary wear and tear) and make all necessary repairs, renewals, replacements, additions, betterments and improvements thereto and actively conduct and carry on its business; provided, however, that nothing in this Section 4.05 shall prevent the Company or any of the Restricted Subsidiaries of the Company from discontinuing the operation and maintenance of any of its properties, if such discontinuance is (A) in the ordinary course of business pursuant to customary business terms or (B) in the good faith judgment of the respective Boards of Directors or other governing body of the Company or Restricted Subsidiary, as the case may be, desirable in the conduct of their respective businesses and is not disadvantageous in any material respect to the Holders.

(2)  The Company shall provide or cause to be provided, for itself and each of the Restricted Subsidiaries of the Company, insurance (including appropriate self-insurance) against loss or damage of the kinds that, in the good faith judgment of the Company, are adequate and appropriate for the conduct of the business of the Company and its Restricted Subsidiaries in a

43

prudent manner, with reputable insurers or with the Government of the United States of America or any agency or instrumentality thereof (if not through self-insurance).

SECTION 4.06.  Compliance Certificate; Notice of Default.

(1)  The Company shall deliver to the Trustee, within 120 days after the end of each of the Company’s fiscal years, an Officers’ Certificate (provided, however, that one of the signatories to each such Officers’ Certificate shall be the Company’s principal executive officer, principal financial officer or principal accounting officer), as to such Officers’ knowledge, without independent investigation, of the Company’s compliance with all conditions and covenants under this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and in the event any Default of the Company’s exists, such Officers shall specify the nature of such Default.  Each such Officers’ Certificate shall also notify the Trustee should the Company elect to change the manner in which it fixes its fiscal year-end.

(2)  So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the annual financial statements delivered pursuant to Section 4.08 shall be accompanied by a written report of the Company’s independent certified public accountants (who shall be a firm of established national reputation) stating (A) that their audit examination has included a review of the terms of this Indenture and the form of the Notes as they relate to accounting matters, and (B) whether, in connection with their audit examination, any Default or Event of Default has come to their attention and if such a Default or Event of Default has come to their attention, specifying the nature and period of existence thereof; provided, however, that, without any restriction as to the scope of the audit examination, such independent certified public accountants shall not be liable by reason of any failure to obtain knowledge of any such Default or Event of Default that would not be disclosed in the course of an audit examination conducted in accordance with generally accepted auditing standards.

(3)  (A) If any Default or Event of Default has occurred and is continuing or (B) if any Holder seeks to exercise any remedy hereunder with respect to a claimed Default under this Indenture or the Notes, the Company shall deliver to the Trustee, at its address set forth in Section 13.02, by registered or certified mail or by facsimile transmission followed by hard copy by registered or certified mail an Officers’ Certificate specifying such event, notice or other action promptly upon its becoming aware of such occurrence.

SECTION 4.07.  Compliance with Laws.  The Company shall comply, and shall cause each of its Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of America, all states and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as could not singly or in the aggregate reasonably be expected to have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries taken as a whole.

SECTION 4.08.  Reports to Holders.  The Company will deliver to the Trustee within 15 days after filing of the same with the Commission, copies of the quarterly and annual reports and of the information, documents and other reports, if any, which the Company is

44

required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.  Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the Commission, to the extent permitted, and provide the Trustee and Holders with such annual reports and such information, documents and other reports specified in Sections 13 and 15(d) of the Exchange Act.  The Company will also comply with the other provisions of Section 314(a) of the TIA.

SECTION 4.09.  Waiver of Stay, Extension or Usury Laws.  The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

SECTION 4.10.  Limitation on Restricted Payments.  The Company will not and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, (1) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of the Company or warrants, options or other rights to acquire Qualified Capital Stock (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, Qualified Capital Stock)) on or in respect of shares of the Company’s Capital Stock to holders of such Capital Stock, (2) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock, (3) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of the Company that is subordinate or junior in right of payment to the Notes, or (4) make any Investment (other than Permitted Investments) (each of the foregoing actions set forth in clauses (1), (2) (3) and (4) being referred to as a “Restricted Payment”), if at the time of such Restricted Payment or immediately after giving effect thereto, (A) a Default or an Event of Default shall have occurred and be continuing, (B) the Company is not able to incur at least $1.00 of additional Indebtedness under the first paragraph of clause (1) of Section 4.12, or (C) the aggregate amount of Restricted Payments (including such proposed Restricted Payment but excluding the Distribution) made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the fair market value of such property as determined reasonably and in good faith by the Board of Directors of the Company, whose determination shall be conclusive) shall exceed the sum, without duplication, of:  (i) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company earned during the period beginning on the first day of the fiscal quarter which includes the Issue Date and ending on the last day of the last fiscal quarter that precedes the date the Restricted Payment occurs (the “Reference Date”) for which a financial statement relating to such fiscal quarter has been filed or furnished in a report with the Commission (treating such period as a single accounting period); plus (ii) 100% of the aggregate net cash proceeds received by the Company from any Person (other than a Subsidiary of the

45

Company) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of the Company (other than Preferred Stock to the extent that the net cash proceeds therefrom are or are expected to be used to fund the Distribution and other than proceeds of Qualified Capital Stock to the extent that they are used pursuant to clause (14) of the definition of “Permitted Investments” in Section 1.01); plus (iii) 100% of the aggregate net cash proceeds received after the Issue Date by the Company from the issuance or sale (other than to a Subsidiary of the Company) of debt securities or Disqualified Capital Stock (other than the Preferred Stock to the extent that the net cash proceeds therefrom are or are expected to be used to fund the Distribution) that have been converted into or exchanged for Qualified Capital Stock of the Company, together with (without duplication) any net cash proceeds received by the Company at the time of such conversion or exchange; plus (iv) to the extent not otherwise included in the Consolidated Net Income of the Company, an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) in Unrestricted Subsidiaries resulting from the payments in cash of interest on Indebtedness, dividends, repayments of loans or advances or other transfers of assets, in each case to the Company or a Restricted Subsidiary or from the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary; plus (v) to the extent not otherwise included in Consolidated Net Income, net cash proceeds from sale of Investments which were treated as Restricted Payments, but not to exceed the amounts so treated; plus (vi) without duplication of any amounts included in clauses (C)(ii) and (C)(iii) of this Section 4.10, 100% of the aggregate net cash proceeds of any equity contribution received by the Company from a holder of the Company’s Capital Stock other than proceeds of a Capital Contribution to the extent that they are used pursuant to clause (14) of the definition of “Permitted Investments” in Section 1.01.

Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit:  (1) the payment of any dividend or redemption payment within 60 days after the date of declaration of such dividend or redemption payment if the dividend or redemption payment would have been permitted on the date of declaration; (2) the acquisition of any shares of Capital Stock of the Company, either: (A) solely in exchange for shares of Qualified Capital Stock of the Company (or warrants, options or other rights to acquire Qualified Capital Stock of the Company (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, Qualified Capital Stock)), or (B) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company (or warrants, options or other rights to acquire Qualified Capital Stock of the Company (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, Qualified Capital Stock)); (3) the acquisition of any Indebtedness of the Company or of any Guarantor that is subordinate or junior in right of payment to the Notes or such Guarantor’s Guarantee, as the case may be, either: (A) solely in exchange (i) for shares of Qualified Capital Stock of the Company (or warrants, options or other rights to acquire Qualified Capital Stock of the Company (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, Qualified Capital Stock)); or (ii) Refinancing Indebtedness; or (B) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of (i) shares of Qualified Capital Stock of the Company (or warrants, options or other rights to acquire Qualified Capital Stock of the Company (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, Qualified Capital Stock)); or (ii) Refinancing Indebtedness; (4) the purchase of any Subordinated Indebtedness at a purchase price not greater

46

than 101% of the principal amount thereof in the event of a Change of Control in accordance with provisions similar to Section 4.15; provided that prior to such purchase the Company has made the Change of Control Offer as provided in Section 4.15 with respect to the Notes and has purchased all Notes validly tendered for payment in connection with such Change of Control Offer and that no Default or Event of Default is in existence prior to or as a result of such purchase; (5) so long as no Default or Event of Default shall have occurred and be continuing, repurchases by the Company of Equity Interests of the Company from employees, consultants or directors of the Company or any of its Subsidiaries or their authorized representatives upon or within 270 days after the death, disability or termination of employment, consultancy or directorships of such employees, consultants or directors, in an amount not to exceed (A) a cumulative amount equal to $10.0 million per fiscal year (or partial fiscal year) beginning with the fiscal year that included the Issue Date, minus (B) the aggregate amount of Restricted Payments made pursuant to this clause (5); provided, however, that the aggregate amount of Restricted Payments made pursuant to this clause (5) shall not exceed $30.0 million in the aggregate from and after the Issue Date; (6) the repurchase of Equity Interests deemed to occur upon the exercise of stock options if such Equity Interests represent a portion of the exercise price of such stock options; (7) for the avoidance of doubt only, payments pursuant to the Management Agreement; (8) other Restricted Payments pursuant to this clause (8) not to exceed $30.0 million in the aggregate from and after the Issue Date; (9) the acquisition of, declaration or payment of dividends (other than dividends paid in Disqualified Capital Stock) on, Equity Interests of the Company in connection with the consummation of the Distribution, but excluding any dividends declared or paid on the preferred stock issued in connection with the consummation of the Distribution; (10) after the Holding Company Merger, payments to the Parent pursuant to this clause (10), (A) to enable the Parent to pay the federal, state, local, or foreign tax liabilities of itself, and of the Company and its Subsidiaries for which it is liable; such payment shall be determined assuming that the Parent, the Company, and the Subsidiaries file a consolidated Federal (and where actually filed, consolidated, combined, unitary or similar returns for state, local or foreign purposes) tax return with the Parent as the Parent and the Company and the Subsidiaries as members and that the Parent has no substantial assets other than the stock of the Company and any tax payments shall either be used by the Parent to pay such tax liabilities within 90 days of the Parent’s receipt of such payment or refunded to the payee, and (B) in an aggregate amount not to exceed $10.0 million per year in order to pay legal and accounting expenses, payroll and other compensation expenses in the ordinary course of business, and other corporate overhead expenses in the ordinary course of business; and (11) for the avoidance of doubt, the distribution of any Equity Interests of any Subsidiary of the Company for the purpose of establishing a holding company structure in compliance with Section 5.01.

In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (C) of the first paragraph of this Section 4.10, amounts expended pursuant to clauses (2)(A), (3)(A), (3)(B)(ii), (6), (7), (9), (10) and (11) shall be excluded in such calculation and amounts expended pursuant to clauses (1), (2)(B), (3)(B)(i), (4), (5) and (8) shall be included in such calculation.

Not later than (1) 5 days after making any Restricted Payment in excess of $5.0 million or the last or the last Restricted Payment of a series of related Restricted Payments in excess of $5.0 million, or (2) 45 days after the end of any fiscal quarter in which the Company and Restricted Subsidiaries made Restricted Payments in excess of $2.5 million, the Company

47

shall deliver to the Trustee an Officers’ Certificate stating that such Restricted Payment (or Restricted Payments) complies with this Indenture and setting forth in reasonable detail the basis upon which the required calculations were computed, which calculations may be based upon the Company’s latest available internal quarterly financial statements; provided, however, that no such officer’s certificate shall be required in connection with Restricted Payments made pursuant to clauses (2)(A), (3)(A), (3)(B)(ii), (6), (9), (10) and (11) or payments pursuant to the Management Agreement pursuant to clause (7) of the immediately preceding paragraph.

SECTION 4.11.  Limitation on Transactions with Affiliates.

(1)  The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an “Affiliate Transaction”), other than: (A) Affiliate Transactions permitted under clause (2) of this Section 4.11 and (B) Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm’s-length basis from a Person that is not an Affiliate of the Company or such Restricted Subsidiary.  All Affiliate Transactions (and each series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other property with a fair market value in excess of $1.5 million shall be approved by the Board of Directors of the Company or such Restricted Subsidiary, as the case may be, such approval to be evidenced by a Board Resolution delivered to the Trustee stating that such Board of Directors has determined that such transaction complies with the foregoing provisions.  If the Company or any Restricted Subsidiary of the Company enters into an Affiliate Transaction (or a series of related Affiliate Transactions related to a common plan) that involves an aggregate fair market value of more than $20.0 million, the Company or such Restricted Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such transaction or series of related transactions to the Company or the relevant Restricted Subsidiary, as the case may be, from a financial point of view, from an Independent Financial Advisor and file the same with the Trustee.

(2)  The restrictions set forth in clause (1) shall not apply to: (A) fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any Restricted Subsidiary of the Company in the ordinary course of business of the Company or such Restricted Subsidiary; (B) transactions exclusively between or among the Company and any of its Restricted Subsidiaries or exclusively between or among such Restricted Subsidiaries, provided that such transactions are not otherwise prohibited hereunder; (C) any agreement as in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date; (D) so long as no Default or Event of Default has occurred and is continuing, the payment of amounts owing pursuant to the Management Agreement; (E) issuance of employee stock options approved by the Board of Directors of the Company and the shareholders of the Company; (F) transactions effected as part of a Qualified Securitization Transaction; (G) Restricted Payments permitted by, and Permitted Investments made in

48

accordance with, this Indenture; (H) any sale or issuance of Equity Interests of the Company (other than Disqualified Capital Stock) to any Affiliate of the Company and the entering into and performance of any obligations under any investors’ rights agreement, any management rights agreement or other customary agreements entered into in connection with such sale or issuance; (I) declaration and payment of the Distribution; (J) the sale of the Preferred Stock, the net proceeds of which are or will be used for the Distribution, on substantially the terms described in the Company’s Final Offering Memorandum relating to the issuance of the Notes, and the entering into and performance of any obligations under any investors’ rights agreement, any management rights agreement or other customary agreements entered into in connection therewith; (K) payment of bonuses to and purchases of Equity Interests from employees, directors and consultants of the Company or any Restricted Subsidiary; and (L) the distribution of any Equity Interests of any Subsidiary of the Company for the purpose of establishing a holding company structure in compliance with Article Five.

SECTION 4.12.  Limitation on Incurrence of Additional Indebtedness.  (1)  The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, “incur”) any Indebtedness; provided, however, that if no Default or Event of Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of any such Indebtedness, the Company or any of its Restricted Subsidiaries may incur Indebtedness (including, without limitation, Acquired Indebtedness) if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company and its Restricted Subsidiaries is greater than 2.0 to 1.0.

Notwithstanding the foregoing, the Company and any Restricted Subsidiary (except as specified in this Section 4.12) may incur each and all of the following:

(A) Indebtedness under the Notes offered hereby and the Guarantees thereof;

(B) Indebtedness incurred pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding not to exceed $580.0 million, less

(i) the aggregate amount of any Indebtedness of Securitization Entities in Qualified Securitization Transactions incurred at a time that the Company is not able to incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of this clause (a), provided that the Company may elect in writing to the Trustee to have the amount of said reduction resulting from such Indebtedness incurred in connection with a Qualified Securitization Transaction to be reduced by an amount (the “Transferred Reduction Amount”) up to the then remaining amount of Indebtedness that could be incurred pursuant to clause (M) of this Section 4.12, and in the event of such election, the amount of Indebtedness that can be incurred pursuant to clause (M) of this Section 4.12 will be reduced by the Transferred Reduction Amount,

(ii) the amount of all scheduled principal payments actually made by the Company (excluding any such payment to the extent such payment is made with the proceeds of Indebtedness incurred at the time of repayment) and

49

(iii) the amount of all required permanent prepayments of Indebtedness under the Credit Agreement actually made with the proceeds of an Asset Sale;

The aggregate amount of reductions under subclauses (1)(B)(i), (1)(B)(ii) and (1)(B)(iii) of this Section 4.12 at any time can be established by the Company by providing the Trustee with an Officers’ Certificate setting forth the calculations for such amount.

(C) Indebtedness of Foreign Subsidiaries not to exceed $40.0 million (or the equivalent amount thereof, at the time of incurrence, in other foreign currencies) at any time outstanding pursuant to this clause (C);

(D) other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Issue Date reduced by the amount of any scheduled amortization payments or permanent mandatory prepayments when actually paid or permanent reductions thereon;

(E) Interest Swap Obligations of the Company covering Indebtedness of the Company or any of its Restricted Subsidiaries and Interest Swap Obligations of any Restricted Subsidiary of the Company covering Indebtedness of such Restricted Subsidiary; provided, however, that such Interest Swap Obligations are entered into for the purpose of fixing or hedging interest rate risk with respect to any floating and/or fixed rate on Indebtedness incurred in accordance with the Indenture to the extent the notional principal amount of such Interest Swap Obligation does not exceed the principal amount of the Indebtedness to which such Interest Swap Obligation relates and not with the purpose of speculation;

(F) Indebtedness under Currency Agreements; provided that such Currency Agreements do not increase the Indebtedness of the Company and its Restricted Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder;

(G) Indebtedness of a Restricted Subsidiary of the Company to the Company or to a Restricted Subsidiary of the Company for so long as such Indebtedness is held by the Company or a Restricted Subsidiary of the Company, in each case subject to no Lien (other than a Lien in connection with the Credit Agreement and Permitted Liens which are not consensual) held by a Person other than the Company or a Restricted Subsidiary of the Company; provided that if as of any date any Person other than the Company or a Restricted Subsidiary of the Company owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness (other than a Lien in connection with the Credit Agreement and Permitted Liens which are not consensual), such date shall be deemed the incurrence of Indebtedness which is not allowed by this clause (G);

(H) Indebtedness of the Company to a Restricted Subsidiary of the Company for so long as such Indebtedness is held by a Restricted Subsidiary of the Company, in each case subject to no Lien (other than a Lien in connection with the Credit Agreement and Permitted Liens which are not consensual); provided that (i) any Indebtedness of the Company to any Restricted Subsidiary of the Company (other than a Restricted Subsidiary which is a Guarantor) is unsecured and subordinated, pursuant to a written agreement, to the Company’s obligations under the Indenture and the Notes and (ii) if as of any date any Person other than a Restricted Subsidiary of the Company owns or holds any such Indebtedness or any Person holds a Lien in

50

respect of such Indebtedness (other than a Lien in connection with the Credit Agreement and Permitted Liens which are not consensual), such date shall be deemed the incurrence of Indebtedness which is not allowed by this clause (H);

(I) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within five Business Days of incurrence;

(J) Indebtedness represented by performance bonds, warranty or contractual service obligations, standby letters of credit or appeal bonds, in each case to the extent incurred in the ordinary course of business of the Company or such Restricted Subsidiary in accordance with customary industry practices, in amounts and for the purposes customary in the Company’s industry;

(K) the incurrence by a Securitization Entity of Indebtedness in a Qualified Securitization Transaction that is not recourse to the Company or any Subsidiary of the Company (except for Standard Securitization Undertakings);

(L) Refinancing Indebtedness;

(M) additional Indebtedness of the Company and its Restricted Subsidiaries in an aggregate principal amount not to exceed $100.0 million at any one time outstanding (which may be Indebtedness under the Credit Agreement in addition to that permitted by clause (B)); and

(N) Acquired Indebtedness, and refinancings or replacements thereof, not to exceed $50.0 million at any one time outstanding pursuant to this clause (N).

(2) For purposes of determining any particular amount of Indebtedness under this Section 4.12, Indebtedness incurred under the Credit Agreement on or prior to the Issue Date shall be treated as incurred pursuant to subclause (B) of clause (1) of this Section 4.12.  For purposes of determining compliance with this Section 4.12, in the event that an item of Indebtedness at any time could have been incurred (regardless of when it was actually incurred) under more than one of the types of Indebtedness described of this Section 4.12 (other than Indebtedness incurred under the Credit Agreement on or prior to the Issue Date, which shall be treated as incurred pursuant to subclause (B) of clause (1) of this Section 4.12), including under the first paragraph of clause (1) of this Section 4.12, the Company, in its sole discretion, shall classify, and at any such time may reclassify, such item of Indebtedness.

SECTION 4.13.  Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.  The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company to (1) pay dividends or make any other distributions on or in respect of its Capital Stock to the Company or any of its Restricted Subsidiaries; (2) make loans or advances or to pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary of the Company; or (3) transfer any of its property or assets to the Company or any other Restricted Subsidiary of the Company, except for such encumbrances or restrictions existing under or by

51

reason of:  (A) applicable law; (B) this Indenture; (C) customary non-assignment provisions of any contract or any lease governing a leasehold interest of any Restricted Subsidiary of the Company; (D) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Restricted Subsidiaries, or the properties or assets of any Restricted Subsidiaries, other than the Person or such Person’s Subsidiaries or the properties or assets of the Person so acquired or such Person’s Subsidiaries; (E) agreements existing on the Issue Date to the extent and in the manner such agreements are in effect on the Issue Date; (F) any agreement to sell assets or Capital Stock permitted under this Indenture to any Person pending the closing of such sale; (G) any instrument governing a Permitted Lien, to the extent and only to the extent such instrument restricts the transfer or other disposition of assets subject to such Permitted Lien; (H) restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business; (I) customary provisions in joint venture agreements and other similar agreements; (J) the documentation relating to Indebtedness of Foreign Subsidiaries incurred pursuant to the terms of this Indenture, provided that such encumbrances or restrictions are not more restrictive than those contained in the Credit Agreement; (K) the Credit Agreement; (L) the documentation relating to other Indebtedness permitted to be incurred subsequent to the Issue Date pursuant to the provisions of Section 4.12, provided that such encumbrances or restrictions are not more restrictive than those contained in the Credit Agreement; (M) the documentation relating to Indebtedness of a Securitization Entity in connection with a Qualified Securitization Transaction; provided that such restrictions apply only to such Securitization Entity; or (N) an agreement governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in subclause (B), (D), (E) or (K) of this clause (3); provided, however, that the provisions relating to such encumbrance or restriction contained in any such Indebtedness are no less favorable to the Company in any material respect as determined by the Board of Directors of the Company in their reasonable and good faith judgment than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clause (B), (D), (E) or (K) of this clause (3).  Nothing contained in this Section 4.13 shall prevent the Company or any Subsidiary of the Company from creating, incurring, assuming or suffering to exist any Permitted Liens.

SECTION 4.14.  Limitation on Restricted and Unrestricted Subsidiaries.

(1)  The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any Restricted Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided that (A) the Company certifies to the Trustee that such designation complies with Section 4.10 and (B) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries (other than the assets of such Restricted Subsidiary to be designated an Unrestricted Subsidiary and its Subsidiaries).

(2)  The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (A) immediately after giving effect to such designation, the Company is able to incur at least $1.00 of additional Indebtedness (other than Permitted

52

Indebtedness) in compliance with Section 4.12 unless such designated Subsidiary shall, at the time of designation, have no Indebtedness outstanding other than Indebtedness pursuant to Section 4.12, and (B) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing.  Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing provisions.

(3)Other than Federal Express Trust No. 1991-B and Federal Express Trust No. 1991-A, subsidiaries of the Company that are not designated by the Board of Directors of the Company as Restricted or Unrestricted Subsidiaries will be deemed to be Restricted Subsidiaries of the Company.

SECTION 4.15.  Change of Control.

(1)  Upon the occurrence of a Change of Control, the Company will make an offer described in this Section 4.15 (the “Change of Control Offer”), and each Holder will have the right to require that the Company purchase all or a portion of such Holder’s Notes, at a purchase price equal to 101% of the principal amount thereof plus accrued interest to the date of purchase.

(2)  Prior to the mailing of the notice referred to in Section 4.15(3), but in any event within 30 days following any Change of Control, the Company will: (A) obtain the requisite consents under the Credit Agreement (so long as the terms of which provide that a Change of Control would result in a default or event of default or would otherwise require repayment) and all other Senior Debt (the terms of which provide that a Change of Control would result in a default or event of default or would otherwise require repayment) to permit the repurchase of the Notes as provided in this Section 4.15, or (B) in the event a consent is not obtained with respect to such Credit Agreement or any such other Senior Debt, repay in full and terminate all commitments under Indebtedness under such Credit Agreement or such other Senior Debt, as the case may be, or offer to repay in full and terminate all commitments under all Indebtedness under such Credit Agreement or such other Senior Debt, as the case may be, and to repay the Indebtedness owed to each lender which has accepted such offer.  The Company shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase Notes pursuant to the provisions described in this Section 4.15.  The Company’s failure to comply with the first sentence of this paragraph shall be governed by Section 6.01(3) and not Section 6.01(2).

(3)  Within 30 days following the date upon which a Change of Control occurs, the Company must send, by first class mail, a notice to each Holder at such Holder’s last registered address, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer.  The notice to the Holders shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Change of Control Offer.  Such notice shall state:

(A) that the Change of Control Offer is being made pursuant to this Section 4.15, that all Notes tendered and not withdrawn will be accepted for

53

payment and that the Change of Control Offer shall remain open for a period of 20 Business Days or such longer period as may be required by law;

(B) the purchase price (including the amount of accrued interest) and the purchase date (which shall be no earlier than 30 days nor later than 45 days from the date such notice is mailed, other than as may be required by law) (the “Change of Control Payment Date”);

(C) that any Note not tendered will continue to accrue interest;

(D) that, unless the Company defaults in making payment therefor, any Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date;

(E) that Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date;

(F) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the second Business Day prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing its election to have such Notes purchased;

(G) that Holders whose Notes are purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered; provided, however, that each Note purchased and each new Note issued shall be in an original principal amount of $1,000 or integral multiples thereof; and

(H) the circumstances and relevant facts regarding such Change of Control.

On or before the Change of Control Payment Date, the Company shall (i) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent, in accordance with Section 2.14, U.S. Legal Tender sufficient to pay the purchase price plus accrued interest, if any, of all Notes so tendered and (iii) deliver to the Trustee Notes so accepted together with an Officers’ Certificate stating the Notes or portions thereof being purchased by the Company.  Upon receipt by the Paying Agent of the monies specified in clause (2) of this Section 4.15 and a copy of the Officers’ Certificate specified in clause (3) of this Section 4.15, the Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price plus accrued interest, if any, and the Trustee shall promptly authenticate and mail to such Holders new Notes equal in principal amount to any unpurchased portion of the Notes surrendered.  For purposes of this Section 4.15, the Trustee shall act as the Paying Agent.

54

Neither the Board of Directors of the Company nor the Trustee may waive the provisions of this Section 4.15 relating to the Company’s obligation to make a Change of Control Offer.

The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer.  To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.15, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the provisions of this Section 4.15 by virtue thereof.

SECTION 4.16.  Limitation on Asset Sales.

The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by the Company’s Board of Directors), (2) at least 75% of the consideration received by the Company or the Restricted Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Cash Equivalents and is received at the time of such disposition provided that for purposes of this provision, the amount of (A) any liabilities (as shown on the most recent balance sheet of the Company or such Restricted Subsidiary or in the notes thereto) of the Company or such Restricted Subsidiary that are assumed by the transferee of any such assets (other than liabilities that are by their terms pari passu with or subordinated to the Notes or the guarantee of the Guarantors, as applicable) and (B) any securities or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash or Cash Equivalents (or (i) are Marketable Securities that are actually sold for cash or Cash Equivalents within 180 days of the consummation of such Asset Sale or (ii) as to which the Company or such Restricted Subsidiary has received at or prior to the consummation of the Asset Sale a commitment (which may be subject to customary conditions) from a nationally recognized investment, merchant or commercial bank to convert into cash or Cash Equivalents within 180 days of the consummation of such Asset Sale and which are thereafter actually converted into cash or Cash Equivalents within such 180-day period) will be deemed to be cash or Cash Equivalents (and shall be deemed to be Net Cash Proceeds for purposes of the following provisions as and when reduced to cash or Cash Equivalents) to the extent of the net cash or Cash Equivalents realized thereon, and (3) upon the consummation of an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 365 days of receipt thereof either: (A) to repay or prepay any Senior Debt and, in the case of any Senior Debt under any revolving credit facility, effect a permanent reduction in the availability under such revolving credit facility, (B) to make an investment (or shall have entered into a binding commitment to make such an investment within 180 days) in properties and assets that replace the properties and assets that were the subject of such Asset Sale or in properties and assets that will be used in the business of the Company and its Subsidiaries as existing on the Issue Date or in businesses which are the same, similar or reasonably related or complementary to the businesses in which the Company and its Restricted Subsidiaries are engaged on the Issue Date

55

(“Replacement Assets”), or (C) a combination of prepayment and investment permitted by the foregoing clauses (3)(A) and (3)(B).  On the 366th day after an Asset Sale or such earlier date, if any, as the Board of Directors of the Company or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (3)(A), (3)(B) and (3)(C) of the next preceding sentence (each, a “Net Proceeds Offer Trigger Date”), such aggregate amount of Net Cash Proceeds which have not been applied (or committed to the purchase of replacement assets) on or before such Net Proceeds Offer Trigger Date as permitted in clauses (3)(A), (3)(B) and (3)(C) of the next preceding sentence (each a “Net Proceeds Offer Amount”) shall be applied by the Company or such Restricted Subsidiary to make an offer to purchase (the “Net Proceeds Offer”) on a date (the “Net Proceeds Offer Payment Date”) not less than 30 nor more than 45 days following the applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest thereon, if any, to the date of purchase; provided, however, that if at any time any non-cash consideration received by the Company or any Restricted Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this Section 4.16.  The Company may defer the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $10.0 million resulting from one or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not just the amount in excess of $10.0 million, shall be applied as required pursuant to this paragraph).

In the event of the transfer of substantially all (but not all) of the property and assets of the Company and its Restricted Subsidiaries as an entirety to a Person in a transaction permitted under Section 5.01, the successor corporation shall be deemed to have sold the properties and assets of the Company and its Restricted Subsidiaries not so transferred for purposes of this Section 4.16, and shall comply with the provisions of this Section 4.16 with respect to such deemed sale as if it were an Asset Sale.  In addition, the fair market value of such properties and assets of the Company or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this Section 4.16.

(1)Notwithstanding the two immediately preceding paragraphs, the Company and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraphs to the extent (A) the consideration for such Asset Sale constitutes Replacement Assets and (B) such Asset Sale is for fair market value.

(2)Each notice of a Net Proceeds Offer pursuant to this Section 4.16 shall be mailed or caused to be mailed, by first class mail, by the Company not more than 25 days after the Net Proceeds Offer Trigger Date to all Holders at their last registered addresses, with a copy to the Trustee.  The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Net Proceeds Offer and shall state the following terms:

(A)that the Net Proceeds Offer is being made pursuant to this Section 4.16, that all Notes tendered will be accepted for payment; provided, however, that if the aggregate principal amount of Notes tendered in a Net Proceeds Offer plus

56

accrued interest at the expiration of such offer exceeds the aggregate amount of the Net Proceeds Offer, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000 or multiples thereof shall be purchased) and that the Net Proceeds Offer shall remain open for a period of 20 Business Days or such longer period as may be required by law;

(B)the purchase price (including the amount of accrued interest) and the Net Proceeds Offer Payment Date (which shall be not less than 30 nor more than 45 days following the applicable Net Proceeds Offer Trigger Date and which shall be at least three Business Days after the Trustee receives notice thereof from the Company unless a shorter period shall be agreed to by the Trustee);

(C)that any Note not tendered will continue to accrue interest;

(D)that, unless the Company defaults in making payment therefor, any Note accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest after the Net Proceeds Offer Payment Date;

(E)that Holders electing to have a Note purchased pursuant to a Net Proceeds Offer will be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Net Proceeds Offer Payment Date;

(F)that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the second Business Day prior to the Net Proceeds Offer Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing its election to have such Note purchased; and

(G)that Holders whose Notes are purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered; provided, however, that each Note purchased and each new Note issued shall be in an original principal amount of $1,000 or integral multiples thereof.

On or before the Net Proceeds Offer Payment Date, the Company shall (1) accept for payment Notes or portions thereof tendered pursuant to the Net Proceeds Offer which are to be purchased in accordance with item (2)(B) of this Section 4.16, (2) deposit with the Paying Agent in accordance with Section 2.14 U.S. Legal Tender sufficient to pay the purchase price plus accrued interest, if any, of all Notes to be purchased and (3) deliver to the Trustee Notes so accepted together with an Officers’ Certificate stating the Notes or portions thereof being purchased by the Company.  The Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price plus accrued interest, if any.  For purposes of this Section 4.16, the Trustee shall act as the Paying Agent.  The Trustee shall promptly authenticate and mail to such Holders new Notes equal in principal amount to any

57

unpurchased portion of the Notes surrendered.  Upon the payment of the purchase price for the Notes accepted for purchase, the Trustee shall either cancel the Notes or return the Notes purchased to the Company for cancellation.  Any monies remaining after the purchase of Notes pursuant to a Net Proceeds Offer shall be returned within three Business Days by the Trustee to the Company except with respect to monies owed as obligations to the Trustee pursuant to Article Seven.  For purposes of this Section 4.16, the Trustee shall act as the Paying Agent.

To the extent the amount of Notes tendered pursuant to any Net Proceeds Offer is less than the amount of Net Cash Proceeds subject to such Net Proceeds Offer, the Company may use any remaining portion of such Net Cash Proceeds not required to fund the repurchase of tendered Notes for general corporate purposes and such Net Proceeds Offer Amount shall be reset to zero.

The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Net Proceeds Offer.  To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.16, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the provisions of this Indenture by virtue thereof.

SECTION 4.17.  Limitation on Preferred Stock of Restricted Subsidiaries.  The Company will not permit any of its Restricted Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly Owned Restricted Subsidiary of the Company) or permit any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company) to own any Preferred Stock of any Restricted Subsidiary of the Company.

SECTION 4.18.  Limitation on Liens Securing Indebtedness.  The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Liens of any kind securing any Indebtedness against or upon any property or assets of the Company or any of its Restricted Subsidiaries whether owned on the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom to secure any Indebtedness unless: (1) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Notes or any Guarantee, the Notes and such Guarantee, as the case may be, are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens, and (2) in all other cases, the Notes and the Guarantees are equally and ratably secured, except for (A) Liens existing as of the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date; (B) Liens securing Indebtedness incurred under the Credit Agreement; (C) Liens securing Senior Debt and Liens securing Guarantor Senior Debt; (D) Liens securing the Notes and the Guarantees; (E) Liens of the Company or a Restricted Subsidiary of the Company on assets of any Subsidiary of the Company; (F) Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness which has been secured by a Lien permitted under this Indenture and which has been incurred in accordance with the provisions of this Indenture; provided, however, that such Liens (i) are no less favorable to the Holders and are not more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being Refinanced and (ii) do not extend to or cover any

58

property or assets of the Company or any of its Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (G) Permitted Liens.

SECTION 4.19.  [Intentionally Omitted].

SECTION 4.20.  Additional Subsidiary Guarantees.  If the Company or any of its Restricted Subsidiaries transfers or causes to be transferred, in one transaction or a series of related transactions, any property to any Restricted Subsidiary (other than a Foreign Subsidiary or Securitization Entity) that is not a Guarantor and that has total assets with a book value in excess of $500,000 after giving effect to such transfer, or if the Company or any of its Restricted Subsidiaries shall organize, acquire or otherwise invest in another Restricted Subsidiary (other than a Foreign Subsidiary or a Securitization Entity) having total assets with a book value in excess of $500,000 that is not already a Guarantor, then such transferee or acquired or other Restricted Subsidiary shall within 15 days of the end of the next succeeding fiscal quarter (unless the book value of such Restricted Subsidiary is in excess of $5.0 million in which case, contemporaneously with the organization, acquisition or other investment in such Restricted Subsidiary, as the case may be) (1) execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Company’s obligations under the Notes and this Indenture on the terms set forth in this Indenture and (2) deliver to the Trustee an Opinion of Counsel that such supplemental indenture has been duly authorized, executed and delivered by such Restricted Subsidiary and constitutes a legal, valid, binding and enforceable obligation of such Restricted Subsidiary.  Thereafter, such Restricted Subsidiary shall be a Guarantor for all purposes of this Indenture.

SECTION 4.21.  Prohibition on Incurrence of Senior Subordinated Debt.  The Company will not, and will not permit any Guarantor to, incur or suffer to exist Indebtedness that is senior in right of payment to the Notes or any Guarantee, as the case may be, and expressly contractually subordinate in right of payment to any other Indebtedness of the Company or such Guarantor, as the case may be.

SECTION 4.22.  Limitation on Repurchase of Equity Interests from Employees.  The Company will not, nor will it permit any of its Restricted Subsidiaries to, repurchase any Equity Interest issued to any officer, employee, director or consultant pursuant to the terms of the Management Equity Plan other than:

(1) a repurchase of any Equity Interest that is made pursuant to the Distribution;

(2) a repurchase of any Equity Interest that is made after the death or Permanent Disability of such officer, employee, director or consultant;

(3) a repurchase of any Capital Stock which has been owned by such officer, employee, director or consultant for a period of time greater than six months;

(4) a repurchase of any Equity Interest in connection with a Change of Control or in connection with a merger or consolidation, or sale, assignment, transfer, lease, conveyance, or disposition of all or substantially all or the Company’s assets, which is permitted pursuant to the terms of Section 5.01;

59

(5) a repurchase of any Equity Interest at any point in time at which all options issued and outstanding under the Management Equity Plan are subject to variable plan accounting pursuant to the accounting provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”;

(6) a repurchase of any Equity Interest to the extent necessary or advisable pursuant to Section 10 or 13 of the Management Equity Plan; however, for purposes of clarity, the Company’s call right upon a participant’s termination of employment, except in the case of death or Permanent Disability, described in Section 10(a) of the Management Equity Plan shall not be considered necessary or advisable;

(7) a repurchase of any Equity Interest to the extent used to satisfy Minimum Tax Withholding requirements associated with the exercise of such Equity Interest; or

(8) a repurchase of any Equity Interest at any point subsequent to the Company’s adoption of the accounting provisions of Financial Accounting Standards Board Issuance No. 123 — “Accounting for Stock-Based Compensation”, or any other fair value method of accounting generally accepted in the United States, such that the repurchase of such Equity Interest would not trigger liability accounting for all options under the Management Equity Plan.

Notwithstanding the foregoing, the Company and its Restricted Subsidiaries must comply with the provisions of Articles Four and Five in connection with such repurchases.

SECTION 4.23.  Special Redemption.  On the Closing Date, the Company shall deposit with the Securities Intermediary as hereinafter provided the net proceeds from the issuance of the Notes (the “Proceeds”).

(1)  In order to secure the full and punctual payment and performance of the Company’s obligation to redeem the Notes upon a Special Redemption, if any, the Company hereby grants to the Trustee, for the ratable benefit of the Holders, a continuing perfected security interest in and to the Collateral, whether now owned or existing or hereafter acquired or arising.  The Company shall be required to effect the Special Redemption upon the occurrence of an event specified in this Section 4.23 at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest thereon to the date of redemption.

(2)  At all times until the release of the proceeds in accordance with this Section 4.23 and the Security Agreement, there shall be maintained with the Securities Intermediary an account (the “Secured Proceeds Account”), which account shall be under the sole dominion and control of the Securities Intermediary.  On the Closing Date, the Company shall cause the Proceeds to be deposited in the Secured Proceeds Account.  Amounts on deposit in the Secured Proceeds Account shall be held in cash or invested (and reinvested from time to time) in U.S. Government Obligations or Money Market Funds investing in U.S. Government Obligations (such investments collectively referred to herein as “Eligible Investments”), which Eligible Investments shall be held in the Secured Proceeds Account.  Any income, including any interest or capital gains received with respect to the balance from time to time standing to the credit of the Secured Proceeds Account, shall remain, or be deposited, in the Secured Proceeds Account.

60

The Securities Intermediary shall in no event have any liability for any tax, fee, loss or other charge incurred in connection with the Company’s written instructions to the Securities Intermediary regarding any investment, reinvestment or liquidation of any such investment.

(3)  Upon the earlier to occur of (A) any Proceeds being released by the Securities Intermediary to be used in the redemption of all of the outstanding Existing Notes and (B) the Special Redemption Date, the security interests in the Collateral shall automatically terminate.

(4)  Upon receipt by the Securities Intermediary on or prior to November 7, 2003 of a certificate signed by the President or any Vice President and any other officer of the Company (the “Redemption Disbursement Request”) stating, among other things, that the redemption of all of the outstanding Existing Notes is to be effected on the terms and conditions described in all material respects in the indenture, as amended, relating to the Existing Notes on a date specified therein, but no later than November 7, 2003, and requesting the Securities Intermediary to release the Proceeds, which along with additional proceeds from the Company, will be used to effect the redemption of all of the outstanding Existing Notes in accordance with the terms of the indenture relating to the Existing Notes, the Securities Intermediary shall disburse all such Proceeds to, or at the direction of, the Company on the closing date of the redemption (or the Business Day before such closing date if the trustee with respect to the Existing Notes so requires) of all of the outstanding Existing Notes, which shall be specified in such certificate.  If the redemption of the Existing Notes is not effected on such closing date, the Company shall redeposit any such Proceeds in the Secured Proceeds Account.  The Redemption Disbursement Request may be withdrawn by the Company upon written notice to the Securities Intermediary at anytime on or prior to the business day immediately prior to such closing date.

(5)  If the Securities Intermediary has not received the Redemption Disbursement Request by 5:00 p.m. New York time on or prior to November 7, 2003 (such an event constituting an “Event of Failure”), the Company will make an offer described in this Section 4.23 (the “Special Redemption Offer”), and each Holder will have the right to require that the Company purchase all or a portion of such Holder’s Notes, at a purchase price equal to 100% of the principal amount thereof plus accrued interest to the date of purchase.

(A) Within five days following the date upon which the Event of Failure occurs (the “Special Redemption Offer Date”), the Company must send, by first class mail, a notice to each Holder at such Holder’s last registered address, with a copy to the Trustee, which notice shall govern the terms of the Special Redemption Offer.  The notice to the Holders shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Offer.  Such notice shall state:

(i)that the Special Redemption Offer is being made pursuant to this Section 4.23, that all Notes tendered and not withdrawn will be accepted for payment and that the Special Redemption Offer shall remain open until December 1, 2003 or such longer period as may be required by law;

61

(ii)the purchase price (including the amount of accrued interest) and the purchase date (which shall be December 1, 2003, other than as may be required by law) (the “Special Redemption Payment Date”);

(iii)that any Note not tendered will continue to accrue interest;

(iv)that, unless the Company defaults in making payment therefor, any Note accepted for payment pursuant to the Special Redemption Offer shall cease to accrue interest after the Special Redemption Payment Date;

(v)that Holders electing to have a Note purchased pursuant to a Special Redemption Offer will be required to surrender the Note to the Paying Agent at the address specified in the notice prior to the close of business on November 26, 2003;

(vi)that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than November 26, 2003, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing its election to have such Notes purchased; and

(vii)that Holders whose Notes are purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered; provided, however, that each Note purchased and each new Note issued shall be in an original principal amount of $1,000 or integral multiples thereof.

(B) By 10:30 A.M., New York City time, on the Special Redemption Offer Date, the Securities Intermediary shall disburse all Proceeds to the Paying Agent in connection with the redemption of the Notes; and

(C) On or before the Special Redemption Payment Date, the Company shall (1) accept for payment Notes or portions thereof tendered pursuant to the Special Redemption Offer, (2) deposit with the Paying Agent U.S. Legal Tender, which along with the Proceeds, that is sufficient to pay the purchase price plus accrued interest, if any, of all Notes so tendered and (3) deliver to the Trustee Notes so accepted together with an Officers’ Certificate stating the Notes or portions thereof being purchased by the Company.  Upon receipt by the Paying Agent of the monies specified in clause (2) of this Section 4.23 and a copy of the Officers’ Certificate specified in clause (3) of this Section 4.23, the Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price plus accrued interest, if any, and the Trustee shall promptly authenticate and mail to such Holders new Notes equal in principal amount to any unpurchased portion of the Notes surrendered.

62

ARTICLE FIVE
SUCCESSOR CORPORATION

SECTION 5.01.  Merger, Consolidation and Sale of Assets.

(1)  The Company will not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Company’s assets (determined on a consolidated basis for the Company and the Company’s Restricted Subsidiaries) whether as an entirety or substantially as an entirety to any Person (other than the Company or any Wholly Owned Restricted Subsidiary that is a Guarantor) unless:  (A) either (i) with respect to such a consolidation or merger, the Company shall be the surviving or continuing corporation or (ii) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company and of the Company’s Restricted Subsidiaries substantially as an entirety (the “Surviving Entity”) (a) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia and (b) shall expressly assume, by supplemental indenture (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if any, and interest on all of the Notes and the performance of every covenant of the Notes, this Indenture and the Registration Rights Agreement on the part of the Company to be performed or observed; (B) immediately after giving effect to such transaction and the assumption contemplated by clause (1)(A)(ii)(b) of this Section 5.01 (including giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), the Company or such Surviving Entity, as the case may be, shall be able to incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of clause (1) Section 4.12; (C) immediately after giving effect to such transaction and the assumption contemplated by clause (1)(A)(ii)(b) of this Section 5.01 (including, without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; and (D) the Company or the Surviving Entity, as the case may be, shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of this Indenture and that all conditions precedent in this Indenture relating to such transaction have been satisfied.

(2)  For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries of the Company, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.

(3)  Each Guarantor (other than any Guarantor whose Guarantee is to be released in accordance with the terms of the Guarantee and this Indenture in connection with any

63

transaction complying with the provisions of Section 4.16) will not, and the Company will not cause or permit any Guarantor to, consolidate with or merge with or into any Person other than the Company or any other Guarantor unless:  (A) the entity formed by or surviving any such consolidation or merger (if other than the Guarantor) or to which such sale, lease, conveyance or other disposition shall have been made is a Person organized and existing under the laws of the United States or any State thereof or the District of Columbia; (B) such entity assumes by supplemental indenture all of the obligations of the Guarantor on the Guarantee; and (C) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing.  Any merger or consolidation of a Guarantor with and into the Company (with the Company being the surviving entity) or another Guarantor that is a Wholly Owned Restricted Subsidiary of the Company need only comply with clause (D) of the first paragraph of this Section 5.01.

The foregoing restrictions shall not apply to any transaction involving (A) a merger of the Company and one of its Subsidiaries for the purposes of establishing a holding company structure (the “Holding Company Merger”) or (B) the merger of the Company and one of its Subsidiaries for the purpose of reincorporating into another jurisdiction.  Either of the transactions described in clause (A) or clause (B) of this paragraph may be effected individually or in connection with one or more related transactions; provided that (i) such transaction or transactions (individually or taken as a whole) is not for the purposes of evading the provisions set forth in this Section 5.01 and (ii) clause (1) of the first paragraph of this Section 5.01 applies to such transaction or transactions.

SECTION 5.02.  Successor Corporation Substituted.  Upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of the Company in accordance with Section 5.01, in which the Company is not the continuing corporation, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture and the Notes with the same effect as if such successor had been named as the Company herein and thereafter (except in the case of a sale, assignment, transfer, lease, conveyance or other disposition) the predecessor corporation will be relieved of all further obligations and covenants under this Indenture and the Notes; provided that solely for purposes of computing the amounts described in subclauses (4)(C)(i), (4)(C)(ii) and (4)(C)(iii) of Section 4.10, any successor Person shall only be deemed to have succeeded to and be substituted for the Company with respect to periods subsequent to the effective time of such merger, consolidation or transfer of assets.

ARTICLE SIX
REMEDIES

SECTION 6.01.  Events of Default.  An “Event of Default” means any of the following events:

(1)  the failure to pay interest on any Notes when the same becomes due and payable and the default continues for a period of 30 days (whether or not such payment shall be prohibited by Article Ten of this Indenture);

64

(2)  the failure to pay the principal on any Notes, when such principal becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a payment to purchase Notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or not such payment shall be prohibited by Article Ten of this Indenture);

(3)  a default in the observance or performance of any other covenant or agreement contained in this Indenture which default continues for a period of 30 days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes (except in the case of a default with respect to Section 5.01, which will constitute an Event of Default with such notice requirement but without such passage of time requirement);

(4)  the failure to pay at final maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of the Company or any Restricted Subsidiary of the Company (other than a Securitization Entity) and such failure continues for a period of 30 days or more, or the acceleration of the final stated maturity of any such Indebtedness (which acceleration is not rescinded, annulled or otherwise cured within 30 days of receipt by the Company or such Restricted Subsidiary of notice of any such acceleration) if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final maturity or which has been accelerated, in each case with respect to which the 30-day period described in this Section 6.01 has passed, aggregates $25.0 million or more at any time;

(5)  one or more judgments which exceeds in the aggregate $25.0 million (excluding judgments to the extent covered by insurance by a reputable insurer as to which the insurer has acknowledged coverage) shall have been rendered against the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary of the Company and such judgments remain undischarged, unvacated, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable;

(6)  the Company or any of its Significant Subsidiaries (A) commences a voluntary case or proceeding under any Bankruptcy Law with respect to itself, (B) consents to the entry of a judgment, decree or order for relief against it in an involuntary case or proceeding under any Bankruptcy Law, (C) consents to the appointment of a Custodian of it or for substantially all of its property, (D) consents to or acquiesces in the institution of a bankruptcy or an insolvency proceeding against it, (E) makes a general assignment for the benefit of its creditors, or (F) takes any corporate action to authorize or effect any of the foregoing;

(7)  a court of competent jurisdiction enters a judgment, decree or order for relief in respect of the Company or any of its Significant Subsidiaries in an involuntary case or proceeding under any Bankruptcy Law, which shall (A) approve as properly filed a petition seeking reorganization, arrangement, adjustment or composition in respect of the Company or any of its Significant Subsidiaries, (B) appoint a Custodian of the Company or any of its Significant Subsidiaries or for substantially all of its property or (C) order the winding-up or liquidation of its affairs; and such judgment, decree or order shall remain unstayed and in effect for a period of 60 consecutive days;

65

(8)any of the Guarantees ceases to be in full force and effect or any of the Guarantees is declared to be null and void and unenforceable or any of the Guarantees is found to be invalid or any of the Guarantors denies its liability under its Guarantee (other than (A) by reason of release of a Guarantor in accordance with the terms of this Indenture or (B) in connection with the bankruptcy of a Guarantor, so long as the aggregate assets of such Guarantor and any other Guarantor whose Guarantee ceased or ceases to be in full force as a results of a bankruptcy are less than $25.0 million); or

(9)the failure by the Company to deposit funds, as required in order to secure the redemption of the Notes upon an Event of Failure, pursuant to Section 4.23 or the Security Agreement shall cease to be in full force and effect or enforceable in accordance with its terms, other than in accordance with its terms.

SECTION 6.02.  Acceleration.

If an Event of Default (other than an Event of Default specified in clause (6) or (7) of Section 6.01 with respect to the Company) shall occur and be continuing, the Trustee or the Holders of at least 25% in principal amount of outstanding Notes may declare the principal of and accrued interest on all the Notes to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a “notice of acceleration” (the “Acceleration Notice”), and the same (1) shall become immediately due and payable, or (2) if there are any amounts outstanding under the Credit Agreement, shall become immediately due and payable upon the first to occur of an acceleration under the Credit Agreement or 5 Business Days after receipt by the Company and the representative under the Credit Agreement of such Acceleration Notice.  If an Event of Default specified in clause (6) or (7) of Section 6.01 with respect to the Company occurs and is continuing, then all unpaid principal of, and premium, if any, and accrued and unpaid interest on all of the outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.

At any time after a declaration of acceleration with respect to the Notes as described in the preceding paragraph, the Holders of a majority in principal amount of the Notes may rescind and cancel such declaration and its consequences: (1) if the rescission would not conflict with any judgment or decree, (2) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration, (3) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid, (4) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances, and (5) in the event of the cure or waiver of an Event of Default of the type described in clause (6) or (7) of Section 6.01, the Trustee shall have received an Officers’ Certificate and an Opinion of Counsel that such Event of Default has been cured or waived.  No such rescission shall affect any subsequent Default or impair any right consequent thereto.

SECTION 6.03.  Other Remedies.  If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to

66

collect the payment of the principal of, premium, if any, or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

All rights of action and claims under this Indenture or the Notes may be enforced by the Trustee even if it does not possess any of the Notes or does not produce any of them in the proceeding.  A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default.  No remedy is exclusive of any other remedy.  All available remedies are cumulative to the extent permitted by law.

SECTION 6.04.  Waiver of Past Defaults.  Prior to the declaration of acceleration of the Notes, the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may, on behalf of the Holders of all the Notes, waive any existing Default or Event of Default and its consequences under this Indenture, except a Default or Event of Default specified in Section 6.01(1) or (2) or in respect of any provision hereof which cannot be modified or amended without the consent of the Holder so affected pursuant to Section 9.01.  When a Default or Event of Default is so waived, it shall be deemed cured and shall cease to exist.  This Section 6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA.

SECTION 6.05.  Control by Majority.  Subject to Section 2.09, the Holders of the Notes may not enforce this Indenture or the Notes except as provided in this Article Six and under the TIA.  The Holders of not less than a majority in aggregate principal amount of the outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided, however, that the Trustee may refuse to follow any direction (1) that conflicts with any rule of law or this Indenture, (2) that the Trustee determines may be unduly prejudicial to the rights of another Holder, or (3) that may expose the Trustee to personal liability for which reasonable indemnity provided to the Trustee against such liability shall be inadequate; provided, further, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction or this Indenture.  This Section 6.05 shall be in lieu of Section 316(a)(1)(A) of the TIA, and such Section 316(a)(1)(A) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA.

SECTION 6.06.  Limitation on Suits.  No Holder of any Notes shall have any right to institute any proceeding with respect to this Indenture or the Notes or any remedy hereunder, unless the Holders of at least 25% in aggregate principal amount of the outstanding Notes have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as Trustee under the Notes and this Indenture, the Trustee has failed to institute such proceeding within 45 days after receipt of such notice, request and offer of indemnity and the Trustee, within such 45-day period, has not received directions inconsistent with such written request by Holders of not less than a majority in aggregate principal amount of the outstanding Notes.

67

The foregoing limitations shall not apply to a suit instituted by a Holder of a Note for the enforcement of the payment of the principal of, premium, if any, or interest on, such Note on or after the respective due dates expressed or provided for in such Note.

A Holder may not use this Indenture to prejudice the rights of any other Holders or to obtain priority or preference over such other Holders.

SECTION 6.07.  Right of Holders To Receive Payment.  Notwithstanding any other provision in this Indenture, the right of any Holder of a Note to receive payment of the principal of, premium, if any, and interest on such Note, on or after the respective due dates expressed or provided for in such Note, or to bring suit for the enforcement of any such payment on or after the respective due dates, is absolute and unconditional and shall not be impaired or affected without the consent of the Holder.

SECTION 6.08.  Collection Suit by Trustee.  If an Event of Default specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company, or any other obligor on the Notes for the whole amount of the principal of, premium, if any, and accrued interest remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum provided for by the Notes and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

SECTION 6.09.  Trustee May File Proofs of Claim.  The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents, counsel, accountants and experts) and the Holders allowed in any judicial proceedings relative to the Company or Restricted Subsidiaries (or any other obligor upon the Notes), their creditors or their property and shall be entitled and empowered to participate as a member, voting or otherwise, of any official committee of creditors appointed in such matter and to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.07.  The Company’s payment obligations under this Section 6.09 shall be secured in accordance with the provisions of Section 7.07.  Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

SECTION 6.10.  Priorities.  If the Trustee collects any money pursuant to this Article Six it shall pay out such money in the following order:

68

First:  to the Trustee for amounts due under Section 7.07;

Second:  to Holders for interest accrued on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest;

Third:  to Holders for the principal amounts (including any premium) owing under the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for the principal (including any premium); and

Fourth:  the balance, if any, to the Company or any other obligor on the Notes, as their interests may appear, or as a court of competent jurisdiction may direct.

The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10.

SECTION 6.11.  Undertaking for Costs.  In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court may in its discretion require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant.  This Section 6.11 does not apply to any suit by the Trustee, any suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in aggregate principal amount of the outstanding Notes.

SECTION 6.12.  Restoration of Rights and Remedies.  If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Note and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.

ARTICLE SEVEN
TRUSTEE

SECTION 7.01.  Duties of Trustee.

(1)  If an Event of Default has occurred and is continuing, the Trustee may exercise such of the rights and powers vested in it by this Indenture and shall use the same degree of care and skill in its exercise thereof as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(2)  Except during the continuance of an Event of Default:

69

(A)The Trustee need perform only those duties as are specifically set forth in this Indenture and no duties, covenants or obligations of the Trustee shall be implied in this Indenture.

(B)In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture.  However, in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not conform or investigate the accuracy or mathematical calculations or other facts stated therein or otherwise verify the contents thereof).

(3)  Notwithstanding anything to the contrary herein contained, the Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(A)This paragraph does not limit the effect of paragraph (2) of this Section 7.01.

(B)The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts.

(C)The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.02, 6.04 or 6.05.

(4)  No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(5)  Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (1), (2), (3) and (4) of this Section 7.01 and Section 7.02.

(6)  The Trustee shall not be liable for interest on any money or assets received by it except as the Trustee may agree in writing with the Company.  Assets held in trust by the Trustee need not be segregated from other assets except to the extent required by law.

(7)  The Trustee may refuse to perform any duty or exercise any right or power hereunder unless (A) it is provided adequate funds to enable it to do so and (B) it receives indemnity reasonably satisfactory to it against any loss, liability, fee or expense.

SECTION 7.02.  Rights of Trustee.  Subject to Section 7.01:

70

(1)  The Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper Person.  The Trustee need not and shall not be required to investigate any fact or matter stated in the document.

(2)  Before the Trustee acts or refrains from acting, it may consult with counsel of its selection and may require an Officers’ Certificate or an Opinion of Counsel, or both, which shall conform to Sections 13.04 and 13.05.  The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers’ Certificate or Opinion of Counsel.

(3)  The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

(4)  The Trustee shall not be liable for any action that it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers.

(5)  The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice to the Company, to examine the books, records, and premises of the Company, personally or by agent or attorney and to consult with the officers and representatives of the Company, including the Company’s accountants and attorneys.

(6)  The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities which may be incurred by it in compliance with such request, order or direction.

(7)  The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.

(8)  Delivery of reports, information and documents to the Trustee under Section 4.08 is for informational purposes only and the Trustee’s receipt of the foregoing shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of their covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates).  The Trustee shall not be deemed to have knowledge of any defaults until such time as the Trustee receives written knowledge or has actual knowledge of the default.

SECTION 7.03.  Individual Rights of Trustee.  The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company, any of their Subsidiaries, or their respective Affiliates with the same rights it would have if it were not Trustee.  Any Agent may do the same with like rights.  However, the Trustee must comply with Sections 7.10 and 7.11.

71

SECTION 7.04.  Trustee’s Disclaimer.  The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, and it shall not be accountable for the Company’s use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in this Indenture or any document entered into or issued in connection with the issuance and sale of the Notes or any statement in the Notes other than the Trustee’s certificate of authentication.

SECTION 7.05.  Notice of Default.  If a Default or an Event of Default occurs and is continuing and if it is known to a Trust Officer, the Trustee shall mail to each Holder notice of the uncured Default or Event of Default within 90 days after obtaining knowledge thereof.  Except in the case of a Default or an Event of Default in payment of principal of, or interest on, any Note, including an accelerated payment, a Default in payment on the Change of Control Payment Date pursuant to a Change of Control Offer or on the Net Proceeds Offer Payment Date pursuant to a Net Proceeds Offer and a Default in compliance with Article Five hereof, the Trustee may withhold the notice if and so long as its Board of Directors, the executive committee of its Board of Directors or a committee of its directors and/or Trust Officers in good faith determines that withholding the notice is in the interest of the Holders.  The foregoing sentence of this Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso to Section 315(b) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA.

SECTION 7.06.  Reports by Trustee to Holders.  Within 60 days after May 15 of each year beginning with 2004, the Trustee shall, to the extent that any of the events described in TIA Section 313(a) occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such date that complies with TIA Section 313(a).  The Trustee also shall comply with TIA Sections 313(b), (c) and (d).

A copy of each report at the time of its mailing to Holders shall be mailed to the Company and filed with the Commission and each stock exchange, if any, on which the Notes are listed.

The Company shall promptly notify the Trustee if the Notes become listed on any stock exchange and the Trustee shall comply with TIA Section 313(d).

SECTION 7.07.  Compensation and Indemnity.  The Company and the Guarantors, jointly, shall pay to the Trustee from time to time such compensation for its services as has been agreed to in writing signed by the Company and the Trustee.  The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust.  The Company and the Guarantors, jointly, shall reimburse the Trustee upon request for all reasonable out-of-pocket disbursements, advances or expenses incurred or made by it in connection with the performance of its duties under this Indenture.  Such expenses shall include the reasonable fees and expenses of the Trustee’s agents, counsel, accountants and experts.

The Company and the Guarantors, jointly, shall indemnify each of the Trustee (or any predecessor Trustee) and its agents, employees, stockholders, Affiliates and directors and officers for, and hold them each harmless against, any and all loss, liability, damage, claim or expense (including reasonable fees and expenses of counsel), including taxes (other than taxes

72

based on the income of the Trustee) incurred by any of them except for such actions to the extent caused by any negligence, bad faith or willful misconduct on their part, arising out of or in connection with the acceptance or administration of this trust including the reasonable costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their rights, powers or duties hereunder.  The Trustee shall notify the Company and the Guarantors promptly of any claim asserted against the Trustee for which it may seek indemnity, provided, however, that failure to so notify the Company and the Guarantors shall not release the Company and the Guarantors of its obligations hereunder unless and to the extent such failure results in the forfeiture by the Company and the Guarantors of substantial rights and defenses.  At the Trustee’s sole discretion, the Company and the Guarantors shall defend the claim and the Trustee shall cooperate and may participate in the defense; provided, however, that any settlement of a claim shall be approved in writing by the Trustee if such settlement would result in an admission of liability by the Trustee or if such settlement would not be accompanied by a full release of the Trustee for all liability arising out of the events giving rise to such claim.  Alternatively, the Trustee may at its option have separate counsel of its own choosing and the Company shall pay the reasonable fees and expenses of such counsel; provided that the Company will not be required to pay such fees and expenses if it assumes the Trustee’s defense and there is no conflict of interest between the Company and the Trustee in connection with such defense as reasonably determined by the Trustee.  The Company need not pay for any settlement made without its written consent, which consent will not be unreasonably withheld.  The Company need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its negligence, bad faith or willful misconduct.

To secure the Company and the Guarantors’ payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Notes on all assets or money held or collected by the Trustee, in its capacity as Trustee, except assets or money held in trust to pay principal of or premium, if any, or interest on particular Notes.

When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(6) or (7) occurs, such expenses and the compensation for such services are intended to constitute expenses of administration under any Bankruptcy Law.

The provisions of this Section 7.07 shall survive the termination of this Indenture.

SECTION 7.08.  Replacement of Trustee.  The Trustee may resign at any time by so notifying the Company in writing at least 30 days in advance of such resignation; provided, however, that no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.08.  The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee and appoint a successor Trustee with the Company’s consent, by so notifying the Company and the Trustee.  The Company may remove the Trustee if:

(1)the Trustee fails to comply with Section 7.10;

(2)the Trustee is adjudged bankrupt or insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

73

(3)a receiver or other public officer takes charge of the Trustee or its property; or

(4)the Trustee becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall notify each Holder of such event and shall promptly appoint a successor Trustee.  Within one year after the successor Trustee takes office, the Holders of a majority in aggregate principal amount of the outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company.  Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture.  The successor Trustee shall mail notice of such successor Trustee’s appointment to each Holder.

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in aggregate principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

Notwithstanding any resignation or replacement of the Trustee pursuant to this Section 7.08, the Company’s obligations under Section 7.07 shall continue for the benefit of the retiring Trustee.

SECTION 7.09.  Successor Trustee by Merger, Etc.  If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee; provided, however, that such corporation shall be otherwise qualified and eligible under this Article Seven.

SECTION 7.10.  Eligibility; Disqualification.  This Indenture shall always have a Trustee who satisfies the requirement of TIA Sections 310(a)(1), (2) and (5).  The Trustee (or, in the case of a Trustee that is a corporation included in a bank holding company system, the related bank holding company) shall have a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition, and have a Corporate Trust Office in the City of New York.  In addition, if the Trustee is a corporation included in a bank holding company system, the Trustee, independently of such bank holding company, shall meet the capital requirements of TIA Section 310(a)(2).  The Trustee shall comply with TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or

74

participation in other securities, of the Company are outstanding, if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met.

SECTION 7.11.  Preferential Collection of Claims Against the Company.  The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b).  A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.

ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE

SECTION 8.01.  Termination of Company’s Obligations.  This Indenture will be discharged and will cease to be of further effect (except as to surviving rights of registration of transfer or exchange of the Notes, as expressly provided for in this Indenture) as to all outstanding Notes when: (1) either (A) all Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation or (B) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable or have been called for redemption in accordance with this Indenture and the Company has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit (or to the date of redemption in the case of the Notes being called for redemption) together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (2) the Company has paid all other sums payable under this Indenture by the Company; and (3) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel stating that all conditions precedent under this Indenture relating to the satisfaction and discharge of this Indenture have been complied with; provided, however, that such counsel may rely, as to matters of fact, on a certificate or certificates of officers of the Company.

The Company may, at its option and at any time, elect to have its obligations and the obligations of the Guarantors discharged with respect to the outstanding Notes (“Legal Defeasance”).  Such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Debt represented by the outstanding Notes, and satisfied all of their obligations with respect to the Notes, except for (1) the rights of Holders to receive payments from a trust established by the Company in respect of the principal of, premium, if any, and interest on the Notes when such payments are due, (2) the Company’s obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payments, (3) the rights, powers, trust, duties and immunities of the Trustee and the Company’s obligations in connection therewith, and (4) the Legal Defeasance provisions of this Article Eight.  In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to covenants contained in Sections 4.04, 4.05, 4.06, 4.07, 4.08, 4.10 through 4.20 and Article Five (“Covenant Defeasance”) and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes.

75

In the event of Covenant Defeasance, those events described under Section 6.01 (except those events described in Section 6.01(1), (2), (6) and (7)) will no longer constitute an Event of Default with respect to the Notes.

In order to exercise either Legal Defeasance or Covenant Defeasance:

(1)the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders cash in U.S. dollars, non-callable U.S. government obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the Notes on the stated date for payment thereof or on the applicable Redemption Date, as the case may be;

(2)in the case of Legal Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3)in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4)(A) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or (B) in the case of Legal Defeasance, no Defaults or Events of Default under Section 6.01(6) or (7) shall have occurred, at any time in the period ending on the 123rd day after the date of deposit;

(5)the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under this Indenture or any other material agreement or instrument to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound;

(6)the Company shall have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others;

(7)the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to

76

the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with; and

(8)the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that creation of the defeasance trust does not violate the Investment Company Act of 1940, as amended, and, assuming that no Holder is an “insider” as that term is defined in the United States Bankruptcy Code, after the passage of 123 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law.

SECTION 8.02.  Application of Trust Money.  The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or U.S. Government Obligations deposited with it pursuant to Section 8.01, and shall apply the deposited U.S. Legal Tender and the money from U.S. Government Obligations in accordance with this Indenture to the payment of the principal of and interest on the Notes.  The Trustee shall be under no obligation to invest said U.S. Legal Tender or U.S. Government Obligations except as it may agree in writing with the Company.

The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Legal Tender or U.S. Government Obligations deposited pursuant to Section 8.01 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of outstanding Notes.

SECTION 8.03.  Repayment to the Company.  Subject to Section 8.01, the Trustee and the Paying Agent shall promptly pay to the Company upon request any excess U.S. Legal Tender or U.S. Government Obligations held by them at any time and thereupon shall be relieved from all liability with respect to such money.  The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for one year; provided, however, that the Trustee or such Paying Agent, before being required to make any payment, may at the expense of the Company cause to be published once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein which shall be no more than 30 days from the date of such publication or mailing any unclaimed balance of such money then remaining will be repaid to the Company.  After payment to the Company, Holders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another Person.

SECTION 8.04.  Reinstatement.  If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or U.S. Government Obligations in accordance with Section 8.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01 until such time as the Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in accordance with Section 8.01; provided, however, that if the Company has made any payment of interest on or principal of any Notes because of the reinstatement of their obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment

77

from the U.S. Legal Tender or U.S. Government Obligations held by the Trustee or Paying Agent.

SECTION 8.05.  Acknowledgment of Discharge by Trustee.  After the conditions of Section 8.01 have been satisfied, the Trustee upon request shall acknowledge in writing the discharge of the Company’s obligations under this Indenture except for those surviving obligations specified in Section 8.01; provided the legal counsel delivering such Opinion of Counsel may rely as to matters of fact on one or more Officers’ Certificates of the Company.

ARTICLE NINE
MODIFICATION OF THIS INDENTURE

SECTION 9.01.  Without Consent of Holders.  Notwithstanding Section 9.02, the Company, the Guarantors and the Trustee may amend, waive or supplement this Indenture without notice to or consent of any Holder:  (1) to cure any ambiguity, defect or inconsistency; (2) to comply with Article Five of this Indenture; (3) to provide for uncertificated Notes in addition to certificated Notes; (4) to comply with any requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA; (5) to make any change that would provide any additional benefit or rights to the Holders; (6) to make any other change that does not adversely affect in any material respect the rights of any Holder hereunder; or (7) in connection with the issuance of any Additional Notes, so long as in each case, such change does not, in the opinion of the Trustee, adversely affect the rights of any of the Holders in any material respect under this Indenture.  In formulating its opinion on such matters, the Trustee will be entitled to rely on such evidence as it deems appropriate, including, without limitation, solely on an Opinion of Counsel; provided, however, that in delivering such Opinion of Counsel, such counsel may rely as to matters of fact, on a certificate or certificates of officers of the Company.

SECTION 9.02.  With Consent of Holders.  All other modifications, waivers and amendments of this Indenture may be made with the consent of the Holders of a majority in principal amount of the then outstanding Notes, except that, without the consent of each Holder of the Notes affected thereby, no amendment or waiver may:  (1) reduce the amount of Notes whose Holders must consent to an amendment; (2) reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any Notes; (3) reduce the principal of or change or have the effect of changing the fixed maturity of any Notes, or change the date on which any Notes may be subject to redemption or repurchase, or reduce the redemption or repurchase price therefor; (4) make any Notes payable in money other than that stated in the Notes; (5) make any change in provisions of this Indenture protecting the right of each Holder to receive payment of principal of and interest on such Note on or after the due date thereof or to bring suit to enforce such payment, or permitting Holders of a majority in principal amount of Notes to waive Defaults or Events of Default; (6) amend, change or modify in any material respect the obligation of the Company to make and consummate a Change of Control Offer in the event a Change of Control has occurred or make and consummate a Net Proceeds Offer with respect to any Asset Sale that has been consummated, or, following the occurrence or consummation of a Change of Control or Asset Sale, modify any of the provisions or definitions with respect thereto; (7) modify or change any provision of this Indenture or the related definitions affecting the subordination or ranking of the Notes or any Guarantee in a manner which adversely affects the Holders; (8) release any Guarantor from any of its

78

obligations under its Guarantee or this Indenture otherwise than in accordance with the terms of this Indenture; or (9) amend, change or modify in any material respect any provision of this Indenture relating to an offer to redeem upon an Event of Failure.

After an amendment, supplement or waiver under this Section 9.02 becomes effective (as provided in Section 9.04), the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver.  Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver.

SECTION 9.03.  Compliance with TIA.  Every amendment, waiver or supplement of this Indenture or the Notes shall comply with the TIA as then in effect; provided, however, that this Section 9.03 shall not of itself require that this Indenture or the Trustee be qualified under the TIA or constitute any admission or acknowledgment by any party hereto that any such qualification is required prior to the time this Indenture and the Trustee are required by the TIA to be so qualified.

SECTION 9.04.  Revocation and Effect of Consents.  Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note.  Subject to the following paragraph, any such Holder or subsequent Holder may revoke the consent as to such Holder’s Note or portion of such Note by notice to the Trustee or the Company received before the date on which the Trustee receives an Officers’ Certificate certifying that the Holders of the requisite principal amount of Notes have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver.  An amendment, supplement or waiver becomes effective upon receipt by the Trustee of such Officers’ Certificate and evidence of consent by the Holders of the requisite percentage in principal amount of outstanding Notes.

The Company may, but shall not be obligated to, fix a Record Date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver, which Record Date shall be at least 30 days prior to the first solicitation of such consent.  If a Record Date is fixed, then notwithstanding the second sentence of the immediately preceding paragraph, those Persons who were Holders at such Record Date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such Record Date.  No such consent shall be valid or effective for more than 90 days after such Record Date unless consents from Holders of the requisite percentage in principal amount of outstanding Notes required hereunder for the effectiveness of such consents shall have also been given and not revoked within such 90 day period.

SECTION 9.05.  Notation on or Exchange of Notes.  If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder of such Note to deliver it to the Trustee.  The Trustee may place an appropriate notation on the Note about the changed terms and return it to the Holder.  Alternatively, if the Company or the Trustee

79

so determine, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms.

SECTION 9.06.  Trustee To Sign Amendments, Etc.  The Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article Nine; provided, however, that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee’s own rights, duties or immunities under this Indenture.  In executing such supplement or waiver the Trustee shall be entitled to receive indemnity reasonably satisfactory to it, and shall be fully protected in relying upon an Opinion of Counsel and an Officers’ Certificate of the Company, stating that no event of default shall occur as a result of such amendment, supplement or waiver and that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture; provided the legal counsel delivering such Opinion of Counsel may rely as to matters of fact on one or more Officers’ Certificates of the Company.  Such Opinion of Counsel shall not be an expense of the Trustee.

ARTICLE TEN
SUBORDINATION

SECTION 10.01.  Notes Subordinated to Senior Debt.  The Company covenants and agrees, and each Holder of the Notes, by its acceptance thereof, likewise covenants and agrees, that all Notes shall be issued subject to the provisions of this Article Ten; and each Person holding any Note, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees that the payment of all Obligations on the Notes by the Company shall, to the extent and in the manner herein set forth, be subordinated and junior in right of payment to the prior payment in full in cash or in Cash Equivalents (other than clause (7) in the definition of “Cash Equivalents” in Section 1.01) of all Obligations on Senior Debt, including, without limitation, the Company’s obligations under the Credit Agreement; provided that the subordination is for the benefit of, and shall be enforceable directly by, the holders of Senior Debt, and that each holder of Senior Debt whether now outstanding or hereafter created, incurred, assumed or guaranteed shall be deemed to have acquired Senior Debt in reliance upon the covenants and provisions contained in this Indenture and the Notes; provided, further that the Company’s obligations under the Notes shall not be subordinated to, and shall rank pari passu with, the Company’s obligations under the Existing Notes.

SECTION 10.02.  Suspension of Payment When Senior Debt Is in Default.

(1)  If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees or commissions with respect to, any Senior Debt, no payment or distribution of any kind or character shall be made by or on behalf of the Company or any other Person on its or their behalf with respect to any Obligations on the Notes or to acquire any of the Notes for cash or property or otherwise.  In addition, if any other event of default occurs and is continuing with respect to any Designated Senior Debt, as such event of default is defined in the instrument creating or evidencing such Designated Senior Debt, permitting the holders of such Designated Senior Debt then outstanding to accelerate the maturity thereof and if the Representative for the respective

80

issue of Designated Senior Debt gives written notice of the event of default to the Trustee (a “Default Notice”), then, unless and until all events of default have been cured or waived or have ceased to exist or the Trustee receives notice thereof from the Representative for the respective issue of Designated Senior Debt terminating the Blockage Period (as defined in this Section 10.02), during the 180 days after the delivery of such Default Notice (the “Blockage Period”), neither the Company nor any other Person on its behalf shall: (A) make any payment or distribution of any kind or character with respect to any Obligations on the Notes, or (B) acquire any of the Notes for cash or property or otherwise.  Notwithstanding anything herein to the contrary, in no event will a Blockage Period extend beyond 180 days from the date the payment on the Notes was due and only one such Blockage Period may be commenced within any 360 consecutive days.  No event of default which existed or was continuing on the date of the commencement of any Blockage Period with respect to the Designated Senior Debt shall be, or be made, the basis for commencement of a second Blockage Period by the Representative of such Designated Senior Debt whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of commencement of such Blockage Period that, in either case, would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose).  Notwithstanding any of the provisions of this Article 10, the Company shall be allowed to make, and make payments related to, the Special Redemption Offer pursuant to Section 4.23.

(2)  In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by Section 10.02(1), such payment shall be held for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear.  The Trustee shall be entitled to rely on information regarding amounts then due and owing on the Senior Debt, if any, received from the holders of such Senior Debt (or their Representatives) or, if such information is not received from such holders or their Representatives after written request therefor, from the Company and only amounts included in the information provided to the Trustee shall be paid to the holders of Senior Debt.

Nothing contained in this Article Ten shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder; provided that all Senior Debt thereafter due or declared to be due shall first be paid in full in cash or in Cash Equivalents (other than clause (7) in the definition of “Cash Equivalents” in Section 1.01) before the Holders are entitled to receive any payment of any kind or character with respect to Obligations on the Notes.

SECTION 10.03.  Notes Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company.

(1)  Upon any direct or indirect payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any

81

liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of the Company or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Company or its property, whether voluntary or involuntary, all Obligations due or to become due upon all Senior Debt shall first be paid in full in cash or in Cash Equivalents (other than clause (7) in the definition of “Cash Equivalents” in Section 1.01), or such payment duly provided for to the satisfaction of the holders of Senior Debt, before any payment or distribution of any kind or character is made on account of any Obligations on the Notes, or for the acquisition, repurchase, redemption or defeasance of any of the Notes for cash or property or otherwise.  Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any direct or indirect payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Notes or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them, directly to the holders of Senior Debt (pro rata to such holders on the basis of the respective amounts of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or in Cash Equivalents (other than clause (7) in the definition of “Cash Equivalents” in Section 1.01), after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt.

(2)  To the extent any payment of Senior Debt (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment has not occurred.

(3)  In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 10.03(3), such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or in Cash Equivalents (other than clause (7) in the definition of “Cash Equivalents” in Section 1.01), after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt.

(4)  The consolidation of the Company with, or the merger of the Company with or into, another corporation or the liquidation or dissolution of the Company following the

82

conveyance or transfer of all or substantially all of its assets, to another corporation upon the terms and conditions provided in Article Five hereof and as long as permitted under the terms of the Senior Debt shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 10.03 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, assume the Company’s obligations hereunder in accordance with Article Five hereof.

SECTION 10.04.  Holders To Be Subrogated to Rights of Holders of Senior Debt.  Subject to the payment in full in cash or in Cash Equivalents (other than clause (7) in the definition of “Cash Equivalents” in Section 1.01) of all Senior Debt, the Holders of the Notes shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Debt until the Notes shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of the Senior Debt by or on behalf of the Company or by or on behalf of the Holders by virtue of this Article Ten which otherwise would have been made to the Holders shall, as between the Company and the Holders of the Notes, be deemed to be a payment by the Company to or on account of the Senior Debt, it being understood that the provisions of this Article Ten are and are intended solely for the purpose of defining the relative rights of the Holders of the Notes, on the one hand, and the holders of the Senior Debt, on the other hand.

Each Holder by purchasing or accepting a Note waives any and all notice of the creation, modification, renewal, extension or accrual of any Senior Debt of the Company and notice of or proof of reliance by any holder or owner of Senior Debt of the Company upon this Article Ten and the Senior Debt of the Company shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Article Ten, and all dealings between the Company and the holders and owners of the Senior Debt of the Company shall be deemed to have been consummated in reliance upon this Article Ten.

SECTION 10.05.  Obligations of the Company Unconditional.  Nothing contained in this Article Ten or elsewhere in this Indenture or in the Notes is intended to or shall impair, as between the Company and the Holders, the obligation of the Company, which is absolute and unconditional, to pay to the Holders the principal of and interest on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Company other than the holders of the Senior Debt, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Ten of the holders of Senior Debt in respect of cash, property or Notes of the Company received upon the exercise of any such remedy.  Upon any payment or distribution of assets or securities of the Company referred to in this Article Ten, the Trustee, subject to the provisions of Sections 7.01 and 7.02, and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any liquidation, dissolution, winding-up or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidating trustee or agent or other Person making any payment or distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Ten.

83

Nothing in this Article Ten shall apply to the claims of, or payments to, the Trustee under or pursuant to Section 7.07.

The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Debt (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Senior Debt or a trustee or representative on behalf of any such holder.

In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article Ten, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Ten, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.

SECTION 10.06.  Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice.  The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Notes pursuant to the provisions of this Article Ten.  Regardless of anything to the contrary contained in this Article Ten or elsewhere in this Indenture, the Trustee shall not be charged with knowledge of the existence of any default or event of default with respect to any Senior Debt or of any other facts which would prohibit the making of any payment to or by the Trustee unless and until the Trustee shall have received notice in writing from the Company, or from a holder of Senior Debt or a Representative therefor, together with proof satisfactory to the Trustee of such holding of Senior Debt or of the authority of such Representative, and, prior to the receipt of any such written notice, the Trustee shall be entitled to assume (in the absence of actual knowledge to the contrary) that no such facts exist.

SECTION 10.07.  Application by Trustee of Assets Deposited with It.  U.S. Legal Tender or U.S. Government Obligations deposited in trust with the Trustee pursuant to and in accordance with Sections 8.01 and 8.02 shall be for the sole benefit of the Holders of the Notes and, to the extent allocated for the payment of Notes, shall not from and after the time of such deposit be subject to the subordination provisions of this Article Ten.  Otherwise, any deposit of assets or securities by or on behalf of the Company with the Trustee or any Paying Agent (whether or not in trust) for the payment of principal of or interest on any Notes shall be subject to the provisions of this Article Ten; provided, however, that if prior to the second Business Day preceding the date on which by the terms of this Indenture any such assets may become distributable for any purpose (including, without limitation, the payment of either principal of or interest on any Note) the Trustee or such Paying Agent shall not have received with respect to such assets any notice provided for in Section 10.06, then the Trustee or such Paying Agent shall have full power and authority to receive such assets and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary received by it on or after such date.  The foregoing shall not apply to the Paying Agent if the Company or any Subsidiary or Affiliate of the Company is acting as Paying Agent.  Nothing contained in this

84

Section 10.07 shall limit the right of the holders of Senior Debt to recover payments as contemplated by this Article Ten.

SECTION 10.08.  No Waiver of Subordination Provisions.

(1)  No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with.

(2)  Without limiting the generality of subsection (1) of this Section 10.08, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Notes, without incurring responsibility to the Holders of the Notes and without impairing or releasing the subordination provided in this Article Ten or the obligations hereunder of the Holders of the Notes to the holders of Senior Debt, do any one or more of the following:  (A) change the manner, place, terms or time of payment of, or renew, refinance, replace or alter, Senior Debt or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (B) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (C) release any Person liable in any manner for the collection or payment of Senior Debt; and (D) exercise or refrain from exercising any rights against the Company and any other Person.

SECTION 10.09.  Holders Authorize Trustee To Effectuate Subordination of Notes.  Each Holder of the Notes by such Holder’s acceptance thereof authorizes and expressly directs the Trustee on his behalf to take such action as may be necessary or appropriate to effect the subordination provisions contained in this Article Ten, and appoints the Trustee such Holder’s attorney-in-fact for such purpose, including, in the event of any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of the Company tending towards liquidation or reorganization of the business and assets of the Company, the immediate filing of a claim for the unpaid balance of such Holder’s Notes in the form required in said proceedings and cause said claim to be approved.  If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then any of the holders of the Senior Debt or their Representative is hereby authorized to file an appropriate claim for and on behalf of the Holders of said Notes.  Nothing herein contained shall be deemed to authorize the Trustee or the holders of Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee or the holders of Senior Debt or their Representative to vote in respect of the claim of any Holder in any such proceeding.

SECTION 10.10.  Right of Trustee to Hold Senior Debt.  The Trustee and any agent of the Company or the Trustee shall be entitled to all the rights set forth in this Article Ten with respect to any Senior Debt which may at any time be held by it in its individual or any other

85

capacity to the same extent as any other holder of Senior Debt and nothing in this Indenture shall deprive the Trustee or any such agent of any of its rights as such holder.

Whenever a distribution is to be made or a notice given to holders or owners of Senior Debt, the distribution may be made and the notice may be given to their Representative, if any.

SECTION 10.11.  This Article Ten Not To Prevent Events of Default.  The failure to make a payment on account of principal of or interest on the Notes by reason of any provision of this Article Ten will not be construed as preventing the occurrence of an Event of Default.

Nothing contained in this Article Ten shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Article Six or to pursue any rights or remedies hereunder or under applicable law, subject to the rights, if any, under this Article Ten of the holders, from time to time, of Senior Debt.

SECTION 10.12.  No Fiduciary Duty of Trustee to Holders of Senior Debt.  The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and it undertakes to perform or observe such of its covenants and obligations as are specifically set forth in this Article Ten, and no implied covenants or obligations with respect to the Senior Debt shall be read into this Indenture against the Trustee.  The Trustee shall not be liable to any such holders (other than for its willful misconduct or gross negligence) if it shall pay over or deliver to the Holders of Notes or the Company or any other Person money or assets in compliance with the terms of this Indenture.  Nothing in this Section 10.12 shall affect the obligation of any Person other than the Trustee to hold such payment for the benefit of, and to pay such payment over to, the holders of Senior Debt or their Representative.

ARTICLE ELEVEN
GUARANTEE OF NOTES

SECTION 11.01.  Unconditional Guarantee.  Subject to the provisions of this Article Twelve, each Guarantor, if any, hereby, jointly and severally, unconditionally and irrevocably guarantees, on a senior subordinated basis (such guarantee to be referred to herein as a “Guarantee”) to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the Notes or the obligations of the Company hereunder or thereunder, that:  (1) the principal of, premium, if any, and interest on the Notes (and any Additional Interest payable thereon) shall be duly and punctually paid in full when due, whether at maturity, upon redemption at the option of Holders pursuant to the provisions of the Notes relating thereto, by acceleration or otherwise, and interest on the overdue principal and (to the extent permitted by law) interest, if any, on the Notes and all other obligations of the Company or the Guarantors to the Holders or the Trustee hereunder or thereunder (including amounts due the Trustee under Section 7.07) and all other obligations shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (2) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration or otherwise.  Failing payment when due of any amount so guaranteed, or failing performance of any other obligation of the Company to the

86

Holders under this Indenture or under the Notes, for whatever reason, each Guarantor shall be obligated to pay, or to perform or cause the performance of, the same immediately.  An Event of Default under this Indenture or the Notes shall constitute an event of default under this Guarantee, and shall entitle the Holders of Notes to accelerate the obligations of the Guarantors hereunder in the same manner and to the same extent as the obligations of the Company.

Each of the Guarantors hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, any release of any other Guarantor, the recovery of any judgment against the Company, any action to enforce the same, whether or not a Guarantee is affixed to any particular Note, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor.  Each of the Guarantors hereby waives the benefit of diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that its Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes, this Indenture and this Guarantee.  This Guarantee is a guarantee of payment and not of collection.  If any Holder or the Trustee is required by any court or otherwise to return to the Company or to any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or such Guarantor, any amount paid by the Company or such Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.  Each Guarantor further agrees that, as between it, on the one hand, and the Holders of Notes and the Trustee, on the other hand, (1) subject to this Article Eleven, the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any acceleration of such obligations as provided in Article Six hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee.

No stockholder, officer, director, employee or incorporator, past, present or future, of any Guarantor, as such, shall have any personal liability under this Guarantee by reason of his, her or its status as such stockholder, officer, director, employee or incorporator.

Each Guarantor that makes a payment or distribution under its Guarantee shall be entitled to a contribution from each other Guarantor in an amount pro rata, based on the net assets of each Guarantor, determined in accordance with GAAP.

SECTION 11.02.  Limitations on Guarantees.  The obligations of each Guarantor under its Guarantee will be limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under this Indenture, will result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law.

87

SECTION 11.03.  Execution and Delivery of Guarantee.  To further evidence the Guarantee set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Guarantee, substantially in the form of Exhibit F hereto, shall be endorsed on each Note authenticated and delivered by the Trustee.  Such Guarantee shall be executed on behalf of each Guarantor by either manual or facsimile signature of one Officer of each Guarantor, each of whom, in each case, shall have been duly authorized to so execute by all requisite corporate action.  The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Note.

Each of the Guarantors hereby agrees that its Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee.

If an Officer of a Guarantor whose signature is on this Indenture or a Guarantee no longer holds that office at the time the Trustee authenticates the Note on which such Guarantee is endorsed or at any time thereafter, such Guarantor’s Guarantee of such Note shall be valid nevertheless.

The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Guarantee set forth in this Indenture on behalf of each Guarantor.

SECTION 11.04.  Release of a Guarantor.

(1)  If no Default exists or would exist under this Indenture, upon the sale or disposition of all of the Capital Stock of a Guarantor by the Company or one or more Restricted Subsidiaries of the Company, or upon the consolidation or merger of a Guarantor with or into any Person in compliance with Article Five (in each case, other than to the Company or a Wholly Owned Restricted Subsidiary), or if any Guarantor is dissolved or liquidated in accordance with this Indenture, or if a Guarantor is designated an Unrestricted Subsidiary in accordance with Section 4.14, such Guarantor and each Subsidiary of such Guarantor that is also a Guarantor shall be automatically and unconditionally released from all obligations under this Article Eleven without any further action required on the part of the Trustee or any Holder; provided, however, that each such Guarantor is sold or disposed of in accordance with this Indenture.  Any Guarantor not so released or the entity surviving such Guarantor, as applicable, shall remain or be liable under its Guarantee as provided in this Article Eleven.

(2)  The Trustee shall deliver an appropriate instrument evidencing the release of a Guarantor upon receipt of a request by the Company or such Guarantor accompanied by an Officers’ Certificate and an Opinion of Counsel certifying as to the compliance with this Section 11.04, provided the legal counsel delivering such Opinion of Counsel may rely as to matters of fact on one or more Officers’ Certificates.

The Trustee shall execute any documents reasonably requested by the Company or a Guarantor in order to evidence the release of such Guarantor from its obligations under its Guarantee endorsed on the Notes and under this Article Eleven.

88

Except as set forth in Articles Four and Five and this Section 11.04, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor.

SECTION 11.05.  Waiver of Subrogation.  Until this Indenture is discharged and all of the Notes are discharged and paid in full, each Guarantor hereby irrevocably waives and agrees not to exercise any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of the Company’s obligations under the Notes or this Indenture and such Guarantor’s obligations under this Guarantee and this Indenture, in any such instance including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy of the Holders against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights.  If any amount shall be paid to any Guarantor in violation of the preceding sentence and any amounts owing to the Trustee or the Holders of Notes under the Notes, this Indenture, or any other document or instrument delivered under or in connection with such agreements or instruments, shall not have been paid in full, such amount shall have been deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Trustee or the Holders and shall forthwith be paid to the Trustee for the benefit of itself or such Holders to be credited and applied to the obligations in favor of the Trustee or the Holders, as the case may be, whether matured or unmatured, in accordance with the terms of this Indenture.  Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 11.05 is knowingly made in contemplation of such benefits.

SECTION 11.06.  No Set-Off.  Each payment to be made by a Guarantor hereunder in respect of the Obligations shall be payable in the currency or currencies in which such Obligations are denominated, and shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.

SECTION 11.07.  Obligations Absolute.  The obligations of each Guarantor hereunder are and shall be absolute and unconditional and any monies or amounts expressed to be owing or payable by each Guarantor hereunder which may not be recoverable from such Guarantor on the basis of a Guarantee shall be recoverable from such Guarantor as a primary obligor and principal debtor in respect thereof.

SECTION 11.08.  Obligations Continuing.  The obligations of each Guarantor hereunder shall be continuing and shall remain in full force and effect until all the obligations have been paid and satisfied in full.  Each Guarantor agrees with the Trustee that, if requested, it will from time to time deliver to the Trustee suitable acknowledgments of this continued liability hereunder and under any other instrument or instruments in such form as counsel to the Trustee may advise and as will prevent any action brought against it in respect of any default hereunder being barred by any statute of limitations now or hereafter in force and, in the event of the failure

89

of a Guarantor so to do, it hereby irrevocably appoints the Trustee the attorney and agent of such Guarantor to make, execute and deliver such written acknowledgment or acknowledgments or other instruments as may from time to time become necessary or advisable, in the judgment of the Trustee on the advice of counsel, to fully maintain and keep in force the liability of such Guarantor hereunder.

SECTION 11.09.  Obligations Not Reduced.  The obligations of each Guarantor hereunder shall not be satisfied, reduced or discharged solely by the payment of such principal, premium, if any, interest, fees and other monies or amounts as may at any time prior to discharge of this Indenture pursuant to Article Eight be or become owing or payable under or by virtue of or otherwise in connection with the Notes or this Indenture.

SECTION 11.10.  Obligations Reinstated.  The obligations of each Guarantor hereunder shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment which would otherwise have reduced the obligations of any Guarantor hereunder (whether such payment shall have been made by or on behalf of the Company or by or on behalf of a Guarantor) is rescinded or reclaimed from any of the Holders upon the insolvency, bankruptcy, liquidation or reorganization of the Company or any Guarantor or otherwise, all as though such payment had not been made.  If demand for, or acceleration of the time for, payment by the Company is stayed upon the insolvency, bankruptcy, liquidation or reorganization of the Company, all such Indebtedness otherwise subject to demand for payment or acceleration shall nonetheless be payable by each Guarantor as provided herein.

SECTION 11.11.  Obligations Not Affected.  The obligations of each Guarantor hereunder shall not be affected, impaired or diminished in any way by any act, omission, matter or thing whatsoever, occurring before, upon or after any demand for payment hereunder (and whether or not known or consented to by any Guarantor or any of the Holders) which, but for this provision, might constitute a whole or partial defense to a claim against any Guarantor hereunder or might operate to release or otherwise exonerate any Guarantor from any of its obligations hereunder or otherwise affect such obligations, whether occasioned by default of any of the Holders or otherwise, including, without limitation:

(1)  any limitation of status or power, disability, incapacity or other circumstance relating to the Company or any other person, including any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, winding up or other proceeding involving or affecting the Company or any other person;

(2)  any irregularity, defect, unenforceability or invalidity in respect of any Indebtedness or other obligation of the Company or any other person under this Indenture, the Notes or any other document or instrument;

(3)  any failure of the Company, whether or not without fault on its part, to perform or comply with any of the provisions of this Indenture or the Notes, or to give notice thereof to a Guarantor;

90

(4)  the taking or enforcing or exercising or the refusal or neglect to take or enforce or exercise any right or remedy from or against the Company or any other Person or their respective assets or the release or discharge of any such right or remedy;

(5)  the granting of time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Company or any other Person;

(6)  any change in the time, manner or place of payment of, or in any other term of, any of the Notes, or any other amendment, variation, supplement, replacement or waiver of, or any consent to departure from, any of the Notes or this Indenture, including, without limitation, any increase or decrease in the principal amount of or premium, if any, or interest on any of the Notes;

(7)  any change in the ownership, control, name, objects, businesses, assets, capital structure or constitution of the Company or a Guarantor;

(8)  any merger or amalgamation of the Company or a Guarantor with any Person or Persons;

(9)  the occurrence of any change in the laws, rules, regulations or ordinances of any jurisdiction by any present or future action of any governmental authority or court amending, varying, reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise affect, any of the Obligations or the obligations of a Guarantor under its Guarantee; and

(10)  any other circumstance (other than by complete, irrevocable payment or a release made pursuant to Section 11.04) that might otherwise constitute a legal or equitable discharge or defense of the Company under this Indenture or the Notes or of a Guarantor in respect of its Guarantee hereunder.

SECTION 11.12.  Waiver.  Without in any way limiting the provisions of Section 11.01 hereof, each Guarantor hereby waives notice of acceptance hereof, notice of any liability of any Guarantor hereunder, notice or proof of reliance by the Holders upon the obligations of any Guarantor hereunder, and diligence, presentment, demand for payment on the Company, protest, notice of dishonor or non-payment of any of the Obligations, or other notice or formalities to the Company or any Guarantor of any kind whatsoever.

SECTION 11.13.  No Obligation To Take Action Against the Company.  Neither the Trustee nor any other Person shall have any obligation to enforce or exhaust any rights or remedies or to take any other steps under any security for the Obligations or against the Company or any other Person or any Property of the Company or any other Person before the Trustee is entitled to demand payment and performance by any or all Guarantors of their liabilities and obligations under their Guarantees or under this Indenture.

SECTION 11.14.  Dealing with the Company and Others.  The Holders, without releasing, discharging, limiting or otherwise affecting in whole or in part the obligations and liabilities of any Guarantor hereunder and without the consent of or notice to any Guarantor, may

91

(1)  grant time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Company or any other Person;

(2)  take or abstain from taking security or collateral from the Company or from perfecting security or collateral of the Company;

(3)  release, discharge, compromise, realize, enforce or otherwise deal with or do any act or thing in respect of (with or without consideration) any and all collateral, mortgages or other security given by the Company or any third party with respect to the obligations or matters contemplated by this Indenture or the Notes;

(4)  accept compromises or arrangements from the Company;

(5)  apply all monies at any time received from the Company or from any security upon such part of the Obligations as the Holders may see fit or change any such application in whole or in part from time to time as the Holders may see fit; and

(6)  otherwise deal with, or waive or modify their right to deal with, the Company and all other Persons and any security as the Holders or the Trustee may see fit.

SECTION 11.15.  Default and Enforcement.  If any Guarantor fails to pay in accordance with Section 11.01 hereof, the Trustee may proceed in its name as trustee hereunder in the enforcement of the Guarantee of any such Guarantor and such Guarantor’s obligations thereunder and hereunder by any remedy provided by law, whether by legal proceedings or otherwise, and to recover from such Guarantor the obligations.

SECTION 11.16.  Amendment, Etc.  No amendment, modification or waiver of any provision of this Indenture relating to any Guarantor or consent to any departure by any Guarantor or any other Person from any such provision will in any event be effective unless it is signed by such Guarantor and the Trustee.

SECTION 11.17.  Acknowledgment.  Each Guarantor hereby acknowledges communication of the terms of this Indenture and the Notes and consents to and approves of the same.

SECTION 11.18.  Costs and Expenses.  Each Guarantor shall pay on demand by the Trustee any and all costs, fees and expenses (including, without limitation, legal fees on a solicitor and client basis) incurred by the Trustee, its agents, advisors and counsel or any of the Holders in enforcing any of their rights under any Guarantee in the same manner as the Company shall be requested to pay the Trustee’s fees.

SECTION 11.19.  No Merger or Waiver; Cumulative Remedies.  No Guarantee shall operate by way of merger of any of the obligations of a Guarantor under any other agreement, including, without limitation, this Indenture.  No failure to exercise and no delay in exercising, on the part of the Trustee or the Holders, any right, remedy, power or privilege hereunder or under this Indenture or the Notes, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under this Indenture or the Notes preclude any other or further exercise thereof or the exercise of any other

92

right, remedy, power or privilege.  The rights, remedies, powers and privileges in the Guarantee and under this Indenture, the Notes and any other document or instrument between a Guarantor and/or the Company and the Trustee are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

SECTION 11.20.  Survival of Obligations.  Without prejudice to the survival of any of the other obligations of each Guarantor hereunder, the obligations of each Guarantor under Section 11.01 shall survive the payment in full of the Obligations and shall be enforceable against such Guarantor without regard to and without giving effect to any defense, right of offset or counterclaim available to or which may be asserted by the Company or any Guarantor.

SECTION 11.21.  Guarantee in Addition to Other Obligations.  The obligations of each Guarantor under its Guarantee and this Indenture are in addition to and not in substitution for any other obligations to the Trustee or to any of the Holders in relation to this Indenture or the Notes and any guarantees or security at any time held by or for the benefit of any of them.

SECTION 11.22.  Severability.  Any provision of this Article Eleven which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction unless its removal would substantially defeat the basic intent, spirit and purpose of this Indenture and this Article Eleven.

SECTION 11.23.  Successors and Assigns.  Each Guarantee shall be binding upon and inure to the benefit of each Guarantor and the Trustee and the other Holders and their respective successors and permitted assigns, except that no Guarantor may assign any of its obligations hereunder or thereunder.

ARTICLE TWELVE
SUBORDINATION OF GUARANTEE

SECTION 12.01.  Obligations of Guarantors Subordinated to Guarantor Senior Debt.  Anything herein to the contrary notwithstanding, each of the Guarantors, for itself and its successors, and each Holder, by his or her acceptance of Guarantees, agrees that the payment of all Obligations owing to the Holders in respect of its Guarantee (collectively, as to any Guarantor, its “Guarantee Obligations”) is subordinated, to the extent and in the manner provided in this Article Twelve, to the prior payment in full in cash or in Cash Equivalents (other than clause (7) of the definition of “Cash Equivalents” in Section 1.01), or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Debt, of all Obligations on Guarantor Senior Debt of such Guarantor, including without limitation, the Guarantors’ obligations under the Credit Agreement; that the subordination is for the benefit of, and shall be enforceable directly by, any holder of Guarantor Senior Debt, and that each holder of Guarantor Senior Debt whether now outstanding or hereafter created, incurred, assumed or guaranteed shall be deemed to have acquired Guarantor Senior Debt in reliance upon the covenants and provisions contained in this Indenture and the Notes; provided that the Guarantee Obligations of each Guarantor will rank on a pari passu basis with any guarantees on the Existing Notes.

93

This Article Twelve shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Guarantor Senior Debt, and such provisions are made for the benefit of the holders of Guarantor Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions.

SECTION 12.02.  Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default.

(1)  If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal or interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees or commissions with respect to, any Guarantor Senior Debt of a Guarantor or guaranteed by a Guarantor, no payment or distribution of any kind or character shall be made by or on behalf of such Guarantor or any other Person on its or their behalf with respect to any Obligations on the Notes or to acquire, repurchase, redeem or defease any of the Notes for cash or property or otherwise.  In addition, if any other event of default occurs and is continuing with respect to any Designated Guarantor Senior Debt of any Guarantor, as such event of default is defined in the instrument creating or evidencing such Designated Guarantor Senior Debt, permitting the holders of such Designated Guarantor Senior Debt then outstanding to accelerate the maturity thereof and if the Representative for the respective issue of Designated Guarantor Senior Debt gives a Default Notice, then, unless and until all events of default have been cured or waived or have ceased to exist or the Trustee receives notice from the Representative for the respective issue of Designated Guarantor Senior Debt terminating the Blockage Period, during the Blockage Period, neither said Guarantor nor any other Person on its behalf shall (A) make any payment or distribution of any kind or character with respect to any Obligations on the Notes or (B) acquire, repurchase, redeem or defease any of the Notes for cash or property or otherwise.  Notwithstanding anything herein to the contrary, in no event will a Blockage Period extend beyond 180 days from the date the payment on the Notes was due and only one such Blockage Period may be commenced within any 360 consecutive days.  No event of default which existed or was continuing on the date of the commencement of any Blockage Period with respect to the Designated Guarantor Senior Debt shall be, or be made, the basis for commencement of a second Blockage Period by the Representative of such Designated Guarantor Senior Debt whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of commencement of such Blockage Period, that in either case, would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose).

(2)  In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder from such Guarantor when such payment is prohibited by Section 12.02(1), such payment shall be held for the benefit of, and shall be paid over or delivered to, the holders of Guarantor Senior Debt with respect to such Guarantor (pro rata to such holders on the basis of the respective amount of such Guarantor Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear.  The Trustee shall be entitled to rely on information regarding amounts then due and owing on the Guarantor Senior Debt, if any, received from the holders of such Guarantor Senior Debt (or their

94

Representatives) or, if such information is not received from such holders or their Representatives after written request therefor, from the Company and only amounts included in the information provided to the Trustee shall be paid to the holders of such Guarantor Senior Debt.

Nothing contained in this Article Twelve shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder; provided that all Guarantor Senior Debt thereafter due or declared to be due shall first be paid in full in cash or Cash Equivalents (other than clause (7) in the definition of “Cash Equivalents” in Section 1.01) before the Holders are entitled to receive any payment of any kind or character with respect to Obligations on the Notes.

SECTION 12.03.  Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Debt on Dissolution, Liquidation or Reorganization of Such Guarantor.

(1)  Upon any direct or indirect payment or distribution of assets of any Guarantor of any kind or character, whether in cash, property or securities, to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of such Guarantor or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to such Guarantor or its property, whether voluntary or involuntary, all Obligations due or to become due upon all Guarantor Senior Debt shall first be paid in full in cash or in Cash Equivalents (other than clause (7) in the definition of “Cash Equivalents” in Section 1.01), or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Debt, before any payment or distribution of any kind or character is made on account of any Obligations on the Guarantee of such Guarantor, or for the acquisition, repurchase, redemption or defeasance of the Guarantee of such Guarantor for cash or property or otherwise.  Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any direct or indirect payment or distribution of assets of such Guarantor of any kind or character, whether in cash, property or securities, to which the Holders of the Guarantee of such Guarantor or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them, directly to the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective amounts of Guarantor Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Guarantor Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Guarantor Senior Debt remaining unpaid until all such Guarantor Senior Debt has been paid in full in cash or in Cash Equivalents (other than clause (7) in the definition of “Cash Equivalents” in Section 1.01) after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Guarantor Senior Debt.

(2)  To the extent any payment of Guarantor Senior Debt (whether by or on behalf of any Guarantor, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is

95

recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Guarantor Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment has not occurred.

(3)  In the event that, notwithstanding the foregoing, any payment or distribution of assets of any Guarantor of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 12.03(3), such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective amount of Guarantor Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Guarantor Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Guarantor Senior Debt remaining unpaid until all such Guarantor Senior Debt has been paid in full in cash or in Cash Equivalents (other than clause (7) in the definition of “Cash Equivalents” in Section 1.01), after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Guarantor Senior Debt.

(4)  The consolidation of any Guarantor with, or the merger of any Guarantor with or into, another corporation or the liquidation or dissolution of any Guarantor following the conveyance or transfer of all or substantially all of its assets, to another corporation upon the terms and conditions provided in Article Five hereof and as long as permitted under the terms of the Guarantor Senior Debt shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, assume such Guarantor’s obligations hereunder in accordance with Article Five hereof.

SECTION 12.04.  Holders of Guarantee Obligations To Be Subrogated to Rights of Holders of Guarantor Senior Debt.  Subject to the payment in full in cash or Cash Equivalents (other than clause (7) in the definition of “Cash Equivalents” in Section 1.01), or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Debt, of all Guarantor Senior Debt, the Holders of Guarantee Obligations of a Guarantor shall be subrogated to the rights of the holders of Guarantor Senior Debt of such Guarantor to receive payments or distributions of assets of such Guarantor applicable to such Guarantor Senior Debt until all amounts owing on or in respect of the Guarantee Obligations shall be paid in full in cash or Cash Equivalents (other than clause (7) in the definition of “Cash Equivalents” in Section 1.01), and for the purpose of such subrogation no payments or distributions to the holders of such Guarantor Senior Debt by or on behalf of such Guarantor, or by or on behalf of the Holders by virtue of this Article Twelve, which otherwise would have been made to the Holders shall, as between such Guarantor and the Holders, be deemed to be payment by such Guarantor to or on account of such Guarantor Senior Debt, it being understood that the provisions of this Article Twelve are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of such Guarantor Senior Debt, on the other hand.

If any payment or distribution to which the Holders would otherwise have been entitled but for the provisions of this Article Twelve shall have been applied, pursuant to the provisions of this Article Twelve, to the payment of all amounts payable under such Guarantor Senior Debt, then the Holders shall be entitled to receive from the holders of such Guarantor

96

Senior Debt any such payments or distributions received by such holders of such Guarantor Senior Debt in excess of the amount sufficient to pay all amounts payable under or in respect of such Guarantor Senior Debt in full in cash or Cash Equivalents (other than clause (7) in the definition of “Cash Equivalents” in Section 1.01), or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Debt.

Each Holder by purchasing or accepting a Note waives any and all notice of the creation, modification, renewal, extension or accrual of any Guarantor Senior Debt of the Guarantors and notice of or proof of reliance by any holder or owner of Guarantor Senior Debt of the Guarantors upon this Article Twelve and the Guarantor Senior Debt of the Guarantors shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Article Twelve, and all dealings between the Guarantors and the holders and owners of the Guarantor Senior Debt of the Guarantors shall be deemed to have been consummated in reliance upon this Article Twelve.

SECTION 12.05.  Obligations of the Guarantors Unconditional.  Nothing contained in this Article Twelve or elsewhere in this Indenture or in the Guarantees is intended to or shall impair, as between the Guarantors and the Holders, the obligation of the Guarantors, which is absolute and unconditional, to pay to the Holders all amounts due and payable under the Guarantees as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Guarantors other than the holders of the Guarantor Senior Debt, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Twelve, of the holders of Guarantor Senior Debt in respect of cash, property or securities of the Guarantors received upon the exercise of any such remedy.  Upon any payment or distribution of assets of any Guarantor referred to in this Article Twelve, the Trustee, subject to the provisions of Sections 7.01 and 7.02, and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any liquidation, dissolution, winding-up or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidating trustee or agent or other Person making any payment or distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Guarantor Senior Debt and other Indebtedness of any Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Twelve.  Nothing in this Article Twelve shall apply to the claims of, or payments to, the Trustee under or pursuant to Section 7.07.  The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Guarantor Senior Debt (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Guarantor Senior Debt or a trustee or representative on behalf of any such holder.

In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Guarantor Senior Debt to participate in any payment or distribution pursuant to this Article Twelve, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Guarantor Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this

97

Article Twelve, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.

SECTION 12.06.  Trustee Entitled To Assume Payments Not Prohibited in Absence of Notice.  The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Notes pursuant to the provisions of this Article Twelve.  Regardless of anything to the contrary contained in this Article Twelve or elsewhere in this Indenture.  The Trustee shall not be charged with knowledge of the existence of any default or event of default with respect to any Guarantor Senior Debt or of any other facts which would prohibit the making of any payment to or by the Trustee unless and until the Trustee shall have received notice in writing from the Company or the Guarantor, or from a holder of Guarantor Senior Debt or a Representative therefor, together with proof satisfactory to the Trustee of such holding of Guarantor Senior Debt or of the authority of such Representative, and, prior to the receipt of any such written notice, the Trustee shall be entitled to assume (in the absence of actual knowledge to the contrary) that no such facts exist.

SECTION 12.07.  Application by Trustee of Assets Deposited with It.  U.S. Legal Tender or U.S. Government Obligations deposited in trust with the Trustee pursuant to and in accordance with Sections 8.01 and 8.02 shall be for the sole benefit of Holders of the Notes and, to the extent allocated for the payment of Notes, shall not from and after the time of such deposit be subject to the subordination provisions of this Article Twelve.  Otherwise, any deposit of assets or securities by or on behalf of a Guarantor with the Trustee or any Paying Agent (whether or not in trust) for payment of the Guarantees shall be subject to the provisions of this Article Twelve; provided, however, that if prior to the second Business Day preceding the date on which by the terms of this Indenture any such assets may become distributable for any purpose (including, without limitation, the payment of either principal of or interest on any Note) the Trustee or such Paying Agent shall not have received with respect to such assets any notice provided for in Section 12.06, then the Trustee or such Paying Agent shall have full power and authority to receive such assets and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary received by it on or after such date.  The foregoing shall not apply to the Paying Agent if the Company or any Subsidiary or Affiliate of the Company is acting as Paying Agent.  Nothing contained in this Section 12.07 shall limit the right of the holders of Guarantor Senior Debt to recover payments as contemplated by this Article Twelve.

SECTION 12.08.  No Waiver of Subordination Provisions.

(1)  No right of any present or future holder of any Guarantor Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Guarantor or by any act or failure to act, by any such holder, or by any non-compliance by any Guarantor with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with.

(2)  Without limiting the generality of subsection (1) of this Section 12.08, the holders of Guarantor Senior Debt may, at any time and from time to time, without the consent of

98

or notice to the Trustee or the Holders of the Notes, without incurring responsibility to the Holders of the Notes and without impairing or releasing the subordination provided in this Article Twelve or the obligations hereunder of the Holders of the Notes to the holders of Guarantor Senior Debt, do any one or more of the following:  (A) change the manner, place, terms or time of payment of, or renew, refinance, replace or alter, Guarantor Senior Debt or any instrument evidencing the same or any agreement under which Guarantor Senior Debt is outstanding; (B) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Guarantor Senior Debt; (C) release any Person liable in any manner for the collection or payment of Guarantor Senior Debt; and (D) exercise or refrain from exercising any rights against the Guarantors and any other Person.

SECTION 12.09.  Holders Authorize Trustee To Effectuate Subordination of Guarantee Obligations.  Each Holder of the Guarantee Obligations by its acceptance thereof authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effect the subordination provisions contained in this Article Twelve, and appoints the Trustee its attorney-in-fact for such purpose, including, in the event of any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of any Guarantor tending towards liquidation or reorganization of the business and assets of any Guarantor, the immediate filing of a claim for the unpaid balance under its or his Guarantee Obligations in the form required in said proceedings and cause said claim to be approved.  If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then any of the holders of the Guarantor Senior Debt or their Representative is hereby authorized to file an appropriate claim for and on behalf of the Holders of said Guarantee Obligations.  Nothing herein contained shall be deemed to authorize the Trustee or the holders of Guarantor Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any holder of Guarantee Obligations any plan of reorganization, arrangement, adjustment or composition affecting the Guarantee Obligations or the rights of any Holder thereof, or to authorize the Trustee or the holders of Guarantor Senior Debt or their Representative to vote in respect of the claim of any holder of Guarantee Obligations in any such proceeding.

SECTION 12.10.  Right of Trustee To Hold Guarantor Senior Debt.  The Trustee shall be entitled to all of the rights set forth in this Article Twelve in respect of any Guarantor Senior Debt at any time held by it to the same extent as any other holder of Guarantor Senior Debt, and nothing in this Indenture shall be construed to deprive the Trustee of any of its rights as such holder.

SECTION 12.11.  No Suspension of Remedies.  The failure to make a payment in respect of the Guarantees by reason of any provision of this Article Twelve shall not be construed as preventing the occurrence of a Default or an Event of Default under Section 6.01.

Nothing contained in this Article Twelve shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Article Six or to pursue any rights or remedies hereunder or under applicable law, subject to the rights, if any, under this Article Twelve of the holders, from time to time, of Guarantor Senior Debt.

99

SECTION 12.12.  No Fiduciary Duty of Trustee to Holders of Guarantor Senior Debt.  The Trustee shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior Debt, and it undertakes to perform or observe such of its covenants and obligations as are specifically set forth in this Article Twelve, and no implied covenants or obligations with respect to the Guarantor Senior Debt shall be read into this Indenture against the Trustee.  The Trustee shall not be liable to any such holders (other than for its willful misconduct or gross negligence) if it shall pay over or deliver to the holders of Guarantee Obligations or the Guarantors or any other Person, money or assets in compliance with the terms of this Indenture.  Nothing in this Section 12.12 shall affect the obligation of any Person other than the Trustee to hold such payment for the benefit of, and to pay such payment over to, the holders of Guarantor Senior Debt or their Representative.

ARTICLE THIRTEEN
MISCELLANEOUS

SECTION 13.01.  TIA Controls.  If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control; provided, however, that this Section 13.01 shall not of itself require that this Indenture or the Trustee be qualified under the TIA or constitute any admission or acknowledgment by any party hereto that any such qualification is required prior to the time this Indenture and the Trustee are required by the TIA to be so qualified.

SECTION 13.02.  Notices.  Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by telecopier, by email or by overnight courier guaranteeing next-day delivery or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

if to the Company or any Guarantor:

KINETIC CONCEPTS, INC.
8023 Vantage Drive
San Antonio, TX 78230
Fax Number:  (210) 255-6998
Attn:  Chief Executive Officer

with a copy to:

Cox & Smith
112 E. Pecan Street
San Antonio, TX 78205
Fax Number:  (210) 226-8395
Attn:  William J. McDonough, Jr., Esq.

if to the Trustee:

U.S. Bank National Association
60 Livingston Ave.
St. Paul, Minnesota 55107-2292

100

Fax Number:  (651) 495-8097
Attention:  Corporate Trust Administration - KCI

Each of the Company and the Trustee by written notice to the other may designate additional or different addresses for notices to such Person.  Any notice or communication to the Company or the Trustee shall be deemed to have been given or made as of the date so delivered if hand delivered; when answered back, if telexed; when receipt is acknowledged, if emailed or faxed; and five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that (1) the Trustee shall not be deemed to have knowledge of such notice nor shall any time period within which the Trustee is required to act as a result of such notice commence until the Trustee actually receives the notice in question and (2) a notice of change of address shall not be deemed to have been given until actually received by the addressee).

Any notice or communication mailed to a Holder shall be mailed by first class mail, certified or registered return receipt requested, or by overnight courier guaranteeing next-day delivery to its address as it appears on the registration books of the Registrar.  Any notice or communication shall be mailed to any Person as described in TIA Section 313(c), to the extent required by the TIA.

Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.  If a notice or communication is mailed in the manner provided in this Section 13.02, it is duly given, whether or not the addressee receives it.

SECTION 13.03.  Communications by Holders with Other Holders.  Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes.  The Company, the Trustee, the Registrar and any other Person shall have the protection of TIA Section 312(c).

SECTION 13.04.  Certificate and Opinion as to Conditions Precedent.  Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:

(1)an Officers’ Certificate, in form and substance satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent to be performed by the Company, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(2)an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent to be performed by the Company, if any, provided for in this Indenture relating to the proposed action have been complied with (which counsel, as to factual matters, may rely on an Officers’ Certificate).

SECTION 13.05.  Statements Required in Certificate or Opinion.  Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, other than the Officers’ Certificate required by Section 4.06, shall include:

(1)a statement that the Person making such certificate or opinion has read such covenant or condition;

101

(2)a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(3)a statement that, in the opinion of such Person, he has made such examination or investigation as is reasonably necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(4)a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with.

SECTION 13.06.  Rules by Trustee, Paying Agent, Registrar.  The Trustee may make reasonable rules in accordance with the Trustee’s customary practices for action by or at a meeting of Holders.  The Paying Agent or Registrar may make reasonable rules for its functions.

SECTION 13.07.  Legal Holidays.  A “Legal Holiday” used with respect to a particular place of payment is a Saturday, a Sunday or a day on which banking institutions in New York, New York or at such place of payment are not required to be open.  If a payment date is a Legal Holiday at such place, payment may be made at such place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period.

SECTION 13.08.  Governing Law.  THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK.  Each of the parties hereto agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Indenture.

SECTION 13.09.  No Adverse Interpretation of Other Agreements.  This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries.  Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

SECTION 13.10.  No Personal Liability.  No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture, or in any of the Notes or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator, stockholder, officer, director, employee or controlling person of the Company or of any successor Person thereof.  Each Holder, by accepting the Notes, waives and releases all such liability.  The waiver and release are part of the consideration for the issuance of the Notes.  Such waiver may not be effective to waive liabilities under the federal securities laws.

SECTION 13.11.  Successors.  All agreements of the Company in this Indenture and the Notes shall bind their successors.  All agreements of the Trustee in this Indenture shall bind its successors.

102

SECTION 13.12.  Duplicate Originals.  All parties may sign any number of copies of this Indenture.  Each signed copy shall be an original, but all of them together shall represent the same agreement.

SECTION 13.13.  Severability.  In case any one or more of the provisions in this Indenture or in the Notes shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law.

SECTION 13.14.  Table of Contents, Headings, Etc..  The Table of Contents, Cross-Reference Table and headings of the Articles and Section of this Indenture have been inserted for convenience of reference only, are not considered a part hereof and shall in no way modify or restrict any of the terms and provisions hereof.

***                                       0;  **

[signature page follows]

103

SIGNATURES

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above.

KINETIC CONCEPTS, INC.
By:
	Name:
	Title:
MEDCLAIM, INC., as Guarantor
By:
	Name:
	Title:
KCI HOLDING COMPANY, INC., as Guarantor
By:
	Name:
	Title:
KCI REAL HOLDINGS, L.L.C., as Guarantor
By:
	Name:
	Title:
KCI INTERNATIONAL, INC., as Guarantor
By:
	Name:
	Title:

104

KCI LICENSING, INC., as Guarantor
By:
	Name:
	Title:
KCI PROPERTIES LIMITED, as Guarantor
	By:  KCI USA REAL HOLDINGS, L.L.C.,
	its General Partner
By:
	Name:
	Title:
KCI REAL PROPERTY LIMITED, as Guarantor
	By:  KCI USA REAL HOLDINGS, L.L.C.,
	its General Partner
By:
	Name:
	Title:
KCI USA, INC., as Guarantor
By:
	Name:
	Title:
KCI USA REAL HOLDINGS, L.L.C., as Guarantor
By:
	Name:
	Title:

105

U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:
	Name:
	Title:

106

EXHIBIT A

[FORM OF NOTE]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW.  BY ITS ACQUISITION HEREOF, EACH HOLDER ACQUIRING THE NOTE IN CONNECTION WITH THE COMPANY’S INITIAL DISTRIBUTION OF THE NOTES REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT.  BY ITS ACQUISITION HEREOF, EACH HOLDER AGREES THAT IT WILL NOT, PRIOR TO THE DATE THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE OF THIS SECURITY AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY, RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.  IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

A-1

CUSIP No.:[        ]

KINETIC CONCEPTS, INC.

7³/₈% Senior Subordinated Note Due 2013

No. [          ] $[              ]

KINETIC CONCEPTS, INC., a Texas corporation (the “Company,” which term includes any successor entities), for value received promises to pay to [               ] or registered assigns the principal sum of [              ] Dollars on May 15, 2013.

Interest Payment Dates:  May 15 and November 15, commencing [          ].

Record Dates:  May 1 and November 1.

Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place.

IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officer.

KINETIC CONCEPTS, INC.
By:
	Name:
	Title:
	Dated:  [            ]

A-2

Certificate of Authentication

This is one of the 7³/₈% Senior Subordinated Notes due 2013, referred to in the within-mentioned Indenture.

U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
	Authorized Signatory
	Title:
	Date of Authentication:  [         ]

A-3

(REVERSE OF SECURITY)

7³/₈% Senior Subordinated Note due 2013

Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Indenture, dated as of August 11, 2003 (the “Indenture”), and as amended from time to time, by and among Kinetic Concepts, Inc., a Texas corporation (the “Company”), the Guarantors named therein and U.S. Bank National Association, as trustee (the “Trustee”).

(1) Interest.  The Company promises to pay interest on the principal amount of this Note at the rate per annum shown above.  Interest on the Notes will accrue from and including the most recent date on which interest has been paid or, if no interest has been paid, from and including [           ].  The Company will pay interest semi-annually in arrears on each Interest Payment Date, commencing [          ].  Interest will be computed on the basis of a 360-day year of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed.

The Company shall pay interest on overdue principal and on overdue installments of interest from time to time on demand at the rate borne by the Notes and on overdue installments of interest (without regard to any applicable grace periods) to the extent lawful.

(2) Method of Payment.  The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Notes are cancelled on registration of transfer or registration of exchange (including pursuant to an Exchange Offer (as defined in the Registration Rights Agreement)) after such Record Date.  Holders must surrender Notes to a Paying Agent to collect principal payments.  The Company shall pay principal and premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts (“U.S. Legal Tender”).  However, the Company may pay principal and premium, if any, and interest by check payable in such U.S. Legal Tender.  The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder’s registered address.

(3) Paying Agent and Registrar.  Initially, the Trustee will act as Paying Agent and Registrar.  The Company may change any Paying Agent, Registrar or co-Registrar without notice to the Holders.

(4) Indenture.  The Company issued the Notes under the Indenture.  This Note is one of a duly authorized issue of Notes of the Company designated as its 7³/₈% Senior Subordinated Notes due 2013 (the “Initial Notes”).  The Notes include the Initial Notes and the Exchange Notes, as defined in Paragraph 9 below, issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement.  The Initial Notes and the Exchange Notes are treated as a single class of securities under the Indenture.  The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the “TIA”), as in effect on the date of the Indenture.  Notwithstanding anything to the contrary herein, the Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the TIA for a statement of such

A-4

terms.  The Notes are general obligations of the Company.  Payment on each Note is guaranteed on a senior subordinated basis by the Guarantors pursuant to Articles Eleven and Twelve of the Indenture.  Each Holder, by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time in accordance with its terms.

(5) Special Redemption.  Section 4.23 of the Indenture provides that on the Special Redemption Payment Date, the Company will redeem all Notes tendered pursuant to the Special Redemption Offer at a price equal to 100% of the principal amount of the Notes, plus accrued interest to the date of redemption, if the redemption of all of the outstanding Existing Notes is not consummated on or prior to November 7, 2003.

(6) Redemption.  The Notes are redeemable, at the Company’s option, in whole at any time or in part from time to time, on and after May 15, 2008, upon not less than 30 nor more than 60 days’ notice, at the following Redemption Prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on May 15 of the years set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption:

Year	Redemption Price
2008	103.688	%
2009	102.458	%
2010	101.229	%
2011 and thereafter	100.000	%

In addition, at any time prior to May 15, 2008, the Company may, at its option, redeem the Notes, in whole or in part, from time to time, upon not less than 30 nor more than 60 days’ notice at a redemption price equal to the greater of (1) 101% of the principal amount of the Notes so redeemed, plus accrued and unpaid interest, and (2) the Make-Whole Premium with respect to the Notes, or the portions thereof, to be redeemed, plus, to the extent not included in the Make-Whole Premium, accrued and unpaid interest to the date of redemption.

Notwithstanding the foregoing, at any time, or from time to time, on or prior to May 15, 2006, the Company may, at its option on one or more occasions use all or a portion of the net cash proceeds of one or more Equity Offerings to redeem the Notes issued under the Indenture at a redemption price equal to 107.375% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption, provided that at least 65% of the aggregate principal amount of the Notes originally issued remain outstanding immediately following any such redemption.  In order to effect the foregoing redemption with the proceeds of any Equity Offering, the Company shall make such redemption not more than 90 days after the consummation of any such Equity Offering.

(7) Notice of Redemption.  Notice of redemption will be mailed at least 30 but not more than 60 days, before the Redemption Date (other than with respect to a Special Redemption) to each Holder of Notes to be redeemed at its registered address.  Notes in denominations larger than $1,000 may be redeemed in part.

A-5

Except as set forth in the Indenture, if monies for the redemption of the Notes called for redemption shall have been deposited with the Paying Agent for redemption on such Redemption Date, then, unless the Company defaults in the payment of such Redemption Price plus accrued interest, if any, the Notes called for redemption will cease to bear interest from and after such Redemption Date and the only right of the Holders of such Notes will be to receive payment of the Redemption Price plus accrued interest, if any.

(8) Offers to Purchase.  Sections 4.15 and 4.16 of the Indenture provide that, after certain Asset Sales and upon the occurrence of a Change of Control, and subject to further limitations contained therein, the Company will make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture.

(9) Registration Rights.  Pursuant to the Registration Rights Agreement among the Company, the Guarantors and the Placement Agents, the Company and the Guarantors will be obligated to consummate an exchange offer pursuant to which the Holder of this Note shall have the right to exchange this Note for the Company’s 7³/₈% Series B Senior Subordinated Notes due 2013 (the “Exchange Notes”), which will be registered under the Securities Act, in like principal amount and having terms identical in all material respects as the Initial Notes except for restrictions on transfer.  The Holders of the Initial Notes shall be entitled to receive certain additional interest payments in the event such exchange offer is not consummated and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement.

(10) Denominations; Transfer; Exchange.  The Notes are in registered form, without coupons, and in denominations of $1,000 and integral multiples of $1,000.  A Holder shall register the transfer of or exchange of Notes in accordance with the Indenture.  The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as required by law or as permitted by the Indenture.  The Registrar need not register the transfer of or exchange of any Notes or portions thereof selected for redemption except for the unredeemed portion of any Note being redeemed in part.

(11) Persons Deemed Owners.  The registered Holder of a Note shall be treated as the owner of it for all purposes.

(12) Unclaimed Money.  If money for the payment of principal or interest remains unclaimed for one year, the Trustee and the Paying Agent will pay the money back to the Company.  After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease.

(13) Discharge Prior to Redemption or Maturity.  If the Company at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Notes to redemption or maturity and complies with the other provisions of the Indenture relating thereto, the Company will be discharged from certain provisions of the Indenture and the Notes (including certain covenants, and including, under certain circumstances, their obligation to pay the principal of and interest on the Notes but without affecting the rights of the Holders to receive such amounts from such deposits).

A-6

(14) Amendment; Supplement; Waiver.  Subject to certain exceptions set forth in the Indenture, the Indenture or the Notes may be amended or supplemented with the written consent of the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding, and any past Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding.  Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Notes in addition to or in place of certificated Notes, comply with any requirements of the Commission in order to effect or maintain the qualification of the Indenture under the TIA or comply with Article Five of the Indenture or make any other change that does not adversely affect the rights of any Holder of a Note in any material respect.

(15) Restrictive Covenants.  The Indenture imposes certain limitations on the ability of the Company and the Restricted Subsidiaries to, among other things, incur additional Indebtedness, make payments in respect of its Capital Stock or certain Indebtedness, make certain Investments, create or incur liens, enter into transactions with Affiliates, create dividend or other payment restrictions affecting Restricted Subsidiaries, issue Preferred Stock of its Restricted Subsidiaries, and on the ability of the Company to merge or consolidate with any other Person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Company’s and its Restricted Subsidiaries’ assets or adopt a plan of liquidation.  Such limitations are subject to a number of important qualifications and exceptions.  Pursuant to Section 4.06 of the Indenture, the Company must annually report to the Trustee on compliance with such limitations.

(16) Subordination.  The Notes are subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents of all Obligations on Senior Debt of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed.  Each Holder by its acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee its attorney-in-fact for such purposes.

(17) Successors.  When a successor assumes, in accordance with the Indenture, all the obligations of its predecessor under the Notes and the Indenture, the predecessor, subject to certain exceptions, will be released from those obligations.

(18) Defaults and Remedies.  Except as set forth in the Indenture, if an Event of Default occurs and is continuing, the Trustee or the Holders of not less than 25% in principal amount of Notes then outstanding may declare all the Notes to be due and payable in the manner, at the time and with the effect provided in the Indenture.  Holders of Notes may not enforce the Indenture or the Notes except as provided in the Indenture.  The Trustee is not obligated to enforce the Indenture or the Notes unless it has received indemnity reasonably satisfactory to it.  The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Notes then outstanding to direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from Holders of Notes notice of any continuing

A-7

Default or Event of Default (except a Default in payment of principal or interest when due, including defaults in payments to be made pursuant to a Change of Control Offer or Net Proceeds Offer, for any reason or a Default in compliance with Article Five of the Indenture) if it determines that withholding notice is in their interest.

(19) Trustee Dealings with Company.  The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.

(20) No Recourse Against Others.  No partner, director, officer, employee or stockholder, as such, of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Indenture, the Guarantees or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation.  Each Holder of Notes by accepting a Note waives and releases all such liability.  The waiver and release are part of the consideration for the issuance of the Notes.

(21) Guarantees.  This Note will be entitled to the benefits of certain Guarantees, if any, made for the benefit of the Holders.  Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantors, the Trustee and the Holders.

(22) Authentication.  This Note shall not be valid until the Trustee or Authenticating Agent manually signs the certificate of authentication on this Note.

(23) Governing Law.  This Note and the Indenture shall be governed by and construed in accordance with the laws of the State of New York, as applied to contracts made and performed within the State of New York.  Each of the parties hereto and the Holders agree to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Note.

(24) Abbreviations and Defined Terms.  Customary abbreviations may be used in the name of a Holder of a Note or an assignee, such as:  TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

(25) CUSIP Numbers.  Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes as a convenience to the Holders of the Notes.  No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identification numbers printed hereon.

The Company will furnish to any Holder of a Note upon written request and without charge a copy of the Indenture, which has the text of this Note.  Requests may be made to:  KINETIC CONCEPTS, INC., 8023 Vantage Drive, San Antonio, Texas 78230.

A-8

ASSIGNMENT FORM

If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed:

I or we assign and transfer this Note to:

(Print or type name, address and zip code and

social security or tax ID number of assignee)

and irrevocably appoint                                                               , agent to transfer this Note on the books of the Company.  The agent may substitute another to act for him.

Dated:
Signed:
	(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:

Signature must be guaranteed by an “eligible guarantor institution,” that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

A-9

[OPTION OF HOLDER TO ELECT PURCHASE]

If you want to elect to have this Note purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate box:

Section 4.15 o

Section 4.16 o

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the amount you elect to have purchased:

$                           

Dated:
	NOTICE:  The signature on this assignment must correspond with the name as it appears upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever and be guaranteed.
Signature Guarantee:

A-10

EXHIBIT B

CUSIP No.: [    ]

KINETIC CONCEPTS, INC.

7³/₈% Series B Senior Subordinated Note Due 2013

No. [     ] $[          ]

KINETIC CONCEPTS, INC., a Texas corporation (the “Company,” which term includes any successor entities), for value received promises to pay to [          ] or registered assigns the principal sum of [              ] Dollars on May 15, 2013.

Interest Payment Dates:  May 15 and November 15, commencing [              ].

Record Dates:  May 1 and November 1.

Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place.

IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officer.

KINETIC CONCEPTS, INC.
By:
	Name:
	Title:
	Dated:  [          ]

B-1

Certificate Of Authentication

This is one of the 7³/₈% Series B Senior Subordinated Notes due 2013, referred to in the within-mentioned Indenture.

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

By:

Authorized Signatory

Date of Authentication:

B-2

(REVERSE OF SECURITY)

7³/₈Series B Senior Subordinated Note due 2013

Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Indenture, dated as of August 11, 2003 (the “Indenture”), and as amended from time to time, by and among Kinetic Concepts, Inc., a Texas corporation (the “Company”), the Guarantors named therein and U.S. Bank National Association, as trustee (the “Trustee”).

(1) Interest.  The Company promises to pay interest on the principal amount of this Note at the rate per annum shown above.  Interest on the Notes will accrue from and including the most recent date on which interest has been paid or, if no interest has been paid, from and including [            ].  The Company will pay interest semi-annually in arrears on each Interest Payment Date, commencing [            ].  Interest will be computed on the basis of a 360-day year of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed.

The Company shall pay interest on overdue principal and on overdue installments of interest from time to time on demand at the rate borne by the Notes and on overdue installments of interest (without regard to any applicable grace periods) to the extent lawful.

(2) Method of Payment.  The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Notes are cancelled on registration of transfer or registration of exchange after such Record Date.  Holders must surrender Notes to a Paying Agent to collect principal payments.  The Company shall pay principal and premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts (“U.S. Legal Tender”).  However, the Company may pay principal and premium, if any, and interest by check payable in such U.S. Legal Tender.  The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder’s registered address.

(3) Paying Agent and Registrar.  Initially, the Trustee will act as Paying Agent and Registrar.  The Company may change any Paying Agent, Registrar or Co-Registrar without notice to the Holders.

(4) Indenture.  The Company issued the Notes under the Indenture.  This Note is one of a duly authorized issue of Exchange Notes of the Company designated as its 7³/₈% Senior Subordinated Notes due 2013, Series B (the “Exchange Notes”).  The Notes include the 7³/₈% Senior Subordinated Notes due 2013, Series A (the “Initial Notes”) and the Exchange Notes, issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement.  The Initial Notes and the Exchange Notes are treated as a single class of securities under the Indenture.  The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the “TIA”), as in effect on the date of the Indenture.  Notwithstanding anything to the contrary herein, the Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the TIA for a statement of such terms.  The Notes are general obligations of the

B-3

Company.  Payment on each Note is guaranteed on a senior subordinated basis by the Guarantors pursuant to Articles Eleven and Twelve of the Indenture.  Each Holder, by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time in accordance with its terms.

(5) Redemption.  The Notes are redeemable, at the Company’s option, in whole at any time or in part from time to time, on and after May 15, 2008, upon not less than 30 nor more than 60 days’ notice, at the following Redemption Prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on May 15 of the years set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption:

Year	Percentage
2008	103.688	%
2009	102.458	%
20010	101.229	%
2011 and thereafter	100.000	%

In addition, at any time prior to May 15, 2008, the Company may, at its option, redeem the Notes, in whole or in part, from time to time, upon not less than 30 nor more than 60 days’ notice at a redemption price equal to the greater of (1) 101% of the principal amount of the Notes so redeemed, plus accrued and unpaid interest, and (2) the Make-Whole Premium with respect to the Notes, or the portions thereof, to be redeemed, plus, to the extent not included in the Make-Whole Premium, accrued and unpaid interest to the date of redemption.

Notwithstanding the foregoing, at any time, or from time to time, on or prior to May 15, 2006, the Company may, at its option on one or more occasions use all or a portion of the net cash proceeds of one or more Equity Offerings to redeem the Notes issued under the Indenture at a redemption price equal to 107.375% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption, provided, that at least 65% of the aggregate principal amount of the Notes originally issued remain outstanding immediately following any such redemption.  In order to effect the foregoing redemption with the proceeds of any Equity Offering, the Company shall make such redemption not more than 90 days after the consummation of any such Equity Offering.

(6) Notice of Redemption.  Notice of redemption will be mailed at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address.  Notes in denominations larger than $1,000 may be redeemed in part.

Except as set forth in the Indenture, if monies for the redemption of the Notes called for redemption shall have been deposited with the Paying Agent for redemption on such Redemption Date, then, unless the Company defaults in the payment of such Redemption Price plus accrued interest, if any, the Notes called for redemption will cease to bear interest from and after such Redemption Date and the only right of the Holders of such Notes will be to receive payment of the Redemption Price plus accrued interest, if any.

B-4

(7) Offers to Purchase.  Sections 4.15 and 4.16 of the Indenture provide that, after certain Asset Sales and upon the occurrence of a Change of Control, and subject to further limitations contained therein, the Company will make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture.

(8) Denominations; Transfer; Exchange.  The Notes are in registered form, without coupons, and in denominations of $1,000 and integral multiples of $1,000.  A Holder shall register the transfer of or exchange of Notes in accordance with the Indenture.  The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as required by law or as permitted by the Indenture.  The Registrar need not register the transfer of or exchange of any Notes or portions thereof selected for redemption, except for the unredeemed portion of any Note being redeemed in part.

(9) Persons Deemed Owners.  The registered Holder of a Note shall be treated as the owner of it for all purposes.

(10) Unclaimed Money.  If money for the payment of principal or interest remains unclaimed for one year, the Trustee and the Paying Agent will pay the money back to the Company.  After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease.

(11) Discharge Prior to Redemption or Maturity.  If the Company at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Notes to redemption or maturity and complies with the other provisions of the Indenture relating thereto, the Company will be discharged from certain provisions of the Indenture and the Notes (including certain covenants, and including, under certain circumstances, their obligation to pay the principal of and interest on the Notes and without affecting the rights of the Holders to receive such amounts from such deposit).

(12) Amendment; Supplement; Waiver.  Subject to certain exceptions set forth in the Indenture, the Indenture or the Notes may be amended or supplemented with the written consent of the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding, and any past Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding.  Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Notes in addition to or in place of certificated Notes, comply with any requirements of the Commission in order to effect or maintain the qualification of the Indenture under the TIA or comply with Article V of the Indenture or make any other change that does not adversely affect the rights of any Holder of a Note in any material respect.

(13) Restrictive Covenants.  The Indenture imposes certain limitations on the ability of the Company and the Restricted Subsidiaries to, among other things, incur additional Debt, make payments in respect of its Capital Stock or certain Debt, make certain Investments, create or incur liens, enter into transactions with Affiliates, create dividend or other payment

B-5

restrictions affecting Restricted Subsidiaries, issue Preferred Stock of its Restricted Subsidiaries, and on the ability of the Company to merge or consolidate with any other Person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Company’s and its Restricted Subsidiaries’ assets or adopt a plan of liquidation.  Such limitations are subject to a number of important qualifications and exceptions.  Pursuant to Section 4.06 of the Indenture, the Company must annually report to the Trustee on compliance with such limitations.

(14) Subordination.  The Notes are subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents of all Obligations on Senior Debt of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed.  Each Holder by its acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee its attorney-in-fact for such purposes.

(15) Successors.  When a successor assumes, in accordance with the Indenture, all the obligations of its predecessor under the Notes and the Indenture, the predecessor, subject to certain exceptions, will be released from those obligations.

(16) Defaults and Remedies.  Except as set forth in the Indenture, if an Event of Default occurs and is continuing, the Trustee or the Holders of not less than 25% in principal amount of Notes then outstanding may declare all the Notes to be due and payable in the manner, at the time and with the effect provided in the Indenture.  Holders of Notes may not enforce the Indenture or the Notes except as provided in the Indenture.  The Trustee is not obligated to enforce the Indenture or the Notes unless it has received indemnity reasonably satisfactory to it.  The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Notes then outstanding to direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from Holders of Notes notice of any continuing Default or Event of Default (except a Default in payment of principal or interest when due, including defaults in payments to be made pursuant to a Change of Control Offer or Net Proceeds Offer, for any reason or a Default in compliance with Article Five of the Indenture) if it determines that withholding notice is in their interest.

(17) Trustee Dealings with Company.  The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.

(18) No Recourse Against Others.  No partner, director, officer, employee or stockholder, as such, of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Indenture, the Guarantees or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation.  Each Holder of Notes by accepting a Note waives and releases all such liability.  The waiver and release are part of the consideration for the issuance of the Notes.

(19) Guarantees.  This Note will be entitled to the benefits of certain Guarantees, if any, made for the benefit of the Holders.  Reference is hereby made to the Indenture for a

B-6

statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantors, the Trustee and the Holders.

(20) Authentication.  This Note shall not be valid until the Trustee or Authenticating Agent manually signs the certificate of authentication on this Note.

(21) Governing Law.  This Note and the Indenture shall be governed by and construed in accordance with the laws of the State of New York, as applied to contracts made and performed within the State of New York.  Each of the parties hereto and the Holders agree to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Note.

(22) Abbreviations and Defined Terms.  Customary abbreviations may be used in the name of a Holder of a Note or an assignee, such as:  TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

(23) CUSIP Numbers.  Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes as a convenience to the Holders of the Notes.  No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identification numbers printed hereon.

The Company will furnish to any Holder of a Note upon written request and without charge a copy of the Indenture, which has the text of this Note.  Requests may be made to:  KINETIC CONCEPTS, INC., 8023 Vantage Drive, San Antonio, Texas 78230.

B-7

ASSIGNMENT FORM

If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed:

I or we assign and transfer this Note to:

(Print or type name, address and zip code and social security or tax ID number of assignee)

and irrevocably appoint                                                                    , agent to transfer this Note on the books of the Company.  The agent may substitute another to act for him.

Dated:	Signed:
		(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:

Signature must be guaranteed by an “eligible guarantor institution,” that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

B-8

[OPTION OF HOLDER TO ELECT PURCHASE]

If you want to elect to have this Note purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate box:

Section 4.15 o

Section 4.16 o

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the amount you elect to have purchased:

$                         

Dated:
	NOTICE: The signature on this assignment must correspond with the name as it appears upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever and be guaranteed.
Signature Guarantee:

B-9

EXHIBIT C

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY.  UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.  OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.  OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO.  OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE INDENTURE.

C-1

[EXHIBIT D]

Form of Certificate to Be Delivered in
Connection with Transfers to Non-QIB Accredited Investors

       ,       

U.S. Bank National Association, as Registrar

60 Livingston Ave.,

St. Paul Minnesota 55107-2292

Attn.:  Corporate Trust Department - KCI

Ladies and Gentlemen:

In connection with our proposed purchase of 7³/₈% Senior Subordinated Notes due 2013 (the “Notes”) of KINETIC CONCEPTS, INC. (the “Company”), we confirm that:

1. We understand that any subsequent transfer of the Notes is subject to certain restrictions and conditions set forth in the Indenture relating to the Notes (the “Indenture”) and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the “Securities Act”), and all applicable State securities laws.

2. We understand that the offer and sale of the Notes have not been registered under the Securities Act or any other applicable securities law, and that the Notes may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as permitted in the following sentence.  We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Notes, we will do so only (i) to the Company or any subsidiary thereof, (ii) inside the United States in accordance with Rule 144A under the Securities Act to a person who we reasonably believe is a “qualified institutional buyer” (as defined in Rule 144A promulgated under the Securities Act), (iii) inside the United States to an institutional “accredited investor” (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the Trustee (as defined in the Indenture) a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Notes (the form of which letter can be obtained from the Trustee), (iv) outside the United States in accordance with Rule 904 of Regulation S promulgated under the Securities Act, (v) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available), or (vi) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Notes from us a notice advising such purchaser that resales of the Notes are restricted as stated herein.

3. We understand that, on any proposed resale of any Notes, we will be required to furnish to the Trustee, the Company such certification, legal opinions and other information as the Trustee and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect.

D-1

4. We are an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investment, as the case may be.

5. We are acquiring the Notes purchased by us for our account or for one or more accounts (each of which is an institutional “accredited investor”) as to each of which we exercise sole investment discretion.

6. We acknowledge that we have had access to such financial and other information, have been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto as we deem necessary in connection with our decision to purchase the Notes and we have reviewed the “Transfer Restrictions” section from the Company’s Final Offering Memorandum dated July 23, 2003.

You, the Company, the Trustee, the Initial Purchasers and others are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.

Very truly yours,
[Name of Transferee]
By:
	Name:
	Title:

D-2

EXHIBIT E

Form of Certificate to be Delivered in
Connection with Transfers Pursuant to Regulation S

             ,     

U.S. Bank National Association, as Registrar

60 Livingston Ave.,

St. Paul Minnesota 55107-2292

Attn:  Corporate Trust Department - KCI

Re:  KINETIC CONCEPTS, INC. (the “Company”)
7³/₈% Senior Subordinated Notes due 2013 (the “Notes”)

Ladies and Gentlemen:

In connection with our proposed sale of $                aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, we represent that:

(1) the offer of the Notes was not made to a person in the United States;(2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither we nor any person acting on our behalf knows that the transaction has been prearranged with a buyer in the United States;

(3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable;

(4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and

(5) we have advised the transferee of the transfer restrictions applicable to the Notes.

You, the Company and counsel for the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S.

Very truly yours,

[Name of Transferee]

E-1

By:
	Authorized Signature

E-2

EXHIBIT F

GUARANTEE

For value received, the undersigned hereby unconditionally guarantees, as principal obligor and not only as a surety, to the Holder of this Note the cash payments in United States dollars of principal of, premium, if any, and interest on this Note (and including Additional Interest payable thereon) in the amounts and at the times when due and interest on the overdue principal, premium, if any, and interest, if any, of this Note, if lawful, and the payment or performance of all other obligations of the Company under the Indenture or the Notes, to the Holder of this Note and the Trustee, all in accordance with and subject to the terms and limitations of this Note, Articles Eleven and Twelve of the Indenture and this Guarantee. This Guarantee will become effective in accordance with Article Eleven of the Indenture and its terms shall be evidenced therein. The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Note.

Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indenture dated as of August 11, 2003, among Kinetic Concepts, Inc., a Texas corporation, the Guarantors named therein and U.S. Bank National Association, as trustee (the “Trustee”), as amended or supplemented (the “Indenture”).

The obligations of the undersigned to the Holders of Notes and to the Trustee pursuant to this Guarantee and the Indenture are expressly set forth in Articles Eleven and Twelve of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee and all of the other provisions of the Indenture to which this Guarantee relates.

THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK.  Each Guarantor hereby agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Guarantee.

This Guarantee is subject to release upon the terms set forth in the Indenture.

IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to be duly executed.

Date:
	[NAME OF GUARANTOR], as Guarantor
	By:
		Name:
		Title:

F-1

EXHIBIT G

Certificate to be Delivered Upon Exchange
or Registration of Transfer of Securities

Re:  7³/₈% Senior Notes due 2013, and 7³/₈% Series B Senior Notes due 2013 (the “Notes”), of Kinetic Concepts, Inc.

This Certificate relates to $              principal amount of Notes held in the form of *               a beneficial interest in a Global Note or *               Physical Notes by                  (the “Transferor”).

The Transferor:*

o has requested by written order that the Registrar deliver in exchange for its beneficial interest in the Global Note held by the Depositary a Physical Note or Physical Notes in definitive, registered form of authorized denominations and an aggregate number equal to its beneficial interest in such Global Note (or the portion thereof indicated above); or

o has requested by written order that the Registrar exchange or register the transfer of a Physical Note or Physical Notes.

In connection with such request and in respect of each such Note, the Transferor does hereby certify that the Transferor is familiar with the Indenture relating to the above-captioned Notes and the restrictions on transfers thereof as provided in Section 2.17 of such Indenture, and that the transfer of this Note does not require registration under the Securities Act of 1933, as amended (the “Act”), because*:

o Such Note is being acquired for the Transferor’s own account, without transfer (in satisfaction of [Section 2.17(a)(II)(A)] or [Section 2.17(d)(i)(A)] of the Indenture).

o Such Note is being transferred to a “qualified institutional buyer” (as defined in Rule 144A under the Act), in reliance on Rule 144A.

o Such Note is being transferred to an institutional “accredited investor” (within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Act).

o Such Note is being transferred in reliance on Regulation S under the Act.

o Such Note is being transferred in reliance on Rule 144 under the Act.

Such Note is being transferred in reliance on and in compliance with an exemption from the registration requirements of the Act other than Rule 144A or Rule 144 or Regulation S under the Act to a person other than an institutional “accredited investor.”

[INSERT NAME OF TRANSFEROR]

G-1

	By:
		[Authorized Signatory]
Date:

o*Check applicable box.

G-2

EX-5.1

Exhibit 5.1

Skadden, Arps, Slate, Meagher & Flom LLP

525 University Avenue

Palo Alto, California 94301-1908

Tel: (650) 470-4500

Fax: (650) 470-4570

www.skadden.com

September 29, 2003

Kinetic Concepts, Inc.

8023 Vantage Drive

San Antonio, Texas  78265-9508

Re:Kinetic Concepts, Inc.

Registration Statement on Form S-4

Ladies and Gentlemen:

We have acted as special counsel to Kinetic Concepts, Inc. (the “Issuer”), a Texas corporation (the “Issuer”) and each of the Guarantors (as defined in Schedule I hereto) in connection with the offer of up to $205,000,000 aggregate principal amount of Series B 7 ³/₈% Senior Subordinated Notes due 2013 (the “New Notes”) of the Issuer.  The Indenture, dated August 11, 2003 (the “Indenture”), by and among the Issuer, the Guarantors and U.S. Bank, N.A., as trustee (the “Trustee”), provides for the guarantee of the New Notes by the Guarantors (the “Guarantees”) to the extent set forth in the Indenture.  The New Notes are to be issued pursuant to an exchange offer (the “Exchange Offer”) in exchange for a like principal amount of the issued and outstanding Series A 7³/₈% Senior Subordinated Notes due 2013 of the Issuer (the “Old Notes”) under the Indenture, as contemplated by the Registration Rights Agreement, dated August 11, 2003 (the “Registration Rights Agreement”), by and among the Issuer, the Guarantors, Morgan Stanley & Co. Incorporated, Credit Suisse First Boston LLC, Goldman Sachs & co., J.P. Morgan Securities, Inc., Scotia Capital (USA) Inc. and Wells Fargo Securities, LLC.

This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the “Act”).

In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as facsimile, electronic, certified or photostatic copies, and the authenticity of the originals of such copies.  In making our examination of documents executed or to be executed, we have assumed that the parties thereto (including the Issuer and the Guarantors identified on Schedule I hereto as being incorporated under the laws of a State other than the State of Delaware (the “Non-Delaware Guarantors”) had the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, by such parties (including the Issuer and the Non-Delaware Guarantors), and the execution and delivery by such parties of such documents and, except to the extent expressly set forth in paragraphs 1 and 2 below, the validity and binding effect thereof on such parties.  We have also assumed that the Issuer and the Guarantors have complied with all aspects of applicable laws (except as otherwise stated herein) in connection with the transactions contemplated by the New Notes, the Guarantees, the Indenture and the Registration Rights Agreement.  In rendering the opinions expressed below we have also assumed, without independent investigation or verification of any kind, that the Issuer and the Non-Delaware Guarantors have been duly organized and are validly existing in good standing as corporations under the laws of its respective state of incorporation and that the choice of New York law to govern the New Notes, the Guarantees, the Indenture and the Registration Rights Agreement, which are stated therein to be governed thereby, is legal and valid under the laws of other applicable jurisdictions.  As to any facts material to the opinions expressed herein that we did not independently establish or verify, we have relied upon statements and representations of officers and other representatives of the Issuer and others and of public officials.

In rendering the opinions set forth herein, we have examined and relied on originals or copies of the following:

(a)the Registration Statement on Form S-4 relating to the New Notes filed the Securities and Exchange Commission (the “Commission”) on September 29, 2003 under the Act (the “Registration Statement”);

(b)           the form of the New Notes;

(c)           an executed copy of the Indenture;

2

(d)the Certificate of Incorporation of each of the Delaware Guarantors, as certified by the Secretary of the State of the State of Delaware;

(e)the Bylaws of each of the Delaware Guarantors, as currently in effect;

(f)certain resolutions adopted by the members of the Boards of Directors of each of the Delaware Guarantors relating to the Exchange Offer, the Indenture, the issuance of the Guarantees by the Delaware Guarantors and related matters;

(g)           an executed copy of the Registration Rights Agreement; and

(h)the Form T-1 of the Trustee filed as an exhibit to the Registration Statement.

We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Issuer and the Guarantors and such agreements, certificates and receipts of public officials, certificates of officers or other representatives of the Issuer and the Guarantors and others, and such other documents as we have deemed necessary or appropriate as a basis for the opinions set forth below.

Our opinions set forth herein are limited to the general corporate law of the State of Delaware and the laws of the State of New York (the “Applicable Law”) that are normally applicable to transactions of the type contemplated by the Exchange Offer, and, to the extent that judicial or regulatory orders or decrees or consents, approvals, licenses, authorizations, validations, filings, recordings or registrations with governmental authorities are relevant, to those required under such laws (all of the foregoing, included the Applicable Law, being referred to as “Opined on Law”).  We do not express any opinion with respect to the law of any jurisdiction other than Opined On Law or as the effect of any such non-opined-on law on the opinions herein stated.

The opinions set forth below are subject to the following qualifications, further assumptions and limitations

(a)           we do not express any opinion as to the effect on the opinions expressed herein of (i) the compliance or noncompliance of any party to each of the New Notes, the Guarantees, the Indenture and the Registration Rights Agreement with any state, federal or other laws or regulations applicable to it or them or (ii) the legal or regulatory status or the nature of the business of any party;

3

(b)           the validity or enforcement of any agreements or instruments may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in equity or at law);

(c)           we do not express any opinion as to the applicability or effect of any fraudulent transfer, preference or similar law on each of the New Notes, the Guarantees, the Indenture and the Registration Rights Agreement or any transactions contemplated thereby;

(d)           we do not express any opinion as to the enforceability of any rights to contribution or indemnification which may be violative of the public policy underlying any law, rule or regulation (including any federal or state securities law, rule or regulation);

(e)           we do not express any opinion with respect to the enforceability of the Indenture or the New Notes to the extent any of the foregoing provide for interest in violation of the usury laws;

(f)            we have assumed that the execution and delivery by the Issuer and the Guarantors of the Indenture and the performance of the Issuer and the Guarantors under the New Notes and the Guarantees, respectively, do no and will not violate, conflict with or constitute a default under any agreement or instrument to which the Issuer or its properties are subject;

(g)           we have assumed, without independent investigation or verification of any kind, that the choice of New York law to govern the New Notes, the Guarantees, the Indenture and the Registration Rights Agreement, which are stated therein to be governed thereby, is legal and valid under the laws of other applicable jurisdictions and that insofar as any obligation under any of the New Notes, the Guarantees, the Indenture and the Registration Rights Agreement is to be performed in any jurisdiction, its performance will not be illegal or ineffective by virtue of the law of that jurisdiction;

Members of our firm are admitted to the practice of law in the States of New York and Delaware and we do not express any opinion as to the laws of any other jurisdiction other than the Opined on Law to the extent referred to specifically herein. Insofar as the opinions expressed herein relate to matters governed by laws other than the Opined on Law, we have assumed, without having made any independent investigation, that such laws do not affect any of the opinions set forth herein.  The opinions expressed herein are based on laws in effect on the date hereof, which laws are subject to change with possible retroactive effect.

4

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

1.             Assuming the due authorization, execution and delivery of the Indenture by the Issuer and the Non-Delaware Guarantors, the Indenture is a valid and binding agreement of the Issuer and the Guarantors, respectively, enforceable against each of them in accordance with its terms.  The Indenture complies as to form, in all material respects, to the requirements of the Trust Indenture Act of 1939, as amended (the “TIA”) applicable to an Indenture that is required to be qualified under the TIA.

2.             Assuming (a) the due authorization, execution and delivery of the New Notes by the Issuer and (b) the due authorization, execution and delivery of the Guarantees by the Non-Delaware Guarantors, when the New Notes (in the form examined by us) have been duly authenticated, issued, executed and delivered in exchange for the Old Notes in accordance with the Registration Rights Agreement and the Indenture, the New Notes and the Guarantees will constitute valid and binding obligations of the Issuer and the Guarantors, respectively, entitled to the benefits of the Indenture and enforceable against the Issuer and the Guarantors, respectively, in accordance with their terms.

We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement.  We also consent to the reference to our firm under the caption “Legal Matters” in the prospectus included in the Registration Statement.  In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission.

Very truly yours,

/s/ Skadden, Arps, Slate, Meagher & Flom LLP

5

Schedule I

Name	Jurisdiction of Organization
Medclaim, Inc.*	North Carolina
KCI Holding Company, Inc.	Delaware
KCI Real Holdings, L.L.C.	Delaware
KCI International, Inc.	Delaware
KCI Licensing, Inc.	Delaware
KCI Properties Limited*	Texas
KCI Real Property Limited*	Texas
KCI USA, Inc.	Delaware
KCI USA Real Holdings, L.L.C.	Delaware

* “Non-Delaware Guarantor”.

6

EX-5.2

Exhibit 5.2

(210) 554-5268 wjmcdono@coxsmith.com

September 29, 2003

Kinetic Concepts, Inc.

8023 Vantage Drive

San Antonio, Texas  78230

Re:Registration Statement on Form S-4 filed on September 29, 2003  by Kinetic Concepts, Inc.

Ladies and Gentlemen:

We have acted as special Texas counsel to Kinetic Concepts, Inc., a Texas corporation (the “Company”), KCI Properties Limited , a Texas limited partnership, and KCI Real Property  Limited , a Texas limited partnership, (collectively, the “Texas Guarantors” and collectively with the Company, the “Registrants”) in connection with the Registrants’ Registration Statement on Form S-4 filed on September 29, 2003 (the “Registration Statement”), under the Securities Act of 1933, as amended (the “Securities Act”), relating to the Company’s offer to exchange (the “Exchange Offer”) up to $205,000,000 aggregate principal amount of the Company’s Series B 7³/₈% Senior Subordinated Notes due 2013 (the “Exchange Notes”) for a like principal amount of the Company’s issued and outstanding Series A 7³/₈% Senior Subordinated Notes due 2013 (the “Old Notes”). The Indenture, dated August 11, 2003 (the “Indenture”), by and among the Company, the Guarantors (as defined below) and U.S. Bank, N.A., as trustee (the “Trustee”), provides for the guarantee of the Exchange Notes by the Guarantors (the “Guarantees”) to the extent set forth in the Indenture. The Company is conducting the Exchange Offer to satisfy its obligations under the Registration Rights Agreement, dated August 11, 2003 (the “Registration Rights Agreement”), by and among the Company, the Guarantors, Morgan Stanley & Co. Incorporated, Credit Suisse First Boston LLC, Goldman Sachs & Co., J.P. Morgan Securities, Inc., Scotia Capital (USA) Inc. and Wells Fargo Securities, LLC.

In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as

facsimile, electronic, certified or photostatic copies, and the authenticity of the originals of such copies.  In making our examination of documents executed or to be executed, we have assumed that the parties thereto (including the guarantors identified on Schedule I hereto as being incorporated under the laws of a State other than the State of Texas (the “Non-Texas Guarantors”; the “Non-Texas Guarantors” and the “Texas Guarantors” are collectively, the “Guarantors”) had the power, corporate or otherwise, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or otherwise, by such parties (including the Non-Texas Guarantors), and the execution and delivery by such parties of such documents and, except to the extent expressly set forth in our opinion below, the validity and binding effect thereof on such parties.  We have also assumed that the Non-Texas Guarantors have complied with all aspects of applicable laws (except as otherwise stated herein) in connection with the transactions contemplated by the Exchange Notes, the Guarantees, the Indenture and the Registration Rights Agreement.  In rendering the opinions expressed below we have also assumed, without independent investigation or verification of any kind, that the Non-Texas Guarantors have been duly incorporated, formed, or organized, as the case may be, and are validly existing in good standing as corporations, limited partnerships, or limited liability companies, as the case may be,  under the laws of their respective states of incorporation, formation, or organization.  As to any facts material to the opinions expressed herein that we did not independently establish or verify, we have relied upon statements and representations of officers and other representatives of the Company and others and of public officials.

We have examined and are familiar with originals or copies, the authenticity of which have been established to our satisfaction, of all such documents, corporate records, certificates of officers of the Company and public officials, and other instruments as we have deemed necessary to express the opinions hereinafter set forth.  In expressing our opinions herein, we express no opinion as to compliance with federal and state securities laws.

The opinions expressed herein are limited to the laws of the State of Texas and the federal laws of the United States that are normally applicable to transactions of the type contemplated by the Exchange Offer (the “Applicable Law”).

The opinions set forth below are subject to the following qualifications, further assumptions and limitations:

(a)we do not express any opinion as to the effect on the opinions expressed herein of (i) the compliance or noncompliance of any party to each of the Exchange Notes, the Guarantees, the Indenture and the Registration Rights Agreement with any state, federal or other laws or regulations applicable to it or them or (ii) the legal or regulatory status or the nature of the business of any party; and

(b)we do not express any opinion as to the enforceability of the Indenture, the Exchange Notes and the Guarantees.

Members of our firm are admitted to the practice of law in the State of Texas and we do not express any opinion as to the laws of any other jurisdiction other than the Applicable Law to the extent referred to specifically herein. Insofar as the opinions expressed herein relate to matters governed by laws other than the Applicable Law, we have assumed, without having made any independent investigation, that such laws do not affect any of the opinions set forth herein.  The opinions expressed herein are based on laws in effect on the date hereof, which laws are subject to change with possible retroactive effect.

Based upon the foregoing and subject to the limitations, qualifications, exceptions and assumptions set forth herein, it is our opinion that:

(1) The Indenture has been duly authorized, validly executed and delivered by the Company and the Texas Guarantors.

(2)The Exchange Notes have been duly authorized by the Company.

(3)The Guarantee of each of the Texas Guarantors has been duly authorized by such Texas Guarantor.

We hereby consent to the use of our name in the Registration Statement as counsel who has expressed an opinion upon certain legal matters in connection with the issuance and sale of the Exchange Notes (including specifically the reference contained under the caption “Legal Matters”) and to the filing of this opinion with the Commission as an exhibit to the Registration Statement.  In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the general rules and regulations of the Commission promulgated thereunder.

Yours very truly,
COX & SMITH INCORPORATED
By:	/s/ William J. McDonough, Jr.
	William J. McDonough, Jr.,
	For the Firm

Schedule I

Name	Jurisdiction of Organization
Medclaim, Inc.*	North Carolina
KCI Holding Company, Inc.*	Delaware
KCI Real Holdings, L.L.C.*	Delaware
KCI International, Inc.*	Delaware
KCI Licensing, Inc.*	Delaware
KCI Properties Limited	Texas
KCI Real Property Limited	Texas
KCI USA, Inc.*	Delaware
KCI USA Real Holdings, L.L.C.*	Delaware

* “Non-Texas Guarantor”.

EX-10.1

Exhibit 10.1

REGISTRATION RIGHTS AGREEMENT

Dated August 11, 2003

between

KINETIC CONCEPTS, INC.

and

THE GUARANTORS NAMED HEREIN

MORGAN STANLEY & CO. INCORPORATED

CREDIT SUISSE FIRST BOSTON LLC

GOLDMAN, SACHS & CO

J.P. MORGAN SECURITIES INC.

SCOTIA CAPITAL (USA) INC.

WELLS FARGO SECURITIES, LLC

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is made and entered into  August 11, 2003, by and among Kinetic Concepts, Inc., a Texas corporation (the “Company”), the companies named in Schedule A hereto as guarantors (the “Guarantors”) and MORGAN STANLEY & CO. INCORPORATED, CREDIT SUISSE FIRST BOSTON LLC, GOLDMAN, SACHS & CO., J.P. MORGAN SECURITIES INC., SCOTIA CAPITAL (USA) INC. and WELLS FARGO SECURITIES, LLC (the “Placement Agents”).

This Agreement is made pursuant to the Placement Agreement dated July 23, 2003, by and among the Company, the Guarantors and the Placement Agents (the “Placement Agreement”), which provides for the sale by the Company to the Placement Agents of an aggregate of $205,000,000 principal amount of the Company’s 7 3/8% Senior Subordinated Notes Due 2013 (the “Securities”) to be jointly and severally guaranteed on an unsecured senior subordinated basis by the Guarantors.  In order to induce the Placement Agents to enter into the Placement Agreement, the Company and the Guarantors have agreed to provide to the Placement Agents and their direct and indirect transferees the registration rights set forth in this Agreement.  The execution of this Agreement is a condition to the closing under the Placement Agreement.

In consideration of the foregoing, the parties hereto agree as follows:

1.             Definitions.

As used in this Agreement, the following capitalized defined terms shall have the following meanings:

“1933 Act” shall mean the Securities Act of 1933, as amended from time to time.

“1934 Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

“Closing Date” shall mean the Closing Date as defined in the Placement Agreement.

“Company” shall have the meaning set forth in the preamble and shall also include the Company’s successors.

“Exchange Offer” shall mean the exchange offer by the Company of Exchange Securities for Registrable Securities pursuant to Section 2(a) hereof.

“Exchange Offer Registration” shall mean a registration under the 1933 Act effected pursuant to Section 2(a) hereof.

“Exchange Offer Registration Statement” shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

1

“Exchange Securities” shall mean securities issued by the Company and guaranteed by the Guarantors under the Indenture containing terms substantially identical to the Securities (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Securities or, if no such interest has been paid, from the Closing Date, 2003 and (ii) the Exchange Securities will not contain restrictions on transfer) and to be offered to Holders of Securities in exchange for Securities pursuant to the Exchange Offer.

“Guarantors” shall have the meaning set forth in the preamble and shall include any Guarantor’s successor.

“Holder” shall mean the Placement Agents, for so long as they own any Registrable Securities, and each of their successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture; provided that for purposes of Sections 4 and 5 of this Agreement, the term “Holder” shall include Participating Broker-Dealers (as defined in Section 4(a)).

“Indenture” shall mean the Indenture relating to the Securities dated as of August 11, 2003 between the Company, the Guarantors and U.S. Bank, National Association, as trustee, and as the same may be amended from time to time in accordance with the terms thereof.

“Majority Holders” shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or any Person controlling or controlled by the Company and any of its subsidiaries shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount.

“Person” shall mean an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof.

“Placement Agents” shall have the meaning set forth in the preamble.

“Placement Agreement” shall have the meaning set forth in the preamble.

“Prospectus” shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including all material incorporated by reference therein.

“Registrable Securities” shall mean the Securities; provided, however, that the Securities shall cease to be Registrable Securities (i) when a Registration Statement with respect to such Securities shall have been declared effective under the 1933 Act and such Securities shall have been disposed of pursuant to such Registration Statement, (ii) when such Securities have been sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the 1933 Act or (iii) when such Securities shall have ceased to be outstanding.

2

“Registration Expenses” shall mean any and all expenses incident to performance of or compliance by the Company and the Guarantors with this Agreement, including without limitation:  (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Securities or Registrable Securities), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, (iv) all rating agency fees, (v) all fees and disbursements relating to the qualification of the Indenture under applicable securities laws, (vi) the fees and disbursements of the Trustee and its counsel, (vii) the fees and disbursements of counsel for the Company and the Guarantors and, in the case of a Shelf Registration Statement, the reasonable fees and disbursements of one counsel for the Holders (which counsel shall be selected by the Majority Holders and which counsel may also be counsel for the Placement Agents) and (viii) the fees and disbursements of the independent public accountants of the Company and the Guarantors, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance, but excluding fees and expenses of counsel to the underwriters (other than fees and expenses set forth in clause (ii) above) or the Holders and underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder.

“Registration Statement” shall mean any registration statement of the Company and the Guarantors that covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

“SEC” shall mean the Securities and Exchange Commission.

“Securities” shall have the meaning set forth in the preamble.

“Shelf Registration” shall mean a registration effected pursuant to Section 2(b) hereof.

“Shelf Registration Statement” shall mean a “shelf” registration statement of the Company and the Guarantors pursuant to the provisions of Section 2(b) of this Agreement which covers all of the Registrable Securities (but no other securities unless approved by the Holders whose Registrable Securities are covered by such Shelf Registration Statement) on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

“Trustee” shall mean the trustee with respect to the Securities under the Indenture.

“Underwriter” shall have the meaning set forth in Section 3 hereof.

3

“Underwritten Registration” or “Underwritten Offering” shall mean a registration in which Registrable Securities are sold to an Underwriter for reoffering to the public.

2.             Registration Under the 1933 Act.

(a)           To the extent not prohibited by any applicable law or applicable interpretation of the Staff of the SEC, the Company and the Guarantors shall use their best efforts to cause to be filed an Exchange Offer Registration Statement covering the offer by the Company and the Guarantors to the Holders to exchange all of the Registrable Securities for a like aggregate amount of Exchange Securities and to have such Registration Statement remain effective until the closing of the Exchange Offer.  The Company and the Guarantors shall commence the Exchange Offer no later than 15 days after the Exchange Offer Registration Statement has been declared effective by the SEC and use their best efforts to have the Exchange Offer consummated not later than 240 days after the Closing Date.  The Company and the Guarantors shall commence the Exchange Offer by mailing the related exchange offer Prospectus and accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law:

(i)            that the Exchange Offer is being made pursuant to this Registration Rights Agreement and that all Registrable Securities validly tendered will be accepted for exchange;

(ii)           the dates of acceptance for exchange (which shall be a period of at least 20 business days from the date such notice is mailed) (the “Exchange Dates”);

(iii)          that any Registrable Security not properly tendered or validly withdrawn on or prior to the Exchange Date will remain outstanding and continue to accrue interest, but will not retain any rights under this Registration Rights Agreement;

(iv)          that Holders electing to have a Registrable Security exchanged pursuant to the Exchange Offer will be required to surrender such Registrable Security, together with the enclosed letters of transmittal, to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice prior to the close of business on the last Exchange Date; and

(v)           that Holders will be entitled to withdraw their election by sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice a telegram, telex, facsimile transmission or letter, which shall be received by the institution not later than the close of business on the last Exchange Date, setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange and a statement that such Holder is withdrawing his election to have such Securities exchanged.

As soon as reasonably practicable after the last Exchange Date, the Company and the Guarantors shall:

(i)            accept for exchange Registrable Securities or portions thereof properly tendered and not validly withdrawn pursuant to the Exchange Offer; and

4

(ii)           deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities or portions thereof so accepted for exchange by the Company and the Guarantors and issue, and cause the Trustee to promptly authenticate and mail to each Holder, an Exchange Security equal in principal amount to the principal amount of the Registrable Securities surrendered by such Holder.

The Company and the Guarantors shall use their best efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the 1933 Act, the 1934 Act and other applicable laws and regulations in connection with the Exchange Offer.  The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate applicable law or any applicable interpretation of the Staff of the SEC.  The Company and the Guarantors shall inform the Placement Agents of the names and addresses of the Holders to whom the Exchange Offer is made, and the Placement Agents shall have the right, subject to applicable law, to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer.

(b)           In the event that (i) the Company and the Guarantors determine that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be consummated as soon as practicable after the last Exchange Date because it would violate applicable law or the applicable interpretations of the Staff of the SEC, (ii) the Exchange Offer is not for any other reason consummated 240 days after the Closing Date or (iii) the Exchange Offer Registration Statement has been declared effective by the SEC and in the opinion of counsel for the Placement Agents the Exchange Offer is not available and a separate resale Registration Statement must be filed and a Prospectus must be delivered by any Placement Agent in connection with any offering or sale of Registrable Securities, the Company and the Guarantors shall use their best efforts to cause to be filed as soon as practicable after such determination, date or notice of such opinion of counsel is given to the Company and the Guarantors, as the case may be, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Securities and to have such Shelf Registration Statement declared effective by the SEC.  In the event the Company and the Guarantors are required to file a Shelf Registration Statement solely as a result of the matters referred to in clause (iii) of the preceding sentence, the Company and the Guarantors shall use their best efforts to file and have declared effective by the SEC both an Exchange Offer Registration Statement pursuant to Section 2(a) with respect to all Registrable Securities and a Shelf Registration Statement (which may be a combined Registration Statement with the Exchange Offer Registration Statement) with respect to offers and sales of Registrable Securities held by the Placement Agents after completion of the Exchange Offer.  The Company and the Guarantors agree to use their best efforts to keep the Shelf Registration Statement continuously effective until the expiration of the period referred to in Rule 144(k) with respect to the Registrable Securities or such shorter period that will terminate when all of the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement.  The Company and the Guarantors further agree to supplement or amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company and the Guarantors for such Shelf Registration Statement or by the 1933 Act or by any other rules and regulations thereunder for shelf registration or if reasonably requested by a Holder with respect to information relating to such Holder, and to use their best efforts to cause any such amendment to become effective and such Shelf Registration Statement to become usable as soon

5

as thereafter practicable.  The Company and the Guarantors agree to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC.

(c)           The Company and the Guarantors shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a) and Section 2(b).  Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder’s Registrable Securities pursuant to the Shelf Registration Statement.

(d)           An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that, if, after it has been declared effective, the offering of Registrable Securities pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference until the offering of Registrable Securities pursuant to such Registration Statement may legally resume.  In the event the Exchange Offer is not consummated and the Shelf Registration Statement, if required, is not declared effective on or prior to 240 days after the Closing Date, then as liquidated damages, the interest rate on the Securities will be increased by 0.5% per annum, with an additional increase of 0.25% per annum for each subsequent 90-day period, up to a maximum additional 1.0% per annum until the Exchange Offer is consummated or the Shelf Registration Statement is declared effective by the SEC.  Any and all accrued interest pursuant to this Section 2(d) shall be paid to holders of the Registrable Securities entitled thereto, in the manner provided for the payment of interest in the Indenture, on each Interest Payment Date, as more fully set forth in the Indenture.

(e)           Without limiting the remedies available to the Holders (other than the Placement Agents), the Company and the Guarantors acknowledge that any failure by the Company and the Guarantors to comply with their obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Holders (other than the Placement Agents) for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, any Holder (other than the Placement Agents) may obtain such relief as may be required to specifically enforce the Company’s and the Guarantor’s obligations under Section 2(a) and Section 2(b) hereof, provided that such Holder may not obtain such relief as may be required to specifically enforce such obligations if such failure is in connection with a material acquisition or business combination involving the Company or any of the Guarantors.

3.             Registration Procedures.

In connection with the obligations of the Company and the Guarantors with respect to the Registration Statements pursuant to Section 2(a) and Section 2(b) hereof, the Company and the Guarantors shall as soon as reasonably practicable:

(a)           prepare and file with the SEC a Registration Statement on the appropriate form under the 1933 Act, which form (x) shall be selected by the Company and the Guarantors

6

and (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, and use its best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof;

(b)           prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary (i) to keep such Registration Statement effective for the applicable period and cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the 1933 Act; and (ii) to keep each Prospectus current during the period described under Section 4(3) and Rule 174 under the 1933 Act that is applicable to transactions by brokers or dealers with respect to the Registrable Securities or Exchange Securities;

(c)           in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, to counsel for the Placement Agents, to counsel for the Holders and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or Underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities; and the Company and the Guarantors consent to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Securities and any such Underwriters in connection with the offering and sale of the Registrable Securities covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law;

(d)           use their best efforts to register or qualify the Registrable Securities under all applicable state securities or “blue sky” laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the SEC, to cooperate with such Holders in connection with any filings required to be made with the National Association of Securities Dealers, Inc. and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company and the Guarantors shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process, (iii) subject itself to taxation in any such jurisdiction if it is not so subject or (iv) make any changes to its articles of incorporation or by-laws or any agreement between it and its stockholders in effect as of the Closing Date;

(e)           in the case of a Shelf Registration, notify each Holder of Registrable Securities, counsel for the Holders and counsel for the Placement Agents promptly and, if requested by any such Holder or counsel, confirm such advice in writing (i) when a Registration Statement has become effective and when any post-effective amendment thereto has been filed and becomes effective, (ii) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement and Prospectus or for additional

7

information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company and the Guarantors contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects or if the Company and the Guarantors receive any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (v) of the happening of any event during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading and (vi) of any determination by the Company and the Guarantors that a post-effective amendment to a Registration Statement would be appropriate;

(f)            make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment and provide immediate notice to each Holder of the withdrawal of any such order;

(g)           in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested);

(h)           in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends and enable such Registrable Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders may reasonably request at least three (3) business days prior to the closing of any sale of Registrable Securities;

(i)            in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(e)(v) hereof, use their best efforts to prepare and file with the SEC a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  The Company and the Guarantors agree to notify the Holders to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and the Holders hereby agree to suspend use of the Prospectus until the Company and the Guarantors have amended or supplemented the Prospectus to correct such misstatement or omission;

(j)            a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after the initial filing of a Registration

8

Statement, provide copies of such document to the Placement Agents and their counsel (and, in the case of a Shelf Registration Statement, the Holders and their counsel) and make such of the representatives of the Company and the Guarantors as shall be reasonably requested by the Placement Agents or their counsel (and, in the case of a Shelf Registration Statement, the Holders or their counsel) reasonably available for discussion of such document, and shall not at any time file or make any amendment to the Registration Statement, any Prospectus or any amendment of or supplement to a Registration Statement or a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Placement Agents and their counsel (and, in the case of a Shelf Registration Statement, the Holders and their counsel) shall not have previously been advised and furnished a copy or to which the Placement Agents or their counsel (and, in the case of a Shelf Registration Statement, the Holders or their counsel) shall reasonably object;

(k)           obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement;

(l)            cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the “TIA”), in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use its best efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner;

(m)          in the case of a Shelf Registration, make available for inspection by a representative of the Holders of the Registrable Securities, any Underwriter participating in any disposition pursuant to such Shelf Registration Statement, and attorneys and accountants designated by the Holders, at reasonable times and in a reasonable manner, all financial and other records, pertinent documents and properties of the Company and the Guarantors, and cause the respective officers, directors and employees of the Company and the Guarantors to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with a Shelf Registration Statement; provided, however, that each such party shall be required to maintain in confidence and not to disclose to any other person any information or records reasonably designated by the Company as being confidential, until such time as (A) such information becomes a matter of public record (whether by virtue of its inclusion in such registration statement or otherwise), or (B) such person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter (subject to the requirements of such order, and only after such person shall have given the Company prompt prior written notice of such requirement), or (C) such information is required to be set forth in such Shelf Registration Statement or the prospectus included therein or in an amendment to such Shelf Registration Statement or an amendment or supplement to such prospectus in order that such Shelf Registration Statement, prospectus, amendment or supplement, as the case may be, complies with applicable requirements of the federal securities laws and the rules and regulations of the SEC and does not contain an untrue statement of a material fact or omit to state therein a material

9

fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing.  Notwithstanding the foregoing, such parties (and each employee, representative, or other agent of such parties) may disclose to any and all persons, without limitation of any kind, the tax treatment and any facts that may be relevant to the tax structure of this transaction, provided, however, that no party (and no employee, representative, or other agent thereof) shall disclose any other information that is not relevant to understanding the tax treatment and tax structure of this transaction (including the identity of any party and any information that could lead another to determine the identity of any party), or any other information to the extent that such disclosure could reasonably result in a violation of any applicable securities law.

(n)           in the case of a Shelf Registration, use their best efforts to cause all Registrable Securities to be listed on any securities exchange or any automated quotation system on which similar securities issued by the Company are then listed if requested by the Majority Holders, to the extent such Registrable Securities satisfy applicable listing requirements;

(o)           use their best efforts to cause the Exchange Securities or Registrable Securities, as the case may be, to be rated by two nationally recognized statistical rating organizations (as such term is defined in Rule 436(g)(2) under the 1933 Act);

(p)           if reasonably requested by any Holder of Registrable Securities covered by a Registration Statement, (i) as promptly as practicable incorporate in a Prospectus supplement or post-effective amendment such information with respect to such Holder as such Holder reasonably requests to be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as promptly as practicable after the Company and the Guarantors have received notification of the matters to be incorporated in such filing; and

(q)           in the case of a Shelf Registration, enter into such customary agreements and take all such other reasonable and customary actions in connection therewith (including those reasonably requested by the Holders of a majority of the Registrable Securities being sold) in order to expedite or facilitate the disposition of such Registrable Securities including, but not limited to, an Underwritten Offering and in such connection, (i) to the extent reasonably practicable, make such representations and warranties to the Holders and any Underwriters of such Registrable Securities with respect to the business of the Company and its subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested, (ii) obtain opinions of counsel to the Company and the Guarantors (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to the Holders and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter of Registrable Securities, covering the matters customarily covered in opinions requested in underwritten offerings, (iii) obtain “cold comfort” letters from the independent certified public accountants of the Company and the Guarantors (and, if necessary, any other certified public accountant of any subsidiary of the Company, or of any business acquired by the Company or the Guarantors for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder and Underwriter of Registrable Securities, such letters to be in customary form and covering matters of the type

10

customarily covered in “cold comfort” letters in connection with underwritten offerings, and (iv) deliver such documents and certificates as may be reasonably requested by the Holders of a majority in principal amount of the Registrable Securities being sold or the Underwriters, and which are customarily delivered in underwritten offerings, to evidence the continued validity of the representations and warranties of the Company and the Guarantors made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in an underwriting agreement.

In the case of a Shelf Registration Statement, the Company and the Guarantors may require each Holder of Registrable Securities to furnish to the Company and the Guarantors such information regarding the Holder and the proposed distribution by such Holder of such Registrable Securities as the Company and the Guarantors may from time to time reasonably request in writing.

In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company and the Guarantors of the happening of any event of the kind described in Section 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by the Company and the Guarantors, such Holder will deliver to the Company and the Guarantors (at their expense) all copies in its possession, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice.  The Company and the Guarantors may give any such notice only twice times during any 365 day period and any such suspensions may not exceed 30 days for each suspension and there may not be more than two suspensions in effect during any 365 day period.

The Holders of Registrable Securities covered by a Shelf Registration Statement who desire to do so may sell such Registrable Securities in an Underwritten Offering.  In any such Underwritten Offering, the investment banker or investment bankers and manager or managers (the “Underwriters”) that will administer the offering will be selected by the Majority Holders of the Registrable Securities included in such offering.

4.             Participation of Broker-Dealers in Exchange Offer.

(a)           The Staff of the SEC has taken the position that any broker-dealer that receives Exchange Securities for its own account in the Exchange Offer in exchange for Securities that were acquired by such broker-dealer as a result of market-making or other trading activities (a “Participating Broker-Dealer”), may be deemed to be an “underwriter” within the meaning of the 1933 Act and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities.

The Company and the Guarantors understand that it is the Staff’s position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Securities, without naming the Participating Broker-Dealers or specifying the amount of Exchange Securities owned by them, such Prospectus may

11

be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligation under the 1933 Act in connection with resales of Exchange Securities for their own accounts, so long as the Prospectus otherwise meets the requirements of the 1933 Act.

(b)           In light of the above, notwithstanding the other provisions of this Agreement, the Company and the Guarantors agree that the provisions of this Agreement as they relate to a Shelf Registration shall also apply to an Exchange Offer Registration to the extent, and with such reasonable modifications thereto as may be, reasonably requested by the Placement Agents or by one or more Participating Broker-Dealers, in each case as provided in clause (ii) below, in order to expedite or facilitate the disposition of any Exchange Securities by Participating Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above; provided that:

(i)            the Company and the Guarantors shall not be required to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(i), for a period exceeding 180 days after the last Exchange Date (as such period may be extended pursuant to the penultimate paragraph of Section 3 of this Agreement) and Participating Broker-Dealers shall not be authorized by the Company and the Guarantors to deliver and shall not deliver such Prospectus after such period in connection with the resales contemplated by this Section 4; and

(ii)           the application of the Shelf Registration procedures set forth in Section 3 of this Agreement to an Exchange Offer Registration, to the extent not required by the positions of the Staff of the SEC or the 1933 Act and the rules and regulations thereunder, will be in conformity with the reasonable request to the Company in writing by the Placement Agents or with the reasonable request in writing to the Company by one or more broker-dealers who certify to the Placement Agents, the Company and the Guarantors in writing that they anticipate that they will be Participating Broker-Dealers; provided that, in connection with such application of the Shelf Registration procedures set forth in Section 3 to an Exchange Offer Registration, the Company and the Guarantors shall be obligated (x) to deal only with one entity representing the Participating Broker-Dealers, which shall be Morgan Stanley & Co. Incorporated unless it elects not to act as such representative, in which case an alternate representative shall have been designated by the Participating Broker-Dealers in writing to the Company and the Guarantors (y) to pay the fees and expenses of only one counsel representing the Participating Broker-Dealers, which shall be counsel to the Placement Agents unless such counsel elects not to so act, in which case alternate counsel shall have been designated by the Participating Broker-Dealers in writing to the Company and the Guarantors, and (z) to cause to be delivered only one, if any, “cold comfort” letter with respect to the Prospectus in the form existing on the last Exchange Date and with respect to each subsequent amendment or supplement, if any, effected during the period specified in clause (i) above.

(c)           The Placement Agents shall have no liability to the Company, the Guarantors or any Holder with respect to any request that it may make pursuant to Section 4(b) above.

12

5.             Indemnification and Contribution.

(a)           Each of the Company and the Guarantors agree, jointly and severally, to indemnify and hold harmless the Placement Agents, each Holder and each Person, if any, who controls any Placement Agent or any Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, or is under common control with, or is controlled by, any Placement Agent or any Holder, from and against all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by the Placement Agent, any Holder or any such controlling or affiliated Person in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which Exchange Securities or Registrable Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (as amended or supplemented if the Company and the Guarantors shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to the Placement Agents or any Holder furnished to the Company and the Guarantors in writing through Morgan Stanley & Co. Incorporated or any selling Holder expressly for use therein.  In connection with any Underwritten Offering permitted by Section 3, the Company and the Guarantors will also jointly and severally indemnify the Underwriters, if any, selling brokers, dealers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the 1933 Act and the 1934 Act) to the same extent as provided above with respect to the indemnification of the Holders, if requested in connection with any Registration Statement.

(b)           Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, the Guarantors, the Placement Agents and the other selling Holders, and each of their respective directors, officers who sign the Registration Statement and each Person, if any, who controls the Company or the Guarantors, any Placement Agent and any other selling Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as the foregoing indemnity from the Company and the Guarantors to the Placement Agents and the Holders, but only with reference to information relating to such Holder furnished to the Company and the Guarantors in writing by such Holder expressly for use in any Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto).

(c)           In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above, such Person (the “indemnified party”) shall promptly notify the Person against whom such indemnity may be sought (the “indemnifying party”) in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and

13

any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding.  In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them.  It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (a) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Placement Agents and all Persons, if any, who control any Placement Agent within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, the Guarantors their respective directors and officers who sign the Registration Statement and each Person, if any, who controls the Company or the Guarantors within the meaning of either such Section and (c) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Holders and all Persons, if any, who control any Holders within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred.  In such case involving the Placement Agents and Persons who control the Placement Agents, such firm shall be designated in writing by Morgan Stanley & Co. Incorporated.  In such case involving the Holders and such Persons who control Holders, such firm shall be designated in writing by the Majority Holders.  In all other cases, such firm shall be designated by the Company and the Guarantors.  The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but, if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment.  Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for reasonable fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party for such fees and expenses of counsel in accordance with such request prior to the date of such settlement.  No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which such indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.

(d)           If the indemnification provided for in paragraph (a) or paragraph (b) of this Section 5 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the

14

statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations.  The relative fault of the Company, the Guarantors and the Holders shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the Guarantors or by the Holders and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The Holders’ respective obligations to contribute pursuant to this Section 5(d) are several in proportion to the respective principal amount of Registrable Securities of such Holder that were registered pursuant to a Registration Statement.

(e)           The Company, the Guarantors and each Holder agree that it would not be just or equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above.  The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 5, no Holder shall be required to indemnify or contribute any amount in excess of the amount by which the total price at which Registrable Securities were sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.  The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.

The indemnity and contribution provisions contained in this Section 5 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Placement Agents, any Holder or any Person controlling any Placement Agent or any Holder, or by or on behalf of the Company or the Guarantors, their respective officers or directors or any Person controlling the Company or the Guarantors, (iii) acceptance of any of the Exchange Securities and (iv) any sale of Registrable Securities pursuant to a Shelf Registration Statement.

6.             Miscellaneous.

(a)           No Inconsistent Agreements.  The Company and the Guarantors have not entered into, and on or after the date of this Agreement will not enter into, any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof.  The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company’s and the Guarantors’ other issued and outstanding securities under any such agreements.

(b)           Amendments and Waivers.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or

15

consents to departures from the provisions hereof may not be given unless the Company and the Guarantors have obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or consent; provided, however, that no amendment, modification, supplement, waiver or consent to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder.

(c)           Notices.  All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Company and the Guarantors by means of a notice given in accordance with the provisions of this Section 6(c), which address initially is, with respect to the Placement Agents, the address set forth in the Placement Agreement; and (ii) if to the Company and the Guarantors, initially at the Company’s address set forth in the Placement Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(c).

All such notices and communications shall be deemed to have been duly given:  at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery.

Copies of all such notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture.

(d)           Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Placement Agreement.  If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof.  The Placement Agents (in their capacity as Placement Agents) shall have no liability or obligation to the Company or the Guarantors with respect to any failure by a Holder to comply with, or any breach by any Holder of, any of the obligations of such Holder under this Agreement.

(e)           Purchases and Sales of Securities.  Until the expiration of two years from the Closing Date, the Company and the Guarantors shall not, and shall use their best efforts to cause their affiliates (as defined in Rule 405 under the 1933 Act) not to, purchase and then resell or otherwise transfer any Securities.

16

(f)            Third Party Beneficiary.  The Holders shall be third party beneficiaries to the agreements made hereunder between the Company and the Guarantors, on the one hand, and the Placement Agents, on the other hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder.

(g)           Counterparts.  This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(h)           Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(i)            Governing Law.  This Agreement shall be governed by the laws of the State of New York.

(j)            Severability.  In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

17

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

KINETIC CONCEPTS, INC.
By:
	Name:
	Title:
MEDCLAIM, INC.
By:
	Name:
	Title:
KCI HOLDING COMPANY, INC.
By:
	Name:
	Title:
KCI REAL HOLDINGS, L.L.C.
By:
	Name:
	Title:
KCI INTERNATIONAL, INC.
By:
	Name:
	Title:

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

18

KCI LICENSING, INC.
By:
	Name:
	Title:
KCI PROPERTIES LIMITED
By:	KCI USA REAL HOLDINGS, L.L.C., its General Partner
By:
	Name:
	Title:
KCI REAL PROPERTY LIMITED
By:	KCI USA REAL HOLDINGS, L.L.C., its General Partner
By:
	Name:
	Title:
KCI USA, INC.
By:
	Name:
	Title:

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

KCI USA REAL HOLDINGS, L.L.C.
By:
	Name:
	Title:

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

Accepted as of the date hereof:

MORGAN STANLEY & CO. INCORPORATED

CREDIT SUISSE FIRST BOSTON LLC

GOLDMAN, SACHS & CO.

J.P. MORGAN SECURITIES INC.

SCOTIA CAPITAL (USA) INC.

WELLS FARGO SECURITIES, LLC

By:  MORGAN STANLEY & CO. INCORPORATED
By:
	Name:
	Title:

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

SCHEDULE A

Guarantors

Name	Jurisdiction of Organization
Medclaim, Inc.	North Carolina
KCI Holding Company, Inc.	Delaware
KCI Real Holdings, L.L.C.	Delaware
KCI International, Inc.	Delaware
KCI Licensing, Inc.	Delaware
KCI Properties Limited	Texas
KCI Real Property Limited	Texas
KCI USA, Inc.	Delaware
KCI USA Real Holdings, L.L.C.	Delaware
Any additional subsidiaries of the Company that shall, as of the Closing Date, be named as guarantors in connection with the New Senior Credit Facility.

A-1

EX-10.2

Exhibit 10.2

EXECUTION COPY

KINETIC CONCEPTS, INC.

CREDIT AGREEMENT

August 11, 2003

MORGAN STANLEY SENIOR FUNDING, INC.,
AS ADMINISTRATIVE AGENT

MORGAN STANLEY & CO. INCORPORATED,
AS COLLATERAL AGENT

CREDIT SUISSE FIRST BOSTON,
AS SYNDICATION AGENT

MORGAN STANLEY SENIOR FUNDING, INC,
AS JOINT LEAD ARRANGER AND JOINT BOOK MANAGER

CREDIT SUISSE FIRST BOSTON,
AS JOINT LEAD ARRANGER AND JOINT BOOK MANAGER

WELLS FARGO BANK, NATIONAL ASSOCIATION,
AS ISSUING BANK

AND

JPMORGAN CHASE BANK, WELLS FARGO BANK,

NATIONAL ASSOCIATION AND THE BANK OF NOVA SCOTIA,

AS DOCUMENTATION AGENTS

TABLE OF CONTENTS

SECTION 1.  DEFINITIONS
1.1	Defined Terms
1.2	Other Definitional Provisions
SECTION 2.  AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
2.1	Revolving Credit Commitments
2.2	Procedure for Revolving Credit Borrowing
2.3	Commitment Fee
2.4	Termination or Reduction of Commitments; Repayment of Revolving Loans
2.5	L/C Commitment
2.6	Procedure for Issuance of Letters of Credit
2.7	Letter of Credit Fees, Commissions and Other Charges
2.8	L/C Participations
2.9	Reimbursement Obligation of the Company
2.10	Obligations Absolute
2.11	Letter of Credit Payments
2.12	Application
2.13	Swing Line Commitment
2.14	Procedure for Swing Line Borrowing; Prepayment of Swing Line Loans
2.15	Repayment of Swing Line Loans; Participations in Swing Line Borrowings
SECTION 3.  AMOUNT AND TERMS OF TERM LOAN COMMITMENTS
3.1	Tranche B Term Loans
3.2	Procedure for Tranche B Term Loan Borrowing
3.3	Repayment of Tranche B Term Loans
SECTION 4.  GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT
4.1	Evidence of Debt
4.2	Optional Prepayments
4.3	Mandatory Prepayments of Loans and Reductions of Revolving Credit Commitments
4.4	Conversion and Continuation Options
4.5	Minimum Amounts and Maximum Number of Tranches
4.6	Interest Rates and Payment Dates
4.7	Computation of Interest and Fees
4.8	Inability to Determine Interest Rate
4.9	Pro Rata Treatment and Payments
4.10	Illegality
4.11	Requirements of Law
4.12	Taxes
4.13	Indemnity

4.14	Mitigation Obligations; Replacement of Lenders
SECTION 5.  REPRESENTATIONS AND WARRANTIES
5.1	Financial Condition
5.2	No Change; Solvency
5.3	Existence; Compliance with Law
5.4	Corporate Power; Authorization; Enforceable Obligations
5.5	No Legal Bar
5.6	No Material Litigation
5.7	No Labor Controversy
5.8	No Default
5.9	Ownership of Property; Liens
5.10	Intellectual Property
5.11	No Burdensome Restrictions
5.12	Taxes
5.13	Federal Regulations
5.14	ERISA
5.15	Investment Company Act; Other Regulations
5.16	Subsidiaries
5.17	Purpose of Tranche B Term Loans and Revolving Loans
5.18	Environmental Matters
5.19	Regulation H
5.20	No Material Misstatements
5.21	Collateral
5.22	Senior Debt; No Other Designated Senior Debt
5.23	Chief Executive Office
SECTION 6.  CONDITIONS PRECEDENT
6.1	Conditions to Effectiveness
6.2	Conditions to Each Extension of Credit
SECTION 7.  AFFIRMATIVE COVENANTS
7.1	Financial Statements
7.2	Certificates; Other Information
7.3	Payment of Obligations
7.4	Conduct of Business and Maintenance of Existence
7.5	Maintenance of Property; Insurance
7.6	Inspection of Property; Books and Records; Discussions
7.7	Notices
7.8	Environmental Laws
7.9	Further Assurances
7.10	Additional Collateral
7.11	Interest Rate Protection
SECTION 8.  NEGATIVE COVENANTS
8.1	Financial Condition Covenants
8.2	Limitation on Indebtedness

ii

8.3	Limitation on Liens
8.4	Limitation on Guarantee Obligations
8.5	Limitation on Fundamental Changes
8.6	Limitation on Sale of Assets
8.7	Limitation on Dividends and Stock Purchases
8.8	Limitation on Capital Expenditures
8.9	Limitation on Investments, Loans and Advances
8.10	Limitation on Optional Payments and Modifications of Subordinated and Other Debt Instruments
8.11	Limitation on Transactions with Affiliates
8.12	Limitation on Sales and Leasebacks
8.13	Limitation on Negative Pledge Clauses
8.14	Limitation on Changes in Fiscal Year
8.15	Limitation on Lines of Business
8.16	Limitation on Subsidiary Distributions
8.17	Limitation on Management Fees
8.18	Designated Senior Debt
8.19	Chief Executive Office
8.20	Limitations on Activities of Special Purpose Subsidiaries
SECTION 9.  EVENTS OF DEFAULT
SECTION 10.  THE AGENTS
10.1	Appointment
10.2	Delegation of Duties
10.3	Exculpatory Provisions
10.4	Reliance by Agents
10.5	Notice of Default
10.6	Non-Reliance on Agents and Other Lenders
10.7	Indemnification
10.8	Agent in Its Individual Capacity
10.9	Successor Administrative Agent.
10.10	Agents and Arrangers
SECTION 11.  MISCELLANEOUS
11.1	Amendments and Waivers
11.2	Notices
11.3	No Waiver; Cumulative Remedies
11.4	Survival of Representations and Warranties
11.5	Payment of Expenses and Taxes
11.6	Successors and Assigns; Participations and Assignments
11.7	Adjustments; Set-off
11.8	Counterparts
11.9	Severability
11.10	Integration
11.11	GOVERNING LAW
11.12	Submission To Jurisdiction; Waivers

iii

11.13	Acknowledgements
11.14	WAIVERS OF JURY TRIAL
11.15	Confidentiality
11.16	Conversion of Currencies
11.17	Usury Savings Clause
11.18	Release of Mortgages and Other Security Documents

SCHEDULES
1.l(a)	-	Commitments
1.l(b)	-	Terms of Convertible Preferred
1.1(c)	-	Refinanced Existing Indebtedness
2.1(c)	-	Existing Letters of Credit
5.1	-	Sales, Transfers and Dispositions
5.2	-	Dividends, Distributions and Redemptions
5.9	-	Real Property
5.10	-	Claims with respect to Intellectual Property
5.16	-	Subsidiaries
5.18	-	Environmental Matters
8.2(e)	-	Existing Indebtedness
8.3(f)	-	Existing Liens
8.4(a)	-	Existing Guarantee Obligations
8.6(f)	-	Scheduled Asset Sales
8.9(k)	-	Existing Investments
11.2	-	Addresses for Notices
EXHIBITS
A	-	Form of Assignment and Assumption
B	-	Form of Guarantee and Collateral Agreement
C-l	-	Form of Revolving Credit Note
C-2	-	Form of Tranche B Term Note
C-3	-	Form of Swing Line Note
D	-	Form of Closing Certificate
E-1	-	Form of Legal Opinion of Skadden, Arps, Slate, Meagher and Flom LLP
E-2	-	Form of Legal Opinion of Cox & Smith Incorporated
F	-	Form of Swing Line Loan Participation Certificate
G	-	Form of Exemption Certificate
H	-	Form of Notice of Borrowing

iv

CREDIT AGREEMENT, dated as of August 11, 2003, among KINETIC CONCEPTS, INC., a Texas corporation (the “Company”), the several banks and other financial institutions from time to time parties to this Agreement (the “Lenders”), Morgan Stanley Senior Funding, Inc. (“Morgan Stanley”), as administrative agent for the Lenders hereunder, Morgan Stanley & Co. Incorporated, as collateral agent for the Lenders hereunder, Credit Suisse First Boston (“CSFB”), as syndication agent for the Lenders hereunder, Wells Fargo Bank, National Association, as issuing bank for the Lenders hereunder (the “Issuing Bank”) and JPMorgan Chase Bank, Wells Fargo Bank, National Association and The Bank of Nova Scotia, as documentation agents for the Lenders hereunder (the “Documentation Agents”).

W I T N E S S E T H:

WHEREAS, concurrently with the execution hereof the Company is undertaking the Transactions (except with respect to those transactions which are contemplated herein to close after the date hereof), and in connection therewith has requested that the Lenders provide the facilities described herein, and the Lenders have agreed to provide the same on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto hereby agree as follows:

SECTION 1.  DEFINITIONS

1.1Defined Terms.  As used in this Agreement, the following terms shall have the following meanings:

“Acquired EBITDA”: with respect to any Permitted Acquisition by the Company or any of its Subsidiaries during any period, the portion of consolidated net income of the Prior Owner thereof for such period attributable to the Capital Stock or assets acquired by the Company or such Subsidiary pursuant to such Permitted Acquisition, as the case may be, plus, to the extent deducted in computing such portion of consolidated net income for such period, the sum of (a) income Tax expense, (b) interest expense, (c) depreciation and amortization expense and (d) other non-cash charges and expenses, all as determined with respect to such Capital Stock or assets while under the ownership of the Prior Owner in accordance with GAAP.

“Acquired Interest Expense”: with respect to any Permitted Acquisition by the Company or any of its Subsidiaries during any period, the sum of (a) the portion of interest expense, both expensed and capitalized, of the Prior Owner thereof for such period determined in accordance with GAAP (including that portion of payments under Financing Leases of the Prior Owner attributable to interest expense of the Prior Owner for such period in accordance with GAAP) attributable to any Indebtedness of the Prior Owner which is assumed by the Company or any of its Subsidiaries pursuant to such Permitted Acquisition and (b) the Interest Expense (as defined in clause (a) of the definition thereof) that would have been incurred by the Company from the beginning of such period through the date of consummation of such Permitted Acquisition had the

Indebtedness incurred by the Company or any of its Subsidiaries to finance such Permitted Acquisition been incurred on the first day of such period (assuming the rate of interest applicable to such Indebtedness during such period was equal to the rate of interest applicable to such Indebtedness on the date of consummation of such Permitted Acquisition).

“Acquisition”: as to any Person, the acquisition (in a single transaction or a series of related transactions) by such Person of (a) at least 50% of the outstanding Capital Stock of any other Person, (b) all or substantially all of the assets of any other Person or (c) assets constituting one or more business units or divisions of any other Person.

“Administrative Agent”: Morgan Stanley, together with its affiliates, as the administrative agent for the Lenders under this Agreement and the other Loan Documents.

“Administrative Agent’s Payment Office”: the address for payments set forth in subsection 11.2 or such other address as the Administrative Agent may from time to time specify in accordance with subsection 11.2.

“Affected Eurodollar Loans”: as defined in subsection 4.3(g).

“Affiliate”: as to any Person, any other Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person.  For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 20% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

“Agent-Related Persons”: the Agents and any successor agent pursuant to subsection 10.9, together with their respective Affiliates (including the Arrangers), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.

“Agents”: collectively, the Administrative Agent, the Collateral Agent and the Syndication Agent.

“Aggregate Revolving Credit Outstandings”: as to any Revolving Credit Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Loans made by such Revolving Credit Lender then outstanding, (b) an amount equal to the product of such Revolving Credit Lender’s Revolving Credit Commitment Percentage at such time and the L/C Obligations then outstanding, and (c) an amount equal to the product of such Revolving Credit Lender’s Revolving Credit Commitment Percentage at such time and the aggregate principal amount of all Swing Line Loans then outstanding.

“Agreement”: this Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time.

2

“Agreement Currency”: as defined in subsection 11.16.

“Applicable Creditor”: as defined in subsection 11.16.

“Applicable Margin”: (a) in the case of the Revolving Loans (i) 1.50% if such Loans are Base Rate Loans and (ii) 2.50% if such Loans are Eurodollar Loans; and (b) in the case of the Tranche B Term Loans, (x) at any time that the Leverage Ratio is greater than 3.00 to 1.00, (i) 1.75% if such Loans are Base Rate Loans and (ii) 2.75% if such Loans are Eurodollar Loans and (y) in all other cases, (i) 1.50% if such Loans are Base Rate Loans and (ii) 2.50% if such Loans are Eurodollar Loans.

“Applicable Rate”: 0.50% per annum.

“Arrangers”: Morgan Stanley and CSFB, in their capacity as joint lead arrangers and joint book managers under this Agreement.

“Assignee”: as defined in subsection 11.6(c).

“Available Cash”: at any time, (a) the sum of (i) so long as no Default or Event of Default shall have then occurred and be continuing, the aggregate Available Revolving Credit Commitments of the Revolving Credit Lenders at such time and (ii) the aggregate amount of unrestricted cash and Cash Equivalents of the Company and its Subsidiaries at such time minus (b) the aggregate amount of Taxes that would then be payable if the cash or Cash Equivalents of the Foreign Subsidiaries were paid as a dividend to the Company or any of its Domestic Subsidiaries as a result of the payment of such dividend.

“Available Revolving Credit Commitment”: as to any Revolving Credit Lender at any time, an amount equal to the excess, if any, of (a) the amount of such Revolving Credit Lender’s Revolving Credit Commitment in effect at such time over (b) the Aggregate Revolving Credit Outstandings of such Revolving Credit Lender at such time; collectively, as to all the Revolving Credit Lenders, the “Available Revolving Credit Commitments”.

“Banking Day”: (a) with respect to any borrowings, disbursements and payments in respect of and calculations and interest rates pertaining to Base Rate Loans, any Business Day, and (b) with respect to any borrowings, disbursements and payments in respect of and calculations, interest rates and Interest Periods pertaining to Eurodollar Loans, any Business Day which is also a day on which dealings are carried on in the London Interbank market.

“Base Rate”: for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (i) the rate of interest publicly announced by Citibank, N.A. as its “prime rate” and (ii) the Federal Funds Effective Rate in effect from time to time plus 0.5%; any change in the Base Rate due to a change in the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Federal Funds Effective Rate.

3

“Base Rate Loans”: Loans the rate of interest applicable to which is based upon the Base Rate.

“Base Year”: as defined in subsection 4.3(b).

“Benefited Lender”: as defined in subsection 11.7(a).

“Borrowing Date”: any Banking Day specified in a notice pursuant to subsection 2.2, 2.14 or 3.2 as a date on which the Company requests the Lenders to make Loans hereunder.

“Business”: as defined in subsection 5.18(b).

“Business Day”: a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close.

“Capital Expenditures”: as to any Person for any period, gross expenditures (whether paid in cash or other consideration or accrued by such Person and its Subsidiaries, but without duplication) for the rental, lease, purchase (including by way of the acquisition of securities of a Person), construction or use of any property during such period, the value or cost of which, in accordance with GAAP, would appear on such Person’s consolidated balance sheet in the category of property, plant or equipment at the end of such period, provided that the foregoing shall not be reduced for any sales or dispositions of any category of property, plant or equipment, provided, further, that the foregoing shall exclude (i) any expenditures for raw materials and work-in-process, (ii) any expenditures made with the Net Cash Proceeds of an asset sale or other disposition or a Casualty Event that are reinvested as permitted by subsection 4.3(d), (iii) any expenditures made with the Net Cash Proceeds of capital contributions from, or the issuance of Capital Stock to, the Sponsors and (iv) any expenditures for Permitted Acquisitions.

“Capital Stock”: any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing.

“Cash Collateral Account”: as defined in subsection 4.3(a).

“Cash Equivalents”: (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-2 by Standard and Poor’s Rating Group (“S&P”) or at least P-2 by Moody’s Investors Service,

4

Inc. (“Moody’s”), (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or at least A by Moody’s, (f) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition, (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition or (h) investments made by Foreign Subsidiaries in local currencies in instruments issued by or with entities of such jurisdiction having correlative attributes to the foregoing.

“Cash Interest Expense”: of the Company for any period, Consolidated Interest Expense of the Company for such period minus, in each case to the extent included in determining such Consolidated Interest Expense for such period, the sum of the following: (a) non-cash expenses for interest payable in kind, (b) amortization of debt discount and fees and (c) premiums paid in respect of the repayment of the Existing Subordinated Notes.

“Casualty Event”: with respect to any property of any Person, the receipt by such Person of insurance proceeds, or proceeds of a condemnation award or other compensation in connection with any loss of or damage to, or any condemnation or other taking of, such property.

“Certificate of Designations”: that certain Statement of Designations, Preferences and Rights of the Series A Convertible Participating Preferred Stock of Kinetic Concepts, Inc. that governs the rights and preferences of the Convertible Preferred.

“Closing Date”: the date of the initial funding of Loans hereunder.

“Code”: the Internal Revenue Code of 1986, as amended from time to time.

“Collateral”: all assets of the Loan Parties, now owned or hereinafter acquired, upon which a Lien is purported to be created by any Security Document.

“Collateral Agent”:  Morgan Stanley & Co. Incorporated.

“Commitments”: the collective reference to the Revolving Credit Commitments and the Tranche B Term Loan Commitments; individually, a “Commitment”.

“Commonly Controlled Entity”:  an entity, whether or not incorporated, which is under common control with any Loan Party within the meaning of Section 4001 of ERISA or is part of a group which includes the Loan Parties and which is treated as a single employer under Section 414 of the Code.

“Company”: as defined in the preamble to this Agreement.

5

“Consolidated”: means such term as it applies to the Company and its Subsidiaries on a consolidated basis, after eliminating all intercompany items.

“Continuing Directors”: as defined in subsection 9(l).

“Contractual Obligation”: as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“Convertible Preferred”: the Company’s 9% convertible preferred securities on terms and conditions substantially similar to the terms set forth in the Certificate of Designations attached hereto as Schedule 1.1(b) or otherwise on terms and conditions reasonably satisfactory to the Arrangers.

“Convertible Preferred Documents”: the Convertible Preferred Purchase Agreement, the Investor Rights Agreement, the Certificate of Designations and any other agreements and documents executed and delivered in connection with the foregoing.

“Convertible Preferred Purchase Agreement”: that certain Series A Preferred Stock Purchase Agreement dated on or about August 11, 2003 among the Company and the investors named therein.

“CSFB”: as defined in the preamble to this Agreement.

“Default”: any of the events specified in Section 9, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.

“Dollars” and “$”: dollars in lawful currency of the United States of America.

“Domestic Subsidiary”: any Subsidiary of the Company organized under the laws of any jurisdiction within the United States.

“Documentation Agents”: as defined in the preamble to this Agreement.

“EBITDA”: with respect to any period, the sum of, without duplication, (a) Consolidated Net Income of the Company for such period plus, in each case to the extent deducted in determining such Consolidated Net Income for such period, the sum of the following (without duplication): (i) Consolidated Interest Expense of the Company, (ii) consolidated income Tax expense of the Company and its Consolidated Subsidiaries, (iii) consolidated depreciation and amortization expense of the Company and its Consolidated Subsidiaries, (iv) the unrealized foreign currency losses of the Company and its Consolidated Subsidiaries, (v) all other non-cash charges (including impairment charges with respect to goodwill) and expenses (including option expenses) of the Company and its Consolidated Subsidiaries, (vi) management fees paid to the Sponsors prior to August 31, 2003, (vii) cash expenses for option and stock repurchases for the 12-month period ending on and including the Closing Date, cash expenses related thereto incurred after the Closing Date, and cash expenses in connection with the Redemptions with respect to

6

option repurchases, (viii) R&D expense write off for the twelve month period prior to the Closing Date, and (ix) charges, expenses or fees incurred in connection with the Transactions (including in connection with the extinguishment of Indebtedness but excluding accrued interest and bond tender premium) in an aggregate amount not to exceed $35 million, and minus, to the extent included in determining such Consolidated Net Income for such period, any unrealized foreign currency gains and any non-cash income or non-cash gains, all as determined on a consolidated basis in accordance with GAAP, plus (b) with respect to any Permitted Acquisitions made by the Company or any of its Subsidiaries during such period, the Acquired EBITDA of the Capital Stock or assets acquired pursuant to such Permitted Acquisitions while under the ownership of the Prior Owner thereof for the portion of such period prior to the consummation of such Permitted Acquisition, provided that EBITDA with respect to any period during which any Permitted Acquisition is consummated shall not include any interest income in respect of any cash (other than proceeds of Indebtedness incurred to finance any such Permitted Acquisition) used to finance such Permitted Acquisition.

“EMD CV”: European Medical Distributors, CV, a Dutch limited partnership.

“Environmental Laws”: any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, guidelines, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of the environment, or of human health or employee health and safety as they may be affected by the environment or by Materials of Environmental Concern, as has been, is now, or may at any time hereafter be, in effect.

“ERISA”: the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder.

“Eurocurrency Reserve Requirements”: for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of such Board) maintained by a member bank of such System.

“Eurodollar Base Rate”: with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum equal to the rate for deposits in Dollars for the period commencing on the first day of such Interest Period and ending on the last day of such Interest Period which appears on Telerate Page 3750 as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period.  If at least two rates appear on such Telerate Page for such Interest Period, the “Eurodollar Base Rate” shall be the arithmetic mean of such rates.  If the “Eurodollar Base Rate” cannot be determined in accordance with the immediately preceding sentences with respect to any Interest Period, the “Eurodollar Base Rate” with respect to each day during

7

such Interest Period shall be the rate per annum appearing on Reuters Screen LIBOR Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period.  If at least two rates appear on Reuters Screen LIBOR Page, the “Eurodollar Base Rate” shall be the arithmetic mean of such rates.

“Eurodollar Loans”: Loans the rate of interest applicable to which is based upon the Eurodollar Rate.

“Eurodollar Rate”: with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):

Eurodollar Base Rate

1.00 - Eurocurrency Reserve Requirements

“Event of Default”: any of the events specified in Section 9, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.

“Excess Cash Flow”: for any fiscal year of the Company:

(a)the sum of (i) EBITDA for such fiscal year, plus (ii) any decreases in Working Capital during such fiscal year,

minus

(b)the sum of, without duplication, (i) to the extent deducted in determining Consolidated Net Income of the Company for such fiscal year, the aggregate amount of Cash Interest Expense for such fiscal year plus (ii) scheduled principal amortization of Tranche B Term Loans during such fiscal year (whether or not such payments are made, but after giving effect to any reduction in such scheduled principal amortization as a result of voluntary prepayments), plus (iii) any voluntary prepayments of Tranche B Term Loans made during such fiscal year, plus (iv) any prepayments of Revolving Loans to the extent the Revolving Credit Commitments were concurrently reduced at the option of the Company by a like amount during such fiscal year, plus (v) the sum of, without duplication, (A) the aggregate amount paid, or required to be paid, in cash in respect of income Taxes during such fiscal year and (B) the aggregate amount of Taxes that would be payable if the portion of Consolidated Net Income of the Company for such fiscal year which was earned by Foreign Subsidiaries was paid as a dividend to the Company or any of its Domestic Subsidiaries during such fiscal year plus (vi) the aggregate amount of all Capital Expenditures made during such fiscal year in accordance with the terms hereof plus (vii) any increases in Working Capital during such fiscal year, plus (viii) the Acquired EBITDA of all Capital Stock or assets acquired pursuant to any Permitted Acquisitions made during such fiscal year while under the ownership of the Prior Owner thereof for the portion of such fiscal year prior to the consummation of each such

8

Permitted Acquisition plus (ix) the excess of (A) the aggregate amount of cash used to consummate Permitted Acquisitions during such fiscal year over (B) the increase in Working Capital during such fiscal year which is attributable to such Permitted Acquisitions, plus (x) the aggregate amount of cash used to make Investments under subsections 8.9(c), (f), (i), and (k), plus (xi) the aggregate amount of cash used to repurchase Capital Stock of the Company pursuant to subsection 8.7(i), plus (xii) charges, expenses or fees incurred in connection with the Transactions (including in connection with the extinguishment of Indebtedness), plus (xiii) management fees paid to the Sponsors prior to August 31, 2003, plus (xiv) cash expenses for option and stock repurchases for the 12-month period ending on and including the Closing Date, and cash expenses related thereto incurred after the Closing Date, and cash expenses in connection with the Redemptions with respect to option repurchases, in each case to the extent deducted in determining Net Income, plus (xv) the Net Cash Proceeds of asset sales and other dispositions and Casualty Events that were reinvested as permitted by subsection 4.3(d) during such fiscal year.

“Existing Subordinated Note Indenture”:  the Indenture, dated as of November 5, 1997, between the Company, the guarantors listed therein, and Marine Midland Bank, as trustee.

“Existing Subordinated Note Indenture Documents”:  the Existing Subordinated Note Indenture, the Existing Subordinated Notes, and any other notes, agreements, guaranties and documents executed and delivered in connection with the foregoing.

“Existing Subordinated Notes”:  the 9 5/8% Senior Subordinated Notes due 2007, Series A and the 9 5/8% Senior Subordinated Notes due 2007, Series B issued by the Company pursuant to the Existing Subordinated Note Indenture.

“Federal Funds Effective Rate”: for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it.

“Fee Payment Date”: the last day of each March, June, September and December (or if such day is not a Business Day, the next succeeding Business Day).

“Financing Lease”: any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee.

“Foreign Currency Protection Agreements”: as to any Person, all foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect such Person against fluctuations in currency values.

9

“Foreign Subsidiary”: any Subsidiary of the Company organized under the laws of any jurisdiction outside the United States of America.

“GAAP”: generally accepted accounting principles in the United States of America in effect from time to time.

“Governmental Authority”: any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Guarantee”: (a) the Guarantee and Collateral Agreement, or (b) any other guarantee delivered to the Administrative Agent guaranteeing the Obligations.

“Guarantee and Collateral Agreement”: the Guarantee and Collateral Agreement, to be executed and delivered by the Company and each of the Domestic Subsidiaries, substantially in the form of Exhibit B, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Guarantee Obligation”: as to any Person (the “guaranteeing person”), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business.  The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (x) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (y) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing person in good faith.

10

“Guarantor”: any Person (other than the Company) which is now or hereafter becomes a party to the Guarantee and Collateral Agreement.

“IMD CV”: International Medical Distributors, CV, a Dutch limited partnership.

“Indebtedness”: of any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all obligations of such Person in respect of acceptances issued or created for the account of such Person, (e) all obligations of such Person in respect of Foreign Currency Protection Agreements, Interest Rate Protection Agreements and any other commodity or other hedging arrangement and (f) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof (the amount of any Indebtedness pursuant to this clause (f) shall be equal to the lesser of (i) the amount of such liabilities and (ii) the fair market value of such property).  For purposes of this Agreement, the amount of any Indebtedness referred to in clause (e) of the preceding sentence shall be the net amounts (including by offset of amounts payable thereunder), including any net termination payments, required to be paid to a counterparty rather than any notional amount with regard to which payments may be calculated.  For the avoidance of doubt, all obligations under the Convertible Preferred are deemed not to be Indebtedness for all purposes hereunder.

“Insolvency”: with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.

“Insolvent”: pertaining to a condition of Insolvency.

“Intellectual Property”:  as defined in subsection 5.10.

“Interest Expense”: of the Company for any period, the sum of (a) the amount of interest expense, both expensed and capitalized, of the Company and its Consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP for such period, plus, without duplication, that portion of payments under Financing Leases of the Company and its Consolidated Subsidiaries attributable to interest expense of the Company and its Consolidated Subsidiaries for such period in accordance with GAAP and (b) the Acquired Interest Expense of the Company and its Subsidiaries for such period.  For the avoidance of doubt, any dividends on the Convertible Preferred shall be deemed not to be interest expense for all purposes hereunder.

“Interest Payment Date”: (a) as to any Base Rate Loan or Swing Line Loan, the last dayof each March, June, September and December (or if such day is not a Business Day, the next succeeding Business Day), (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, and (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day which is

11

three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period.

“Interest Period”: with respect to any Eurodollar Loan:

(i)initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Company in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and

(ii)thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Company by irrevocable written notice to the Administrative Agent not less than three Banking Days prior to the last day of the then current Interest Period with respect thereto;

provided that, the foregoing provisions relating to Interest Periods are subject to the following:

(1)if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day that is not a Banking Day, such Interest Period shall be extended to the next succeeding Banking Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Banking Day;

(2)any Interest Period pertaining to a Eurodollar Loan that begins on the last Banking Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Banking Day of a calendar month; and

(3)the Company shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan.

“Interest Rate Protection Agreement”: any interest rate protection agreement, interest rate future, interest rate option, interest rate cap or collar or other interest rate hedge arrangement, to or under which the Company or any of its Subsidiaries is a party or a beneficiary.

“Investment”: as defined in subsection 8.9.

“Investor Rights Agreement”: that certain Investor Rights Agreement dated as of August 11, 2003, among the Company and the investors named therein.

“ISP”: the International Standby Practices of the International Chamber of Commerce (ISP 98).

12

“Issuing Bank”: Wells Fargo Bank, National Association, any of its affiliates or any other Lender which shall be appointed in accordance with the provisions hereof to act as Issuing Bank.

“Judgment Currency”: as defined in subsection 11.16.

“KCI Holding”: KCI Holding Company, Inc., a Delaware corporation.

“KCII Holdings LLC”: KCII Holdings, L.L.C., a Delaware limited liability company.

“KCII”: KCI International, Inc., a Delaware corporation.

“KCI International”: KCI International Holding Company, a Delaware corporation.

“L/C Obligations”:  at any time, the sum of (a) the aggregate amount then available to be drawn under all outstanding Letters of Credit and (b) the aggregate amount of Reimbursement Obligations in respect of Letters of Credit which have not then been reimbursed by the Company pursuant to subsection 2.9.

“L/C Participants”: the collective reference to all the Revolving Credit Lenders other than the Issuing Bank.

“L/C Sublimit”: at any time, the lesser of (a) $30,000,000 and (b) the Revolving Credit Commitments then in effect.

“Lenders”: as defined in the preamble to this Agreement and including, without limitation, the Issuing Bank.

“Letter of Credit Application”: an application in such form as the Issuing Bank may specify from time to time, requesting the Issuing Bank to open a Letter of Credit.

“Letters of Credit”: as defined in subsection 2.5(a).

“Leverage Ratio”: at any time, the ratio of (a) Total Funded Debt at such time to (b) EBITDA for the most recent period of four consecutive fiscal quarters.

“Lien”: any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing).  For the avoidance of doubt, “Liens” shall not include any precautionary notice of an ordinary course operating lease of personal property evidenced by a financing statement filed under the Uniform Commercial Code of any jurisdiction.

“Loan”: any loan made by any Lender or Swing Line Lender.

13

“Loan Documents”: this Agreement, any Notes, any Letter of Credit Applications, any Letters of Credit, any Swing Line Loan Participation Certificates and the Security Documents.

“Loan Notices”: notices from the Company with respect to borrowings, commitments, conversions and continuations, such as notices of borrowings, notices of termination or reduction of Revolving Credit Commitments, notices requesting the issuance of Letters of Credit, notices with respect to whether a Loan is to be a Eurodollar Loan, notices regarding continuing Eurodollar Loans, and notices regarding the conversion of Eurodollar Loans to Base Rate Loans and the conversion of Base Rate Loans to Eurodollar Loans.

“Loan Parties”: the Company and each Subsidiary of the Company which is a party to a Loan Document; individually, a “Loan Party”.

“Management Equity Plan”: the Company’s Management Equity Plan in effect on the Closing Date, as the same may be amended from time to time, or any successor stock option plan which governs the terms of stock options which were initially granted under the Management Equity Plan.

“Material Adverse Effect”:  a material adverse effect on (a) the business, condition (financial or otherwise), operations, performance or properties of the Company and its Subsidiaries taken as a whole, (b) the ability of the Company or any Guarantor to perform its obligations hereunder or under any of the other Loan Documents or (c) the rights or remedies of the Administrative Agent or the Lenders hereunder or under any of the other Loan Documents.

“Materials of Environmental Concern”: any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or by-products or any hazardous or toxic substances, materials or wastes (including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation), that is regulated pursuant to or could give rise to liability under any applicable Environmental Law, whether or not such substance, material, or waste is defined as hazardous or toxic under any applicable Environmental Law.

“Minimum Tax Withholding”:  the amount which the Company or any of its subsidiaries is required to withhold in connection with employee related taxes, including, without limitation, federal and state withholding requirements, and FICA and Medicare taxes.

“Moody’s”: as defined in the definition of “Cash Equivalents.”

“Morgan Stanley”: as defined in the preamble to this Agreement.

“Mortgages”: the collective reference to the fee and ground leasehold mortgages, deeds of trust and other similar documents executed and delivered from time to time in accordance with the terms hereof by the Company and the Guarantors in favor of the Collateral Agent, in such form as shall be reasonably satisfactory to the Company and the

14

Administrative Agent, as each of the same may be amended, restated, supplemented or otherwise modified from time to time.

“Multiemployer Plan”:  a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Net Cash Proceeds”: (a) with respect to any sale or other disposition of assets by the Company or any of its Subsidiaries, the net amount equal to the aggregate amount received in cash (including Cash Equivalents and any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or the subsequent sale or disposition of any non-cash consideration or Investments received in connection therewith or otherwise, but only as and when received) minus the sum of (i) the fees, commissions and other out-of-pocket expenses incurred by the Company or such Subsidiary in connection with such sale or other disposition, (ii) federal, state and local Taxes incurred in connection with such sale or other disposition, whether payable at such time or thereafter, (iii) reserves for indemnification obligations and purchase price adjustments reasonably expected to be payable by such Loan Party in connection therewith (it being understood that if such amount is not subsequently paid, such amount shall constitute “Net Cash Proceeds” at the time such payment is no longer required) and (iv) in the case of any such sale or other disposition of assets subject to a Lien securing any Indebtedness (which Lien and Indebtedness are permitted by this Agreement), any amounts required to be repaid by the Company or such Subsidiary in respect of such Indebtedness (other than Indebtedness under this Agreement) in connection with such sale or other disposition;

(b)with respect to any issuance of any Indebtedness or Capital Stock by any Loan Party or any of its Subsidiaries or any capital contribution made to any Loan Party or any of its Subsidiaries, the net amount equal to the aggregate amount received in cash (including Cash Equivalents and any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or the subsequent sale or disposition of any non-cash consideration or Investments received in connection therewith or otherwise, but only as and when received) in connection with such issuance or capital contribution minus the documented fees, commissions and other out-of-pocket expenses incurred by such Loan Party and its Subsidiaries in connection with such issuance or capital contribution; and

(c)with respect to proceeds received by any Loan Party or any of its Subsidiaries in respect of a Casualty Event, the amount of such proceeds minus (i) the documented out-of-pocket fees and expenses incurred by such Loan Party and its Subsidiaries in connection with the collection of such proceeds (including income taxes payable as a result of any gain recognized in connection therewith), (ii) any such proceeds received in respect of insurance which are required to be paid to any co-insured Persons or other loss payees with respect to such insurance, and (iii) in the case of any Casualty Event relating to any asset subject to a Lien securing any Indebtedness (which Lien and Indebtedness are permitted by this Agreement), any amounts required to be repaid by the Company or such Subsidiary in respect of such Indebtedness (other than Indebtedness under this Agreement) in connection with such Casualty Event.

15

“Net Income”: of the Company for any period, the net income of the Company and its Consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP for such period.

“Non-Excluded Taxes”: as defined in subsection 4.12(a).

“Notes”: the collective reference to the Revolving Credit Notes, the Swing Line Note, and the Tranche B Term Notes.

“Notice of Borrowing”: as defined in subsection 2.2.

“Obligations”: the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Loans and Reimbursement Obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Company, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Company to the Agents, or the Issuing Bank or to any Lender (or to any Affiliate of a Lender which enters into any Foreign Currency Protection Agreement or Interest Rate Protection Agreement with the Company), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, any Letters of Credit, any Foreign Currency Protection Agreement or Interest Rate Protection Agreement entered into with any Lender or any Affiliate of any Lender or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees, charges and disbursements of counsel to any Agent or to any Lender that are required to be paid by the Company pursuant hereto) or otherwise.

“Outstanding Swing Line Loans”: as defined in subsection 2.15(a).

“Participant”: as defined in subsection 11.6(b).

“PBGC”: the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA.

“Permanent Disability”: with respect to any option holder who is an employee of the Company or any of its Subsidiaries, the same meaning as such term or similar term is defined in an employment agreement applicable to the employee or, in the case of an option holder who does not have an employment agreement that defines such term or a similar term, means that the option holder is unable to perform substantially all his or her duties as an employee of the Company or any of its Subsidiaries by reason of illness or incapacity for a period of more than six consecutive months, or six months in the aggregate during any 12-month period, established by medical evidence reasonably satisfactory to the Company.

“Permitted Acquisition”: any Acquisition, provided that (a) the Company satisfies, and is projected to continue to satisfy, after giving effect (on a pro forma basis)

16

to such Acquisition and any Indebtedness incurred in connection therewith, the financial covenants set forth in subsection 8.1 through the Tranche B Final Maturity Date as set forth in a certificate of the Chief Financial Officer of the Company delivered to the Administrative Agent at least five Business Days prior to the consummation of such Acquisition, (b) such Acquisition is approved by the Board of Directors (or a majority of holders of the Capital Stock of such Person) of the Person whose assets or Capital Stock are being acquired pursuant to such Acquisition, (c) no Default or Event of Default has then occurred and is continuing or would result therefrom, (d) the purchase price (including assumed indebtedness and the fair market value of the non-cash consideration in connection with such Acquisition) of such Acquisition does not exceed $20,000,000 individually and the purchase price of all such Acquisitions (i) in any given fiscal year does not exceed $30,000,000 in the aggregate and (ii) since the Closing Date does not exceed $100,000,000 in the aggregate (provided that, if the Company or any of its Subsidiaries receives Net Cash Proceeds of capital contributions by, or from the issuance of any Capital Stock (other than any such Net Cash Proceeds received and applied to finance the consummation of the Transactions) to, the Sponsors after the Closing Date, such aggregate limitation in this clause (d) shall be increased by the aggregate amount of such Net Cash Proceeds), (e) the Available Cash in effect at the time of such Acquisition (and after giving effect thereto) is at least $10,000,000, (f) the Company and its Subsidiaries shall be in compliance with the requirements of subsection 7.10 after giving effect to such Acquisition and (g) the aggregate purchase price (including assumed indebtedness and the fair market value of the non-cash consideration in connection with such Acquisition) of all such Acquisitions that relate to joint ventures shall not exceed $20,000,000.

“Permitted Post Closing Redemptions”: any repurchases or redemptions of the Company’s Capital Stock with:  (i) the net after Tax proceeds received pursuant to that certain Settlement Agreement, dated as of December 31, 2002, by and between the Company, certain of its subsidiaries and shareholders, and Hillenbrand Industries, Inc., certain of its subsidiaries and shareholders in an aggregate amount not to exceed $47 million, (ii) cash strike payments from the exercise of options and the estimated tax benefit to the Company from the Transactions, including the exercise or repurchase of stock options in connection therewith, or (iii) the cash proceeds from the issuance of the Convertible Preferred, in the case of clauses (i) and (ii), completed prior to June 30, 2004, and in the case of clause (iii), completed prior to October 31, 2003.

“Person”: an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

“Placement Agreement”: that certain Placement Agreement dated as of July 23, 2003, among the Company, the guarantors named therein and the initial purchasers named therein.

“Plan”: at a particular time, any employee benefit plan which is covered by ERISA and in respect of which any Loan Party or a Commonly Controlled Entity is (or,

17

if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Prior Owner”: with respect to any Permitted Acquisition by the Company or any of its Subsidiaries, the Person or Persons which was or were the owner(s) of the Capital Stock or assets acquired by the Company or such Subsidiary pursuant to such Permitted Acquisition.

“Projections”: as defined in subsection 5.20.

“Properties”: as defined in subsection 5.18(a).

“Redemption Documents”: all Offers to Purchase and related letters of transmittal or similar documents used in connection with the Redemptions.

“Redemptions” the initial repurchase or redemption of Capital Stock in an aggregate amount not to exceed $300 million, and any Permitted Post Closing Redemptions.

“Register”: as defined in subsection 11.6(d).

“Registration Rights Agreement”: that certain Registration Rights Agreement dated as of August 11, 2003 among the Company, the guarantors named therein and the initial purchasers named therein.

“Regulation S-X”: Regulation S-X under the Securities Act as in effect from time to time.

“Regulation T”: Regulation T of the Board of Governors of the Federal Reserve System as in effect from time to time.

“Regulation U”: Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.

“Regulation X”: Regulation X of the Board of Governors of the Federal Reserve System as in effect from time to time.

“Reimbursement Obligations”: the obligation of the Company to reimburse the Issuing Bank pursuant to subsection 2.9 for amounts drawn under Letters of Credit.

“Related Fund”: with respect to any Lender that is a fund, any other fund that invests in loans and is managed by a Lender, an Affiliate of a Lender or the same investment adviser that manages such Lender or by an affiliate of such investment adviser.

“Reorganization”: with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.

18

“Reportable Event”: any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty-day notice period has been waived by regulation.

“Required Lenders”: at any time, Lenders the Voting Percentages of which aggregate more than 50%.

“Required Revolving Credit Lenders”: at any time, Revolving Credit Lenders the Revolving Credit Commitment Percentages of which aggregate more than 50%.

“Required Tranche B Lenders”: at any time, Tranche B Lenders the Tranche B Commitment Percentages of which aggregate more than 50%.

“Requirement of Law”: as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Responsible Officer”: (a) with respect to the Company, the chief executive officer, the president or any senior vice president of the Company or, with respect to financial matters, the chief financial officer, the vice president of accounting, the vice president of finance or the treasurer of the Company and (b) with respect to any Subsidiary of the Company, the chief executive officer, the president or manager or comparable officer of such Subsidiary or, with respect to financial matters, the chief financial officer of such Subsidiary.

“Revolving Credit Commitment”: as to any Lender, the obligation of such Lender to (a) make Revolving Loans, (b) issue or participate in Letters of Credit, and (c) participate in Swing Line Loans, in an aggregate principal and/or face amount at any one time outstanding not to exceed the amount set forth under such Lender’s name in Schedule 1.1(a) opposite the heading “Revolving Credit Commitment” (in each case as such amount may be adjusted from time to time as provided herein); collectively, as to all such Lenders, the “Revolving Credit Commitments”.

“Revolving Credit Commitment Percentage”: as to any Revolving Credit Lender:

(a)at any time prior to the termination of the Revolving Credit Commitments, the percentage which (i) such Revolving Credit Lender’s Revolving Credit Commitment then constitutes of (ii) the Revolving Credit Commitments of all the Lenders, and

(b)at any time after the termination of the Revolving Credit Commitments, the percentage which (i) (x) the aggregate principal amount of such Revolving Credit Lender’s Revolving Loans then outstanding plus (y) the product of (A) such Revolving Credit Lender’s Revolving Credit Commitment Percentage immediately prior to the termination of the Revolving Credit

19

Commitments (giving effect to any permitted assignments after such termination) times (B) the sum of (1) the L/C Obligations, and (2) the aggregate principal amount of Swing Line Loans then outstanding then constitutes of (ii) the sum of (x) the aggregate principal amount of Revolving Loans of all the Revolving Credit Lenders then outstanding plus (y) the aggregate L/C Obligations of all the Revolving Credit Lenders then outstanding plus (z) the aggregate principal amount of Swing Line Loans then outstanding.

“Revolving Credit Commitment Period”: the period from and including the Closing Date to but not including the Revolving Credit Termination Date.

“Revolving Credit Lender”: any Lender having a Revolving Credit Commitment or that holds outstanding Revolving Loans hereunder.

“Revolving Credit Note”: as defined in subsection 4.1(d).

“Revolving Credit Termination Date”: the earlier of (a) the sixth anniversary of the Closing Date and (b) the date upon which the Revolving Credit Commitments shall be terminated pursuant to this Agreement.

“Revolving Loans”: as defined in subsection 2.1(a).

“Securities Act”: the Securities Act of 1933, as amended from time to time.

“Security Documents”: the collective reference to the Mortgages, the Guarantee and Collateral Agreement and all other security documents hereafter delivered to the Collateral Agent granting a Lien on any asset or assets of any Person to secure the obligations and liabilities of the Company and its Subsidiaries hereunder and under any of the other Loan Documents or to secure any guarantee of any such obligations and liabilities, including, without limitation, any security document delivered pursuant to subsection 7.10.

“Senior Subordinated Note Indenture”: the Indenture, dated as of August 11, 2003, between the Company and U.S. Bank National Association, as trustee, for the issuance of the Senior Subordinated Notes.

“Senior Subordinated Note Indenture Documents”: the Senior Subordinated Note Indenture, the Senior Subordinated Notes, the Registration Rights Agreement, the Placement Agreement and any other notes, agreements, guaranties and documents executed and delivered in connection with the foregoing.

“Senior Subordinated Notes”: the 7³/₈% senior subordinated unsecured notes issued by the Company pursuant to the Senior Subordinated Note Indenture and any other notes issued in exchange therefor and in accordance with any registration rights document entered into in connection with the issuance of the Senior Subordinated Notes.

“Single Employer Plan”: any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan.

20

“Solvent”: with respect to any Person on a particular date, the condition that on such date, (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature, and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small amount of capital.

“Special Purpose Subsidiaries”: KCI International and KCII Holdings LLC.

“Sponsors”: (i) Dr. James R.  Leininger, his spouse, his immediate family members, his heirs, any of his estate planning vehicles and any of their Affiliates, (ii) Fremont Purchaser II, Corp. and its Affiliates and (iii) RCBA Purchaser I, L.P. and its Affiliates.

“Subordinated Debt”: (a) any unsecured Indebtedness of the Company with terms and conditions at least as favorable to the Lenders as those applicable to the Senior Subordinated Notes and (b) any other unsecured Indebtedness of the Company, no part of the principal of which is required to be paid (whether by way of mandatory sinking fund, mandatory redemption, mandatory prepayment or otherwise) prior to the earlier of (i) the tenth anniversary of the Closing Date and (ii) one year after the date of the final scheduled installment of Loans under this Agreement; the payment of the principal of and interest on which and other obligations of the Company in respect thereof are subordinated to the prior payment in full of the Obligations on terms and conditions at least as favorable to the Lenders as those applicable to the Senior Subordinated Notes; and all other terms and conditions of which are reasonably satisfactory in form and substance to the Required Lenders (as evidenced by their prior written approval thereof).

“Subordinated Debt Documentation”: the agreements, indentures and other documentation pursuant to which any Subordinated Debt is issued.

“Subsidiary”: as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company.  For all purposes under this Agreement, the term “Subsidiary” shall not include any grantor trust beneficially owned by the Company or any of its Subsidiaries as of the Closing Date, regardless of whether such grantor trust would be treated as a subsidiary of the Company under GAAP.

21

“Swing Line Commitment”: at any time, the obligation of the Swing Line Lender to make Swing Line Loans pursuant to subsection 2.13.

“Swing Line Lender”: Morgan Stanley, in its capacity as provider of the Swing Line Loans.

“Swing Line Loans”: as defined in subsection 2.13.

“Swing Line Loan Participation Certificate”: a certificate, substantially in the form of Exhibit F.

“Swing Line Note”: as defined in subsection 4.1(d).

“Syndication Agent”: CSFB, together with its affiliates, as the syndication agent for the Lenders under this Agreement.

“S&P”: as defined in the definition of “Cash Equivalents.”

“Taxes”: as defined in subsection 4.12.

“Total Funded Debt”: on any date, with respect to the Company and its Subsidiaries on a Consolidated basis, all Indebtedness of the Company and its Subsidiaries which by its terms or by the terms of any instrument or agreement relating thereto matures more than one year after the date of incurrence thereof, and any such Indebtedness maturing within one year from the date of incurrence which is directly or indirectly renewable or extendible at the option of such Person to a date more than one year from such date of incurrence (including an option of such Person under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from such date of incurrence) and all Guarantee Obligations of the Company and its Subsidiaries on such date in respect of any such Indebtedness of Persons other than the Company and its Subsidiaries.

“Tranche”: the collective reference to Eurodollar Loans the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day); Tranches may be identified as “Eurodollar Tranches”.

“Tranche B Commitment”:  as to any Lender, the obligation of such Lender to make a Tranche B Term Loan to the Company pursuant to subsection 3.1 in an aggregate amount equal to the amount set forth under such Lender’s name in Schedule 1.1(a) opposite the heading Tranche B Commitment; collectively, as to all such Lenders, the “Tranche B Commitments”.  The Tranche B Commitments shall be $480.0 million, and shall be fully drawn on the Closing Date.

“Tranche B Commitment Percentage”: as to any Tranche B Lender, the percentage which the outstanding principal amount of such Tranche B Lender’s Tranche B Term Loan then constitutes of the aggregate principal amount of Tranche B Term Loans of all the Tranche B Lenders then outstanding.

22

“Tranche B Final Maturity Date”: the seventh anniversary of the Closing Date.

“Tranche B Lender”: any Lender that holds outstanding Tranche B Term Loans.

“Tranche B Term Loan”: any Tranche B Term Loan made on the Closing Date pursuant to subsection 3.1.

“Tranche B Term Note”: as defined in subsection 4.1(d).

“Transactions”: the borrowing of the Loans hereunder on the Closing Date, the issuance of the Senior Subordinated Notes, the issuance of the Convertible Preferred on or prior to October 31, 2003, the Redemptions, the refinancing of the Company’s Indebtedness identified on Schedule 1.1(c), and the payment of fees and expenses related to the foregoing.

“Transaction Documents”: the Senior Subordinated Note Indenture Documents, the Convertible Preferred Documents and the Redemption Documents.

“Transferee”: as defined in subsection 11.6(f).

“Type”: as to any Loan, its nature as a Base Rate Loan or a Eurodollar Loan.

“Uniform Customs”: the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time.

“Voting Percentage”: as to any Lender:

(a)at any time prior to the termination of the Revolving Credit Commitments, the percentage which (i) the sum of (x) such Lender’s Revolving Credit Commitment plus (y) the outstanding principal amount of such Lender’s Tranche B Term Loans then constitutes of (ii) the sum of (x) the Revolving Credit Commitments of all the Lenders plus (y) the aggregate principal amount of Tranche B Term Loans of all the Lenders then outstanding, and

(b)at any time after the termination of the Revolving Credit Commitments, the percentage which (i) the sum of (x) the aggregate principal amount of such Lender’s Loans (other than Swing Line Loans) then outstanding plus (y) the product of (A) such Lender’s Revolving Credit Commitment Percentage immediately prior to the termination of the Revolving Credit Commitments (giving effect to any permitted assignments after such termination) times (B) the sum of (1) the L/C Obligations, and (2) the aggregate principal amount of Swing Line Loans then outstanding then constitutes of (ii) the sum of (x) the aggregate principal amount of Loans of all the Lenders then outstanding plus (y) the aggregate L/C Obligations of all the Lenders then outstanding.

“Working Capital”: at any date, the sum of (a) all amounts which would, in conformity with GAAP, be included under current assets (other than cash and Cash Equivalents) on a balance sheet of the Company and its Subsidiaries on a Consolidated

23

basis on such date minus (b) all amounts which would, in conformity with GAAP, be included under current liabilities on a balance sheet (other than Indebtedness) of the Company and its Subsidiaries on a Consolidated basis on such date.

1.2Other Definitional Provisions.

(a)Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Notes, any other Loan Documents or any certificate or other document made or delivered pursuant hereto.

(b)As used herein and in any other Loan Document, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Company and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP.

(c)The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified.

(d)The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

SECTION 2.  AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS

2.1Revolving Credit Commitments.

(a)Subject to the terms and conditions hereof, each Revolving Credit Lender severally agrees to make revolving credit loans (each a “Revolving Loan”) to the Company from time to time during the Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Revolving Credit Lender’s Revolving Credit Commitment Percentage at such time of the sum of (i) the then outstanding L/C Obligations, and (ii) the aggregate principal amount of Swing Line Loans then outstanding, does not exceed the amount of such Revolving Credit Lender’s Revolving Credit Commitment at such time.  During the Revolving Credit Commitment Period, the Company may use the Revolving Credit Commitments by borrowing, prepaying and reborrowing the Revolving Loans in whole or in part, all in accordance with the terms and conditions hereof.

(b)The Revolving Loans may from time to time be (i) Eurodollar Loans, (ii) Base Rate Loans, or (iii) a combination thereof, as determined by the Company and notified to the Administrative Agent in accordance with subsections 2.2 and 4.4, provided that no Revolving Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Revolving Credit Termination Date.

(c)All letters of credit under the Company’s existing credit agreement with Bank of America, N.A. set forth on Schedule 2.1(c) hereto shall be replaced with Letters of Credit issued hereunder on or within 10 days of the Closing Date.  The existing letter of credit

24

issued by Wells Fargo Bank, National Association and set forth on Schedule 2.1(c) hereto shall be deemed to be a Letter of Credit issued hereunder.

2.2Procedure for Revolving Credit Borrowing.  The Company may borrow under the Revolving Credit Commitments during the Revolving Credit Commitment Period on any Banking Day, provided that the Company shall give the Administrative Agent irrevocable written notice in substantially the form of Exhibit H hereto (a “Notice of Borrowing”) (which notice, except as provided in subsection 2.9, must be received by the Administrative Agent prior to 12 Noon, Central time, (a) three Banking Days prior to the requested Borrowing Date, if all or any part of the requested Revolving Loans are to be initially Eurodollar Loans, or (b) one Banking Day prior to the requested Borrowing Date, otherwise), specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans or Base Rate Loans, or a combination thereof, and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Periods therefor.  Each borrowing under the Revolving Credit Commitments shall be in an amount equal to (x) in the case of Base Rate Loans (except for Base Rate Loans made pursuant to subsection 2.9), $1,000,000 or a whole multiple of $500,000 in excess thereof (or, if the then Available Revolving Credit Commitments are less than $1,000,000, such lesser amount) and (y) in the case of Eurodollar Loans, $1,000,000 or a whole multiple of $1,000,000 in excess thereof.  Upon receipt of any such notice from the Company, the Administrative Agent shall promptly notify each Revolving Credit Lender thereof.  Each Revolving Credit Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Company, at the office of the Administrative Agent specified in subsection 11.2 prior to 1 P.M., Central time, on the Borrowing Date requested by the Company in funds immediately available to the Administrative Agent in Dollars.  Except as provided in subsection 2.9, such borrowing will then be made available to the Company by the Administrative Agent crediting the account of the Company on the books of such office (or such other account as may be designated by the Company and as may be acceptable to the Administrative Agent) with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent.

2.3Commitment Fee.  The Company shall pay to the Administrative Agent for the account of each Revolving Credit Lender a commitment fee for the period from and including the first day of the Revolving Credit Commitment Period to the Revolving Credit Termination Date, computed at a rate per annum equal to the Applicable Rate on the average daily amount of such Revolving Credit Lender’s Available Revolving Credit Commitment during the period for which payment is made (calculated as if no Swing Line Loans were outstanding during such period), payable quarterly in arrears on each Fee Payment Date and on the Revolving Credit Termination Date (or such earlier date on which the Revolving Credit Commitments terminate as provided herein).

2.4Termination or Reduction of Commitments; Repayment of Revolving Loans.

(a)The Company shall have the right, upon not less than three Business Days’ written notice to the Administrative Agent (which will promptly notify the Revolving Credit Lenders thereof), to terminate the Revolving Credit Commitments or, from time to time, to reduce the amount of the Revolving Credit Commitments, provided that no such termination

25

or reduction shall be permitted if, after giving effect thereto and to any prepayments of Loans made on the effective date thereof, the Aggregate Revolving Credit Outstandings of all the Revolving Credit Lenders would exceed the Revolving Credit Commitments then in effect.  Any such reduction shall be in an amount equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof and shall reduce permanently the Revolving Credit Commitments then in effect.

(b)The Revolving Credit Commitments shall also be automatically reduced as provided in subsection 4.3.  Any such reduction shall ratably and permanently reduce the Revolving Credit Commitments then in effect.

(c)The Company hereby unconditionally promises to pay to the Administrative Agent on the Revolving Credit Termination Date (or such earlier date on which the Revolving Loans become due and payable pursuant to Section 9) for the account of each Revolving Credit Lender the then unpaid principal amount of each Revolving Loan of such Revolving Credit Lender made to the Company.  The Company hereby further agrees to pay interest on the unpaid principal amount of the Revolving Loans made to it from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsections 4.6 and 4.9.

2.5L/C Commitment.

(a)Subject to the  terms and conditions hereof, the Issuing Bank, in reliance on the agreements of the other Revolving Credit Lenders set forth in subsection 2.8(a), agrees to issue letters of credit (“Letters of Credit”) for the account of the Company on any Business Day during the Revolving Credit Commitment Period in such form as may be approved from time to time by the Issuing Bank, provided that (i) the Issuing Bank shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (A) the L/C Obligations would exceed the L/C Sublimit or (B) the Aggregate Revolving Credit Outstandings of all the Revolving Credit Lenders at such time would exceed the Revolving Credit Commitments at such time and (ii) the Issuing Bank shall not issue any Letter of Credit unless it shall have received notice from the Administrative Agent that the issuance of such Letter of Credit will not violate clause (i) above.

(b)Each Letter of Credit shall (i) be denominated in Dollars, other than the existing letter of credit issued by Wells Fargo Bank, National Association and set forth on Schedule 2.1(c) hereto which shall be denominated in British pounds sterling, (ii) be either (x) a standby letter of credit issued to support obligations of the Company or any of its Subsidiaries, contingent or otherwise or (y) a commercial letter of credit issued in respect of the purchase of goods or services by the Company or any of its Subsidiaries and (iii) expire no later than the earlier of (x) the date that is 12 months after the date of its issuance and (y) the thirtieth Business Day prior to the Revolving Credit Termination Date, provided that, subject to the immediately preceding clause (y), any standby Letter of Credit may, at the request of the Company as set forth in the applicable Letter of Credit Application, be automatically extended on each anniversary of the issuance thereof for an additional period of one year unless the Issuing Bank which issued such Letter of Credit shall have given prior written notice to the Company and the beneficiary of such Letter of Credit at least 30 Business Days prior to the date of termination of such Letter of Credit that such Letter of Credit will not be extended and the Issuing Bank shall

26

permit such beneficiary, upon receipt of such notice, to draw under such Letter of Credit prior to the date such Letter of Credit otherwise would have been automatically renewed.

(c)Each Letter of Credit shall be subject to the Uniform Customs, the ISP (to the extent applicable) and, to the extent not inconsistent therewith, the laws of the State of New York.

(d)The Issuing Bank shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Bank or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law.

2.6Procedure for Issuance of Letters of Credit.  The Company or any Subsidiary may from time to time request that the Issuing Bank issue a Letter of Credit by (a) delivering to the Issuing Bank at its address for notices specified herein in such manner as may be agreed by or be acceptable to the Issuing Bank (including by electronic transmission) a Letter of Credit Application, completed to the reasonable satisfaction of the Issuing Bank, and such other certificates, documents and other papers and information as the Issuing Bank may reasonably request and (b) concurrently delivering a written notice to the Administrative Agent that such Letter of Credit has been requested.  Upon receipt of any such Letter of Credit Application, the Issuing Bank agrees to process such Letter of Credit Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Bank be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Letter of Credit Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Bank and the Company with respect thereto.  The Issuing Bank shall furnish a copy of each Letter of Credit issued by the Issuing Bank to the Company and the Administrative Agent promptly following the issuance thereof.

2.7Letter of Credit Fees, Commissions and Other Charges.

(a)The Company shall pay to the Issuing Bank with respect to each Letter of Credit issued by it under this Agreement, for the account of the Issuing Bank, a fronting fee with respect to the period from the date of issuance of such Letter of Credit to the expiration or termination date of such Letter of Credit, computed at a rate of 0.25% per annum on the average aggregate amount available to be drawn under such Letter of Credit during the period for which such fee is calculated.  Such fronting fee shall be payable in arrears on each Fee Payment Date to occur after the issuance of such Letter of Credit and on the Revolving Credit Termination Date (or on such earlier date as the Revolving Credit Commitments shall terminate as provided herein) and shall be nonrefundable.

(b)The Company shall pay to the Administrative Agent, for the account of the L/C Participants, a letter of credit commission with respect to each Letter of Credit issued under this Agreement with respect to the period from the date of issuance of such Letter of Credit to the expiration or termination date of such Letter of Credit, computed at a rate per annum equal to the Applicable Margin in respect of Revolving Loans which are Eurodollar

27

Loans from time to time in effect on the average aggregate amount available to be drawn under such Letter of Credit during the period for which such fee is calculated.  Such commission shall be shared ratably among the L/C Participants in accordance with their respective Revolving Credit Commitment Percentages.  Such commission shall be payable in arrears on each Fee Payment Date to occur after the issuance of such Letter of Credit and on the Revolving Credit Termination Date (or on such earlier date as the Revolving Credit Commitments shall terminate as provided herein) and shall be nonrefundable.

(c)In addition to the foregoing fees and commissions, the Company shall pay or reimburse the Issuing Bank for such normal and customary costs and expenses as are incurred or charged by the Issuing Bank in issuing, effecting payment under, amending or otherwise administering any Letter of Credit.

(d)The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Bank and the L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this subsection.

2.8L/C Participations.

(a)The Issuing Bank irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Bank to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Bank, on the terms and conditions hereinafter stated, for such L/C Participant’s own account and risk, an undivided interest equal to such L/C Participant’s Revolving Credit Commitment Percentage of the Issuing Bank’s obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Bank thereunder.  Each L/C Participant unconditionally and irrevocably agrees with the Issuing Bank that, if a draft is paid under any Letter of Credit for which the Issuing Bank is not reimbursed in full by the Company in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Bank upon demand at the Issuing Bank’s address for notices specified herein an amount equal to such L/C Participant’s then Revolving Credit Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed.  Each L/C Participant’s obligation to make the payment referred to in the immediately preceding sentence shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such L/C Participant or the Company may have against the Issuing Bank or any other Person for any reason whatsoever, (ii) the occurrence or continuance of a Default or an Event of Default, (iii) any adverse change in the condition (financial or otherwise) of the Company or any of its Subsidiaries, (iv) any breach of this Agreement by any Loan Party or any other Lender or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.

(b)If any amount required to be paid by any L/C Participant to the Issuing Bank pursuant to subsection 2.8(a) in respect of any unreimbursed portion of any payment made by the Issuing Bank under any Letter of Credit is paid to the Issuing Bank within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Bank on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate during the period from and including the date such payment is required to

28

the date on which such payment is immediately available to the Issuing Bank, times (iii) a fraction, the numerator of which is the number of days that elapse during such period and the denominator of which is 360.  If any such amount required to be paid by any L/C Participant pursuant to subsection 2.8(a) is not in fact made available to the Issuing Bank by such L/C Participant within three Business Days after the date such payment is due, the Issuing Bank shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans hereunder.  A certificate of the Issuing Bank submitted to any L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error.

(c)Whenever, at any time after the Issuing Bank has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with subsection 2.8(a), the Issuing Bank receives any payment related to such Letter of Credit (whether directly from the Company or otherwise, including proceeds of collateral applied thereto by the Issuing Bank), or any payment of interest on account thereof, the Issuing Bank will distribute to such L/C Participant its pro rata share thereof, provided, however, that in the event that any such payment received by the Issuing Bank shall be required to be returned by the Issuing Bank, such L/C Participant shall return to the Issuing Bank the portion thereof previously distributed by the Issuing Bank to it.

2.9Reimbursement Obligation of the Company.  The Company agrees to reimburse the Issuing Bank on each date on which the Issuing Bank notifies the Company of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Bank for the amount of such draft so paid and any Taxes, fees, charges or other costs or expenses incurred by the Issuing Bank in connection with such payment.  Each such payment shall be made to the Issuing Bank at its address for notices specified herein in Dollars and in immediately available funds.  If any draft shall be presented for payment under any Letter of Credit, the Issuing Bank shall promptly notify the Company and the Administrative Agent of the date and amount thereof.  If the Issuing Bank notifies the Company prior to 10:00 A.M., Central time, on any Business Day, of any drawing under any Letter of Credit issued by it, the Company shall reimburse the Issuing Bank pursuant to this subsection with respect to such drawing on such Business Day.  If the Issuing Bank notifies the Company and the Administrative Agent after 10:00 A.M., Central time, on any Business Day of any drawing under any Letter of Credit, the Company shall reimburse the Issuing Bank pursuant to this subsection with respect to such drawing on the next succeeding Business Day and interest shall be payable on the amount of such drawing for such period at the rate then applicable to Base Rate Loans hereunder.  If any amount payable under this subsection is not paid when due, the Company shall be deemed to have requested a Base Rate Loan equal to such amount (without regard to the minimum amounts and multiples specified in subsection 2.2), and interest shall be payable on such amount from the date such amount becomes payable under this subsection, which shall be deemed to be the requested Borrowing Date, until payment in full thereof at the rate which would be payable on any outstanding Base Rate Loans.

2.10Obligations Absolute.

(a)The Company’s obligations under subsections 2.7 and 2.9 shall be absolute and unconditional under any and all circumstances and irrespective of any set-off,

29

counterclaim or defense to payment which the Company may have or have had against the Issuing Bank, any L/C Participant or any beneficiary of a Letter of Credit.

(b)Except as provided in clause (c) below, the Company also agrees with the Issuing Bank that the Issuing Bank shall not be responsible for, and the Company’s Reimbursement Obligations under subsection 2.9 shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any dispute between or among any Loan Party and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or (iii) any claims whatsoever of any Loan Party against any beneficiary of such Letter of Credit or any such transferee.

(c)Neither the Issuing Bank nor any L/C Participant shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Bank’s gross negligence or willful misconduct.

(d)The Company agrees that any action taken or omitted by the Issuing Bank under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Company and shall not result in any liability of the Issuing Bank or any L/C Participant to any Loan Party.

2.11Letter of Credit Payments.  If any draft shall be presented for payment under any Letter of Credit, the responsibility of the Issuing Bank to the Loan Parties in connection with such draft shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit.

2.12Application.  To the extent that any provision of any Letter of Credit Application related to any Letter of Credit is inconsistent with the provisions of this Section 2, the provisions of this Section 2 shall apply.

2.13Swing Line Commitment.  Subject to the terms and conditions hereof, the Swing Line Lender agrees to make swing line loans in Dollars (“Swing Line Loans”) to the Company from time to time during the Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding not to exceed $10,000,000, provided that, (a) after giving effect to any such Swing Line Loans, the Aggregate Revolving Credit Outstandings of all the Revolving Credit Lenders at such time do not exceed the Revolving Credit Commitments at such time and (b) the Swing Line Lender shall not make any Swing Line Loan unless it shall have received notice from the Administrative Agent that the making of such Swing Line Loan will not violate clause (a) above.  During the Revolving Credit Commitment Period, the Company may use the Swing Line Commitment by borrowing, prepaying the Swing Line Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof.  All

30

Swing Line Loans shall be Base Rate Loans and may not be converted into Loans that bear interest at any other rate.

2.14Procedure for Swing Line Borrowing; Prepayment of Swing Line Loans.  The Company may borrow under the Swing Line Commitment during the Revolving Credit Commitment Period on any Business Day, provided that the Company shall give the Swing Line Lender and the Administrative Agent irrevocable written notice (which notice must be received by the Swing Line Lender prior to 12:00 Noon, Central time) on the requested Borrowing Date specifying the amount of the requested Swing Line Loan which shall be in an aggregate minimum amount of $500,000 or a whole multiple of $50,000 in excess thereof.  The proceeds of the Swing Line Loan will be made available by the Swing Line Lender to the Company at the office of the Swing Line Lender by 2:00 P.M. (Central time) on the Borrowing Date by crediting the account of the Company at such office with such proceeds.  The Company may at any time and from time to time, prepay the Swing Line Loans, in whole or in part, without premium or penalty, by notifying the Swing Line Lender prior to 1:00 P.M. (Central time) on any Business Day of the date and amount of prepayment.  If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein.  Partial prepayments shall be in an aggregate principal amount of $500,000 or a whole multiple of $50,000 in excess thereof.

2.15Repayment of Swing Line Loans; Participations in Swing Line Borrowings.

(a)The Company hereby unconditionally promises to pay to the Administrative Agent for the account of the Swing Line Lender the then unpaid principal amount of the Swing Line Loans on the Revolving Credit Termination Date (or such earlier date on which the Swing Line Loans become due and payable pursuant to Section 9).  The Company hereby further agrees to pay interest on the unpaid principal amount of Swing Line Loans from time to time outstanding from the date of borrowing thereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsections 4.6 and 4.9.  The Swing Line Lender, at any time in its sole and absolute discretion may, on behalf of the Company (which hereby irrevocably authorizes the Swing Line Lender to act on its behalf) request each Revolving Credit Lender (including the Swing Line Lender) to make a Revolving Loan (which shall be a Base Rate Loan) in an amount equal to such Revolving Credit Lender’s Revolving Credit Commitment Percentage of the aggregate principal amount of the Swing Line Loans outstanding on the date such notice is given (the “Outstanding Swing Line Loans”).  Unless any of the events described in paragraph (f) of Section 9 shall have occurred with respect to the Company (in which event the procedures of paragraph (c) of this subsection 2.15 shall apply) each Revolving Credit Lender shall make the proceeds of its Revolving Loan available to the Administrative Agent for the account of the Swing Line Lender at the Administrative Agent’s Payment Office prior to 1:00 P.M. (Central time) in funds immediately available in Dollars on the Business Day next succeeding the date such notice is given.  The proceeds of such Revolving Loans shall be immediately applied to repay the outstanding Swing Line Loans.  Effective on the day such Revolving Loans are made, the portion of the Swing Line Loans so paid shall no longer be outstanding as Swing Line Loans and shall no longer be due under the Swing Line Note.  The Company authorizes the Swing Line Lender to charge the Company’s accounts with the Swing Line Lender (up to the amount available in each such account) in order to immediately pay the

31

amount of its outstanding Swing Line Loans to the extent amounts received from the Revolving Credit Lenders are not sufficient to repay in full such outstanding Swing Line Loans.

(b)Notwithstanding anything herein to the contrary, the Swing Line Lender shall not be obligated to make any Swing Line Loans if the conditions set forth in subsection 6.2 have not been satisfied.

(c)If prior to the making of a Revolving Loan pursuant to paragraph (a) of this subsection 2.15 one of the events described in paragraph (f) of Section 9 shall have occurred and be continuing with respect to the Company, each Revolving Credit Lender will, on the date such Revolving Loan was to have been made pursuant to the notice described in subsection 2.15(a), purchase an undivided participating interest in the outstanding Swing Line Loans in an amount equal to (i) its Revolving Credit Commitment Percentage times (ii) the aggregate principal amount of Swing Line Loans then outstanding.  Each Revolving Credit Lender will immediately transfer to the Swing Line Lender, in immediately available funds, the amount of its participation, and upon receipt thereof the Swing Line Lender will deliver to such Revolving Credit Lender a Swing Line Loan Participation Certificate dated the date of receipt of such funds and in such amount.

(d)Whenever, at any time after any Revolving Credit Lender has purchased a participating interest in a Swing Line Loan, the Swing Line Lender receives any payment on account thereof, the Swing Line Lender will distribute to such Revolving Credit Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Revolving Credit Lender’s participating interest was outstanding and funded), provided, however, that in the event that such payment received by the Swing Line Lender is required to be returned, such Revolving Credit Lender will return to the Swing Line Lender any portion thereof previously distributed by the Swing Line Lender to it.

(e)Each Revolving Credit Lender’s obligation to make the Revolving Loans referred to in subsection 2.15(a) and to purchase participating interests pursuant to subsection 2.15(c) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Revolving Credit Lender or the Company may have against the Swing Line Lender, the Company or any other Person for any reason whatsoever, (ii) the occurrence or continuance of a Default or an Event of Default, (iii) any adverse change in the condition (financial or otherwise) of the Company, (iv) any breach of this Agreement or any other Loan Document by the Company, any Subsidiary or any other Lender, or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.

SECTION 3.  AMOUNT AND TERMS OF TERM LOAN COMMITMENTS

3.1Tranche B Term Loans.

(a)Subject to the terms and conditions hereof, each Tranche B Lender severally agrees to make a term loan (a “Tranche B Term Loan”) to the Company on the Closing Date in a principal amount equal to such Tranche B Lender’s Tranche B Commitment.  Amounts borrowed under this Section 3.1(a) and repaid or prepaid may not be reborrowed.

32

(b)The Tranche B Term Loans may from time to time be (i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the Company and notified to the Administrative Agent in accordance with subsections 3.2 and 4.4.

3.2Procedure for Tranche B Term Loan Borrowing.  The Company shall give the Administrative Agent an irrevocable written Notice of Borrowing in substantially the form of Exhibit H hereto (which notice must be received by the Administrative Agent prior to 12:00 Noon, Central time, (y) three Banking Days prior to the Closing Date, if all or any part of the Tranche B Term Loans are to be initially Eurodollar Loans or (z) one Banking Day prior to the Closing Date, otherwise) requesting that the Tranche B Lenders make the Tranche B Term Loans on the Closing Date and specifying (i) whether the Tranche B Term Loans are to be initially Eurodollar Loans, Base Rate Loans or a combination thereof and (ii) if the Tranche B Term Loans are to be entirely or partly Eurodollar Loans the amount of such Type of Loan and the length of the initial Interest Periods therefor.  Upon receipt of such notice, the Administrative Agent shall promptly notify each Tranche B Lender thereof.  On the Closing Date, each Tranche B Lender shall make available to the Administrative Agent at its office specified in subsection 11.2 the amount in immediately available funds equal to the Tranche B Term Loans to be made by such Tranche B Lender.  The Administrative Agent shall on such date credit the account of the Company on the books of such office of the Administrative Agent with the aggregate of the amounts made available to the Administrative Agent by such Tranche B Lenders and in like funds as received by the Administrative Agent.

3.3Repayment of Tranche B Term Loans.  The Company hereby unconditionally promises to pay to the Administrative Agent for the account of the Tranche B Lenders the remaining outstanding principal amount of the Tranche B Term Loans in 28 consecutive quarterly installments payable at the end of March, June, September and December of each year (or such earlier date on which Tranche B Term Loans become due and payable pursuant to Section 9).  Each of the first twenty-four installments shall be equal to $1,200,000 and each of the last four installments shall be equal to $112,800,000; provided, that the final installment shall be repaid on the Tranche B Final Maturity Date and in any event shall be in an amount equal to the aggregate principal amount of the Tranche B Term Loans outstanding on such date).

The Company hereby further agrees to pay interest on the unpaid principal amount of the Tranche B Term Loans from time to time outstanding from the Closing Date until payment in full thereof at the rates per annum, and on the dates, set forth in subsections 4.6 and 4.9.

SECTION 4.  GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT

4.1Evidence of Debt.

(a)Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Company to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.

33

(b)The Administrative Agent shall maintain the Register pursuant to subsection 11.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Revolving Loan, Swing Line Loan and Tranche B Term Loan made hereunder, the Type thereof and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable to the Lenders hereunder, (iii) the amount of each Revolving Credit Lender’s participation in outstanding Letters of Credit and Swing Line Loans, and (iv) both the amount of any sum received by the Administrative Agent hereunder from the Company and each Lender’s share thereof.

(c)The entries made in the Register and the accounts of each Lender maintained pursuant hereto shall, absent manifest error, be conclusive evidence of the existence and amounts of the obligations of the Company therein recorded, provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Company to repay (with applicable interest) the Loans made to the Company in accordance with the terms of this Agreement.

(d)The Company agrees that, upon the request to the Administrative Agent by any applicable Lender, the Company will execute and deliver to such Lender, as appropriate, (i) a promissory note of the Company evidencing the Revolving Loans of such Lender, substantially in the form of Exhibit C-l with appropriate insertions as to date and principal amount (a “Revolving Credit Note”), (ii) a promissory note of the Company evidencing the Tranche B Term Loan of such Lender, substantially in the form of Exhibit C-2 with appropriate insertions as to date and principal amount (a “Tranche B Term Note”), and (iii) a promissory note of the Company evidencing the Swing Line Loans of the Swing Line Lender, substantially in the form of Exhibit C-3 with appropriate insertions as to date and principal amount (the “Swing Line Note”).  Each Lender is hereby authorized to record the Borrowing Date, the amount of each relevant Loan and the date and amount of each payment or prepayment of principal thereof, on the schedule annexed to and constituting a part of the Note evidencing such Loan and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded, provided that the failure by a Lender to make any such recordation (or any error therein) shall not affect any of the obligations of the Company under such Note or this Agreement.

4.2Optional Prepayments.  The Company may prepay the Loans made to it in whole or in part without premium or penalty, in the case of Eurodollar Loans on the last day of any Interest Period with respect thereto (except that the Company may make a prepayment of Eurodollar Loans on a day other than the last day of the Interest Period with respect thereto as long as it complies with subsection 4.13(c)) and, in the case of Base Rate Loans (other than Swing Line Loans), on any Business Day, provided that (i) the Company shall have given (x) at least three Business Days’ irrevocable written notice to the Administrative Agent (in the case of Eurodollar Loans) and (y) one Business Day’s irrevocable notice to the Administrative Agent (in the case of Base Rate Loans), (ii) such notice specifies, in the case of any prepayment of Loans, the date and amount of prepayment and whether the prepayment is (x) of Tranche B Term Loans, Revolving Loans or a combination thereof, and in each case if a combination thereof, the amount allocable to each, (y) of Eurodollar Loans, Base Rate Loans or a combination thereof, and, in each case if a combination thereof, the principal amount allocable to each (and in the case of a

34

prepayment of Revolving Loans which are Eurodollar Loans, the principal amount of such prepayment allocable to each Eurodollar Tranche of Revolving Loans) and (iii) each prepayment is in a minimum principal amount of $1,000,000 and a multiple of $1,000,000 in excess thereof.  Upon the receipt of any such notice, the Administrative Agent shall promptly notify each of the relevant Lenders thereof.  If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 4.13 and, in the case of prepayments of the Term Loans only, accrued interest to such date on the amount prepaid.  Any such prepayment of Tranche B Term Loans shall first be applied to any installment thereof due within 90 days of the date of such prepayment and second to the respective then remaining installments of principal thereof pro rata.  Amounts prepaid pursuant to this subsection 4.2 on account of the Tranche B Term Loans may not be reborrowed.  Revolving Loans may not be prepaid if any Swing Line Loans are outstanding at such time.

4.3Mandatory Prepayments of Loans and Reductions of Revolving Credit Commitments.

(a)If, on any day, the Aggregate Revolving Credit Outstandings of all the Revolving Credit Lenders exceeds the Revolving Credit Commitments on such date, the Company shall, without notice or demand, immediately repay such of the outstanding Loans in an aggregate principal amount such that, after giving effect thereto, the Aggregate Revolving Credit Outstandings of all the Revolving Credit Lenders do not exceed the Revolving Credit Commitments, together with interest accrued to the date of such payment or prepayment on the principal so prepaid and any amounts payable under subsection 4.13 in connection therewith.  Any prepayment of Revolving Loans pursuant to the immediately preceding sentence shall first be applied to prepay any outstanding Swing Line Loans.  To the extent that after giving effect to any prepayment of Loans required by this paragraph, the Aggregate Revolving Credit Outstandings of all the Revolving Credit Lenders at such time exceed the Revolving Credit Commitments at such time, the Company shall, without notice or demand, immediately deposit in a Cash Collateral Account upon terms reasonably satisfactory to the Administrative Agent an amount equal to the lesser of (A) the aggregate then outstanding L/C Obligations and (B) the amount of such remaining excess.  The Administrative Agent shall apply any cash deposited in the Cash Collateral Account (to the extent thereof) to pay any Reimbursement Obligations which are or become due thereafter, provided that, (x) the Administrative Agent shall release to the Company from time to time such portion of the amount on deposit in the Cash Collateral Account to the extent such amount is not required to be so deposited in order for the Company to be in compliance with this paragraph and (y) the Administrative Agent may so apply such cash at any time after the occurrence and during the continuation of an Event of Default.  “Cash Collateral Account” means an account established by the Company with the Administrative Agent and over which the Administrative Agent shall have exclusive dominion and control, including the right of withdrawal for application in accordance with this subsection 4.3(a).

(b)On the earlier of (i) the date of receipt by the Lenders of the financial statements required to be delivered pursuant to subsection 7.1(a) as to any fiscal year of the Company commencing with the fiscal year ending December 31, 2004 (each such fiscal year being a “Base Year”) and (ii) the 90th day of the fiscal year of the Company next succeeding the Base Year, the Loans shall be prepaid and/or the Commitments shall be reduced in an amount equal to 50% of Excess Cash Flow for such Base Year in accordance with paragraph (e) of this

35

subsection, provided that, (A) if the Leverage Ratio of the Company for the period of four consecutive fiscal quarters ending on the last day of the period covered by the financial statements relating to the applicable Base Year is less than 3.00 to 1.00 (and clause (B) shall not apply), the foregoing percentage shall be reduced to 25% and (B) if the Leverage Ratio of the Company for the period of four consecutive fiscal quarters ending on the last day of the period covered by the financial statements relating to the applicable Base Year isless than 2.25 to 1.00, no prepayment of Loans and/or reduction of Commitments shall be required pursuant to this paragraph.

(c)On the day upon which the Company or any of its Subsidiaries receives Net Cash Proceeds from the issuance of any Indebtedness (other than any Indebtedness permitted under subsection 8.2 (but including Indebtedness permitted under subsection 8.2(k))) or Capital Stock (other than the Convertible Preferred issued in connection with the Transactions) or from any capital contribution (other than (x) any issuance of Capital Stock to, or any capital contribution by, the Sponsors and/or their Affiliates or (y) the issuance of Capital Stock in connection with the exercise of any stock options or warrants), the Loans shall be prepaid and/or the Commitments shall be reduced in an amount equal to 50% (or 100% in the case of Indebtedness issued under the proviso to subsection 8.2(k)) of the Net Cash Proceeds of such issuance or capital contribution in accordance with paragraph (e) of this subsection.

(d)If the Company or any of its Subsidiaries sells, assigns, transfers, leases or otherwise disposes of any of its assets (other than any such sale, assignment, transfer, lease or other disposition permitted by subsection 8.6 (but including sales and dispositions permitted pursuant to subsection 8.6(g))), or any of its assets becomes the subject of a Casualty Event, no later than three Business Days after receipt of the Net Cash Proceeds therefrom, the Loans shall be prepaid and/or the Commitments shall be reduced in an amount equal to 100% of such Net Cash Proceeds in accordance with paragraph (e) of this subsection, provided that, at the option of the Company and so long as no Default or Event of Default shall have occurred and be continuing or would be caused thereby, (i) the Company and its Subsidiaries may use up to $40,000,000 of the Net Cash Proceeds realized in the aggregate subsequent to the Closing Date from any such sales, assignments, transfers, leases or other dispositions to purchase assets used in the Company’s business, in each case within twelve months (or if such purchase is to be made pursuant to a binding commitment entered into within such twelve-month period, eighteen months) after the consummation of the relevant sale, assignment, lease, transfer or other disposition, subject to the following conditions: (w) in the event the Company or any of its Subsidiaries elects to exercise its rights pursuant to this clause (i), the Company or such Subsidiary, as the case may be, shall promptly deliver a certificate of a Responsible Officer to the Administrative Agent setting forth the amount of the Net Cash Proceeds which the Company or such Subsidiary, as the case may be, expects to so use during the subsequent twelve month period or eighteen-month period, as the case may be, and (x) on the date which is twelve months or eighteen months, as the case may be, after the relevant sale or other disposition, the Company or such Subsidiary, as the case may be, shall (I) deliver a certificate of a Responsible Officer to the Administrative Agent certifying as to the amount and use of such Net Cash Proceeds actually so used and (II) deliver to the Administrative Agent, for application in accordance with (and to the extent required by) this subsection, an amount equal to the remaining unused Net Cash Proceeds and (ii) the Company or any of its Subsidiaries may use the Net Cash Proceeds of any Casualty Event to replace or rebuild the property or assets which were the subject of the Casualty

36

Event or asset related or complementary thereto within twelve months (or if such replacement or rebuilding is to be made pursuant to a binding commitment entered into within such twelve-month period, eighteen months) after the occurrence of such Casualty Event, subject to the following conditions: (y) in the event the Company or any of its Subsidiaries elects to exercise its right pursuant to this clause (ii), the Company or such Subsidiary, as the case may be, shall promptly deliver a certificate of a Responsible Officer to the Administrative Agent setting forth the amount of the Net Cash Proceeds which the Company or such Subsidiary, as the case may be, expects to so use during the subsequent twelve month period or eighteen month period, as the case may be, and (z) on the date which is twelve months or eighteen months, as the case may be, after the relevant Casualty Event, the Company or such Subsidiary, as the case may be, shall (I) deliver a certificate of a Responsible Officer to the Administrative Agent certifying as to the amount and use of such Net Cash Proceeds actually used to replace or rebuild such property or assets and (II) deliver to the Administrative Agent, for application in accordance with (and to the extent required by) this subsection, an amount equal to the remaining unused Net Cash Proceeds, provided, further that, notwithstanding anything to the contrary in the immediately preceding proviso, the Loans shall be prepaid and/or the Commitments shall be reduced in accordance with paragraph (e) of this subsection to the extent the failure to do so would otherwise result in a “Net Proceeds Offer” (as defined in the Senior Subordinated Note Indenture).

(e)Prepayments of the Loans and permanent reductions of Commitments pursuant to subsections 4.3(b), (c) and (d) shall be applied, first, to the payment in full of the Tranche B Term Loans then outstanding, and second, to the permanent reduction of the Revolving Credit Commitments then in effect.  Prepayments of the Tranche B Term Loans pursuant to clause first of the immediately preceding sentence shall be applied pro rata to the respective then remaining installments of principal thereof.

(f)Amounts prepaid on account of Tranche B Term Loans pursuant to this subsection may not be reborrowed.

(g)Notwithstanding the foregoing provisions of subsection 4.3(e), if at any time the mandatory prepayment of Loans pursuant to subsection 4.3(b), (c) or (d) would result, after giving effect to the procedures set forth above, in the Company’s incurring breakage costs under subsection 4.13 as a result of Eurodollar Loans being prepaid other than on the last day of an Interest Period applicable thereto (the “Affected Eurodollar Loans”), then the Company may in its sole discretion, so long as no Default or Event of Default shall have then occurred and be continuing, initially deposit a portion (up to 100%) of the amounts that otherwise would have been paid in respect of the Affected Eurodollar Loans with the Administrative Agent (which deposit must be equal in amount to the amount of the Affected Eurodollar Loans not immediately prepaid) in a Cash Collateral Account to be held as security for the Obligations, with such cash collateral to be directly applied by the Administrative Agent to prepay the relevant Affected Eurodollar Loans on the last day of the Interest Periods applicable thereto (or such earlier date or dates as shall be requested by the Company or as shall be determined by the Administrative Agent at any time after the occurrence and during the continuation of a Default or Event of Default).  Notwithstanding anything to the contrary contained in the immediately preceding sentence, all amounts deposited in such Cash Collateral Account pursuant to the immediately preceding sentence shall be held for the sole benefit of the Lenders whose Loans would otherwise have been immediately prepaid with the amounts deposited, and, upon the

37

taking of any action by the Administrative Agent or the Lenders pursuant to the remedial provisions of Section 9, any amounts held as cash collateral pursuant to this subsection 4.3(g) shall, subject to the requirements of applicable law, be immediately applied to prepay such Loans.

4.4Conversion and Continuation Options.

(a)The Company may elect from time to time to convert Eurodollar Loans to Base Rate Loans by giving the Administrative Agent at least two Banking Days’ prior irrevocable written notice of such election, provided that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto.  The Company may elect from time to time to convert Base Rate Loans to Eurodollar Loans by giving the Administrative Agent at least three Banking Days’ prior irrevocable written notice of such election.  Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor.  Upon receipt of any such notice, the Administrative Agent shall promptly notify each Lender thereof.  All or any part of outstanding Eurodollar Loans and Base Rate Loans may be converted as provided herein, provided that (i) no Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined that such a conversion is not appropriate and (ii) no Loan may be converted into a Eurodollar Loan after the date that is one month prior to (a) the Revolving Credit Termination Date (in the case of conversions of Revolving Loans) or (b) the date of the final installment of principal of the Tranche B Term Loans (in the case of conversions of Tranche B Term Loans).

(b)Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by giving written notice to the Administrative Agent, in accordance with the applicable provisions of the term “Interest Period” set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans, provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined that such a continuation is not appropriate or (ii) after the date that is one month prior to (a) the Revolving Credit Termination Date (in the case of continuations of Revolving Loans) or (b) the date of the final installment of principal of the relevant Term Loans (in the case of continuations of Term Loans), and provided, further, that if the Company shall fail to give such notice or if such continuation is not permitted such Eurodollar Loans shall be automatically converted to Base Rate Loans on the last day of such then expiring Interest Period.

4.5Minimum Amounts and Maximum Number of Tranches.  All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Eurodollar Tranche shall be at least $10,000,000.  In no event shall there be more than 15 Eurodollar Tranches outstanding at any time.

38

4.6Interest Rates and Payment Dates.

(a)Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin.

(b)Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin.

(c)Each Swing Line Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin for Revolving Loans which are Base Rate Loans.

(d)If all or a portion of (i) any principal of any Loan, (ii) any interest payable thereon, (iii) any commitment fee or (iv) any other amount payable hereunder, including any letter of credit fee, shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), any such overdue principal, interest, commitment fee or other amount shall bear interest at a rate per annum which is (except as provided in subsection 2.9) (x) in the case of principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection plus 2% or (y) in the case of any such overdue interest, commitment fee, letter of credit fee or other amount, the rate described in paragraph (b) of this subsection plus 2%, from the date of such non-payment until such overdue principal, interest, commitment fee, letter of credit fee or other amount is paid in full (as well after as before judgment to the extent permitted by law).

(e)Interest shall be payable in arrears on each Interest Payment Date and on the Revolving Credit Termination Date (in the case of Revolving Loans and Swing Line Loans) and the date of the final installment of principal (in the case of Term Loans), provided that interest accruing pursuant to paragraph (d) of this subsection shall be payable from time to time on demand.

4.7Computation of Interest and Fees.

(a)Whenever it is calculated on the basis of the reference rate referred to in the definition of “Base Rate,” interest shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; and, otherwise, interest, commitment fees and letter of credit fees and commissions shall be calculated on the basis of a 360-day year for the actual days elapsed.  The Administrative Agent shall as soon as practicable notify the Company and the Lenders of each determination of a Eurodollar Rate.  Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective.  The Administrative Agent shall as soon as practicable notify the Company and the Lenders of the effective date and the amount of each such change in interest rate.

(b)Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Company and the Lenders in the absence of manifest error.  The Administrative Agent shall, at the request of the Company, deliver to the Company a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to subsection 4.6(a).

39

4.8Inability to Determine Interest Rate.  If prior to the first day of any Interest Period:

(a)the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Company) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or

(b)the Administrative Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period in respect of any Eurodollar Loan will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period,

then the Administrative Agent shall give telecopy or telephonic notice thereof to the Company and the Lenders as soon as practicable thereafter.  If such notice is given pursuant to either clause (a) or (b) of this subsection 4.8 in respect of Eurodollar Loans, then (i) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (ii) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as Base Rate Loans and (iii) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to Base Rate Loans.  Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Company have the right to convert Base Rate Loans to Eurodollar Loans.

4.9Pro Rata Treatment and Payments.

(a)Each borrowing of Revolving Loans by the Company from the Revolving Credit Lenders hereunder shall be made, each payment by the Company on account of any commitment fee in respect of the Revolving Credit Commitments hereunder shall be allocated by the Administrative Agent, and any reduction of the Revolving Credit Commitments shall be allocated by the Administrative Agent, pro rata according to the Revolving Credit Commitment Percentages of the Revolving Credit Lenders.  Each payment (including each prepayment) by the Company on account of principal of and interest on any Revolving Loan shall be allocated pro rata according to the Revolving Credit Commitment Percentages of the Revolving Credit Lenders.  Each payment (including each prepayment) by the Company on account of principal of and interest on any Tranche B Term Loans shall be allocated by the Administrative Agent pro rata among the Tranche B Lenders according to their respective Tranche B Commitment Percentages.  All payments (including prepayments) to be made by the Company hereunder and under any Notes, whether on account of principal, interest, fees, Reimbursement Obligations or otherwise, shall be made without set-off or counterclaim and shall be made prior to 2:00 P.M., Central time, on the due date thereof to the Administrative Agent, for the account of the relevant Lenders at the Administrative Agent’s Payment Office, in Dollars, and in immediately available funds.  Payments received by the Administrative Agent after such time shall be deemed to have been received on the next Business Day.  The Administrative Agent agrees to pay to the Lenders payments received on their behalf promptly after receipt.  If any payment hereunder (other than payments on Eurodollar Loans) becomes due and payable on a day other than a Banking Day,

40

the maturity of such payment shall be extended to the next succeeding Banking Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.  If any payment on a Eurodollar Loan becomes due and payable on a day other than a Banking Day, the maturity of such payment shall be extended to the next succeeding Banking Day (and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension) unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Banking Day.

(b)Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its portion of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent and the Administrative Agent may, in reliance upon such assumption, make available to the Company a corresponding amount.  If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent on demand such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent, in each case with a customary administrative fee with respect thereto.  A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error.  If such Lender’s portion of such borrowing is not made available to the Administrative Agent by such Lender within three Banking Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum equal to the higher of (i) the rate specified in the second sentence of this paragraph and (ii) the rate applicable to Base Rate Loans hereunder, on demand, from the Company.

4.10Illegality.  Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make such Type of Loans, continue such Type of Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be cancelled, and (b) such Lender’s Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law.  If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Company shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 4.13.  During any such period of illegality, any Loans that, but for the application of the preceding sentence would have been maintained as Eurodollar Loans, shall be made and maintained by the affected Lender as Base Rate Loans.

4.11Requirements of Law.

(a)If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive

41

(whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:

(i)shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note, any Letter of Credit, any Letter of Credit Application or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non Excluded Taxes covered by subsection 4.12 and changes in the rate of tax on the overall net income of such Lender);

(ii)shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender (or any affiliate of such Lender from which such Lender customarily obtains funds) which is not otherwise included in the determination of the Eurodollar Rate hereunder; or

(iii)shall impose on such Lender (or such affiliate) any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit or to reduce any amount receivable hereunder in respect thereof,

then, in any such case, the Company shall promptly pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable.

(b)If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its obligations hereunder or under any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, the Company shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction.

(c)If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, such Lender shall promptly notify the Company (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled.  A certificate as to any additional amounts payable pursuant to this subsection submitted by such Lender to the Company (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error.  The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

42

(d)Failure or delay on the part of any Lender to demand compensation pursuant to this subsection shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Company shall not be required to compensate a Lender pursuant to this subsection 4.11 for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies the Company of the event or occurrence giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided further that, if the event or occurrence giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

4.12Taxes.

(a)All payments made by the Company under this Agreement, any Notes, any Letters of Credit or any Letter of Credit Applications shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings (including interest, fines, penalties and additions to tax) (“Taxes”), now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding (i) net income Taxes and franchise Taxes (imposed in lieu of net income Taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such Tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note), and (ii) any Taxes imposed by a jurisdiction to which the Administrative Agent or any Lender is subject as of the date it becomes an Administrative Agent or Lender (but not excluding with respect to clause (ii) any Taxes (including an increase in rate) imposed as a result of a change in law, treaty, or regulation occurring after such date but only to the extent of such change) (any such non-excluded Taxes, “Non-Excluded Taxes”).  If any Taxes are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder or under any Note, any Letters of Credit or any Letter of Credit Applications, (A) the Company shall withhold and deduct any such Taxes from such amounts, (B) the Company shall pay or deposit with the appropriate taxing authority in a timely manner the full amount of Taxes so withheld or deducted, (C) the Company shall promptly send to the Administrative Agent a certified copy of an original official receipt received by the Company (or other documentation reasonably acceptable to the Administrative Agent) showing payment thereof, and (D) if such Taxes are Non-Excluded Taxes, the amounts so payable to the Administrative Agent or the relevant Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Company shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (b) of this subsection.  If the Company fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Company shall indemnify the Administrative Agent and the relevant Lenders for any incremental Taxes that may become payable by the Administrative Agent or any Lender as a result of any

43

such failure.  The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

(b)Each Lender that is not a “U.S.  Person” as defined in Section 7701(a)(30) of the Code shall:

(i)deliver to the Company and the Administrative Agent two copies of either U.S.  Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of such a Lender claiming exemption from U.S. federal withholding Tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest”, a statement substantially in the form of Exhibit G and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding Tax on all payments by the Company under this Agreement and the other Loan Documents;

(ii)deliver to the Company and the Administrative Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Company; and

(iii)obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Company or the Administrative Agent;

unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Company and the Administrative Agent.  Each Person that shall become a Lender or a Participant pursuant to subsection 11.6 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this subsection, provided that in the case of a Participant such Participant shall furnish all such required forms and statements to the Lender from which the related participation shall have been purchased.

(c)Failure or delay on the part of any Lender to demand additional amounts pursuant to this subsection shall not constitute a waiver of such Lender’s right to demand such additional amounts; provided that the Company shall not be required to compensate a Lender pursuant to this subsection 4.12 for any Non-Excluded Taxes incurred more than 180 days prior to the date that such Lender notifies the Company thereof; provided further that, if the Non-Excluded Taxes are retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

4.13Indemnity.  The Company agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Company in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Company has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Company in making any prepayment after the Company has given a notice thereof in accordance with the provisions of

44

this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto.  Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market.  This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

4.14Mitigation Obligations; Replacement of Lenders.

(a)If any Lender or a Participant in such Lender’s Loans requests compensation under subsection 4.11, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof causes the occurrence of one of the events described in clause (a) or (b) of subsection 4.11, or if the Company is required to pay any additional amount to any Lender or a Participant in such Lender’s Loans or any Governmental Authority for the account of any Lender or Participant pursuant to subsection 4.12, then such Lender or Participant shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the reasonable judgment of such Lender or Participant, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to subsection 4.11 or 4.12 or would render inapplicable the adoption, change, interpretation or application of the Requirement of Law that necessitated the occurrence of one of the events described in clause (a) or (b) of subsection 4.11, as the case may be, in the future and (ii) would not subject such Lender or Participant to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender or Participant.  The Company hereby agrees to pay all reasonable costs and expenses incurred by any Lender or Participant in connection with any such designation or assignment.

(b)If any Lender or a Participant in such Lender’s Loans requests compensation under subsection 4.11, or if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof causes the occurrence of one of the events described in clause (a) or (b) of subsection 4.11, or if the Company is required to pay any additional amount to any Lender or a Participant in such Lender’s Loans or any Governmental Authority for the account of any Lender or Participant pursuant to subsection 4.12, then the Company shall have the right, at its sole expense, upon written notice to such Lender and the Administrative Agent, to require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in subsection 11.6), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Company shall have received the prior written consent of the Administrative Agent (and, if a Revolving Credit Commitment is being assigned, the Issuing Bank and the Swing Line Lender)

45

which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in outstanding Letters of Credit, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Company (in the case of all other amounts) and (iii) (x) in the case of any such assignment resulting from a claim for compensation under subsection 4.11 or payments required to be made pursuant to subsection 4.12, such assignment will result in a reduction in such compensation or payments and (y) in the case of any such assignment resulting from the adoption of or any change in any Requirement of Law or in the interpretation or application thereof that causes the occurrence of one of the events described in clause (a) or (b) of subsection 4.11, such assignment will render inapplicable the adoption, change, interpretation or application of the Requirement of Law that necessitated the occurrence of one of the events described in clause (a) or (b) of subsection 4.11.  A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Company to require such assignment and delegation cease to apply.

SECTION 5.  REPRESENTATIONS AND WARRANTIES

To induce the Agents and the Lenders to enter into this Agreement and to induce the Lenders to make their extensions of credit hereunder, the Company hereby represents and warrants to the Administrative Agent and each Lender that:

5.1Financial Condition.  The Consolidated balance sheet of the Company and its Consolidated Subsidiaries as at December 31, 2002 and the related Consolidated statements of earnings and of cash flows for the fiscal year ended on such date, reported on by Ernst & Young LLP, copies of which have heretofore been furnished to each Lender, present fairly the Consolidated financial condition of the Company and its Consolidated Subsidiaries as at such date, and the Consolidated results of their operations and their Consolidated cash flows for the fiscal year then ended.  All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved as required by GAAP (except as approved by such accountants or Responsible Officer, as the case may be, and as disclosed therein).  Neither the Company nor any of its Consolidated Subsidiaries had, at the date of the most recent balance sheet referred to above, any material Guarantee Obligation, contingent liability or liability for Taxes, or any long-term lease or unusual forward or long-term commitment, including, without limitation, any Interest Rate Protection Agreement or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or in the notes thereto.  Except as set forth in Schedule 5.1, during the period from December 31, 2002 to and including the date hereof there has been no sale, transfer or other disposition by the Company or any of its Consolidated Subsidiaries of any material part of its business or property and no purchase or other acquisition of any business or property (including any capital stock of any other Person) material in relation to the Consolidated financial condition of the Company and its Consolidated Subsidiaries at December 31, 2002.

5.2No Change; Solvency.  Since December 31, 2002, there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect and during the period from December 31, 2002 to and including the date hereof, except as set forth in Schedule 5.2, no dividends or other distributions have been declared, paid or made

46

upon the Capital Stock of the Company or any of its Subsidiaries nor has any of the Capital Stock of the Company or any of its Subsidiaries been redeemed, retired, purchased or otherwise acquired for value by the Company or any of its Subsidiaries.  As of the Closing Date, after giving effect to the transactions contemplated by the Loan Documents to occur on the Closing Date, and as of each Borrowing Date, the Company and its Subsidiaries will be Solvent on a Consolidated basis.

5.3Existence; Compliance with Law.  The Company and each of its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate or partnership (as the case may be) power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation or partnership (as the case may be) and in good standing (to the extent applicable) under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except to the extent its failure to be so qualified and/or in good standing could not reasonably be expected to have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

5.4Corporate Power; Authorization; Enforceable Obligations.  Each Loan Party has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and any Notes and to authorize the execution, delivery and performance of the Loan Documents to which it is a party.  No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Loan Documents other than filings and recordings to perfect the Liens created by the Loan Documents.  This Agreement has been, and each other Loan Document to which it is a party will be, duly executed and delivered on behalf of each Loan Party party thereto.  This Agreement constitutes, and each other Loan Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of each Loan Party party thereto enforceable against such Loan Party in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

5.5No Legal Bar.  The execution, delivery and performance of the Loan Documents, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of the Company or of any of its Subsidiaries and will not result in, or require, the creation or imposition of any Lien, except pursuant to the Security Documents, on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation.

5.6No Material Litigation.  No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Company,

47

threatened by or against the Company or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby or (b) which could reasonably be expected to have a Material Adverse Effect.

5.7No Labor Controversy.  There are no strikes or other labor disputes against the Company or any of its Subsidiaries pending or, to the knowledge of the Company, threatened that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect.  Hours worked by and payment made to employees of the Company and its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect.  All payments due from the Company or any of its Subsidiaries on account of employee health and welfare insurance that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect if not paid have been paid or accrued as a liability on the books of the Company or the relevant Subsidiary.

5.8No Default.  Neither the Company nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect.  No Default or Event of Default has occurred and is continuing.

5.9Ownership of Property; Liens.  The Company and each of its Subsidiaries has good record and indefeasible title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by subsection 8.3.  Schedule 5.9 sets forth a true and complete list of each location of real property owned or leased by the Company and its Subsidiaries as of the Closing Date that has a fair value as of the Closing Date of more than $5 million.

5.10Intellectual Property.  The Company and each of its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, patents, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the “Intellectual Property”).  Except as set forth in Schedule 5.10, no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Company know of any valid basis for any such claim.  The use of such Intellectual Property by the Company and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

5.11No Burdensome Restrictions.  No Requirement of Law or Contractual Obligation of the Company or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect.

48

5.12Taxes.  The Company and each of its Subsidiaries has filed or caused to be filed all Tax returns which, to the knowledge of the Company, are required to be filed and has paid all material Taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other Taxes imposed on it or any of its property by any Governmental Authority (other than any such Taxes, the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Company or its Subsidiaries, as the case may be); no Tax Lien has been filed, and, to the knowledge of the Company, no claim is being asserted, with respect to any such Tax which could reasonably be expected to have a Material Adverse Effect.

5.13Federal Regulations.  No part of the proceeds of any Loans will be used for “buying” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U in violation of Regulation U.  If requested by any Lender or the Administrative Agent, the Company will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-l, as applicable, referred to in Regulation U.

5.14ERISA.  Except for matters which could not reasonably be expected to have a Material Adverse Effect, neither a Reportable Event nor an “accumulated funding deficiency” (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan (other than any Multiemployer Plan), and each Plan (other than any Multiemployer Plan) has complied in all material respects with the applicable provisions of ERISA and the Code.  No termination of a Single Employer Plan under Section 4041(c) or 4042 of ERISA has occurred or is reasonably expected to occur, and no Lien in favor of the PBGC or a Plan has arisen or is reasonably expected to arise, during such five-year period.  The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits.  Neither any Loan Party nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, and, to the best knowledge of any Loan Party or any Commonly Controlled Entity, neither any Loan Party nor any Commonly Controlled Entity would become subject to any material liability under ERISA if any Loan Party or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made.  No such Multiemployer Plan is in Reorganization or Insolvent.

5.15Investment Company Act; Other Regulations.  No Loan Party is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.  No Loan Party is subject to regulation under any Federal or State statute or regulation (other than Regulation X) that limits its ability to incur Indebtedness.

5.16Subsidiaries.  Schedule 5.16 (as such schedule may be amended or supplemented as provided in subsection 7.2(b)) sets forth all of the Subsidiaries of the Company,

49

and all of the joint ventures in which the Company or any of its Subsidiaries has an interest, at the Closing Date and (with respect to the making of any Loan) as of each Borrowing Date, the jurisdiction of their organization and the direct or indirect ownership interest of the Company therein.

5.17Purpose of Tranche B Term Loans and Revolving Loans.  The proceeds of the Tranche B Term Loans shall be used by the Company (i) to pay fees and expenses relating to this Agreement to be paid on the Closing Date in accordance with subsection 6.1(o), (ii) to finance certain of the Transactions, and (iii) to the extent there are any remaining proceeds after the payments referred to in clauses (i) and (ii) above, to finance the working capital needs and general corporate purposes of the Company and its Subsidiaries (including the financing of Permitted Acquisitions).  The proceeds of the Revolving Loans shall be used by the Company to finance the working capital needs and general corporate purposes of the Company and its Subsidiaries (including the financing of Permitted Acquisitions).

5.18Environmental Matters.  Except as set forth in Schedule 5.18:

(a)The facilities and properties owned, leased or operated by the Company or any of its Subsidiaries (the “Properties”) do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) would reasonably be expected to give rise to liability under, any applicable Environmental Law, except in either case insofar as such violation or liability, or any aggregation thereof, is not reasonably likely to result in a Material Adverse Effect.

(b)The Properties and all operations at the Properties are in compliance in all material respects, and have in the last five years been in compliance in all material respects, with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the business operated by the Company or any of its Subsidiaries (the “Business”) which is reasonably likely to result in a Material Adverse Effect.

(c)Neither the Company nor any of its Subsidiaries has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws (including, without limitation, the federal Comprehensive Environmental Response, Compensation, and Liability Act) with regard to any of the Properties or the Business, nor does the Company have knowledge or reason to believe that any such notice will be received or is being threatened except insofar as such notice or threatened notice, or any aggregation thereof, does not involve a matter or matters that is or are reasonably likely to result in a Material Adverse Effect.

(d)Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which would be expected to give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law except insofar as such transportation,

50

disposal, generation, treatment or storage, individually or in the aggregate, is not reasonably likely to result in a Material Adverse Effect.

(e)No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Company, threatened, under any Environmental Law or otherwise relating to the protection of human health and safety, natural resources or Material of Environmental Concern, to which the Company or any Subsidiary is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business, nor has the Company or any of its Subsidiaries assumed or retained, by contract or, to the best knowledge of the Company, by operation of law, any liabilities of any kind, fixed or contingent, known or unknown, under any Environmental Law or with respect to any Material of Environmental Concern except insofar as such proceeding, action, decree, order, requirement, assumption or retention, individually or in the aggregate, is not reasonably likely to result in a Material Adverse Effect.

(f)There has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the Company or any of its Subsidiaries in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws except insofar as such release or threat of release is not reasonably likely to result in a Material Adverse Effect.

5.19Regulation H.  No Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968.

5.20No Material Misstatements.  The written information, reports, financial statements, exhibits and schedules furnished by or on behalf of the Company and each other Loan Party to the Administrative Agent and the Lenders in connection with the negotiation of any Loan Document or any document related thereto or included therein or delivered pursuant thereto do not contain any material misstatement of fact and do not, taken as a whole, omit, and will not, taken as a whole, omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not materially misleading.  It is understood that no representation or warranty is made concerning the forecasts, estimates, pro forma information, projections and statements as to anticipated future performance or conditions (the “Projections”), and the assumptions on which they were based, contained in any such information, reports, financial statements, exhibits or schedules, except that, as of the date such Projections were generated, (a) such Projections were based on the good faith assumptions of the management of the Company, and (b) the assumptions on which the Projections were based were believed by such management to be reasonable (it being understood that the Projections are subject to significant uncertainties and contingencies, many of which are beyond the control of the Company and that no assurance is given by the Company that such Projections will be realized).

51

5.21Collateral.  The provisions of each of the Security Documents constitute in favor of the Collateral Agent for the ratable benefit of the Lenders, a legal, valid and enforceable security interest in all right, title, and interest of the Company or any of the other Loan Parties which is a party to such Security Document, as the case may be, in the Collateral described in such Security Document.  Except as otherwise provided in the Security Documents, each of the Security Documents constitutes a perfected security interest in all right, title and interest of the Company or such other Loan Parties, as the case may be, in the Collateral described therein, and except for (i) Liens permitted by subsection 8.3 which have priority over the Liens on the Collateral by operation of law and (ii) Liens described in Schedule 8.3(f), a perfected first Lien on all right, title and interest of the Company or such other Loan Parties, as the case may be, in the Collateral described in each Security Document.

5.22Senior Debt; No Other Designated Senior Debt.  The Obligations constitute “Senior Indebtedness”, “Designated Senior Debt” and “Designated Guarantor Senior Debt” under and as defined in the Senior Subordinated Note Indenture and in any other Subordinated Debt Documentation.  No other Indebtedness of any Loan Party constitutes or has been designated as “Designated Senior Debt” or “Designated Guarantor Senior Debt” under and as defined in the Senior Subordinated Note Indenture or any other Subordinated Debt Documentation.

5.23Chief Executive Office.  The chief executive office of the Company and the office where it maintains its records is located at 8023 Vantage Drive, San Antonio, Texas 78230.  The Company is only organized in the State of Texas and “Kinetic Concepts, Inc.” is the name of the Company as it appears in official filings in the State of Texas.

SECTION 6.  CONDITIONS PRECEDENT

6.1Conditions to Effectiveness.  The effectiveness of this Agreement and the obligations of the Lenders to make Loans hereunder shall be subject to the satisfaction, immediately prior to or concurrently with the making of the Loans on the Closing Date, of the following conditions precedent:

(a)Loan Documents.  The Administrative Agent shall have received on or before the Closing Date the following, each dated such day (unless otherwise specified), in form and substance reasonably satisfactory to the Administrative Agent (unless otherwise specified) and (except for the Notes) in sufficient copies for each Lender:

(i)counterparts of this Agreement executed by the Company and the Lenders;

(ii)Notes payable to the order of the Lenders, to the extent requested pursuant to subsection 4.1(d); and

(iii)the Guarantee and Collateral Agreement substantially in the form of Exhibit B hereto, duly executed and delivered by a duly authorized officer of the Company and each of the Domestic Subsidiaries.

52

(b)Solvency Certificates.  The Administrative Agent shall have received certificates from the Company and each Guarantor, in form and substance satisfactory to the Lenders, attesting to the Solvency of the Company and each Guarantor, as the case may be, in each case individually and together with its Subsidiaries, taken as a whole (including rights of contribution), immediately before and immediately after giving effect to the Transactions, from their respective chief financial officers.

(c)Environmental Assessment Report.  If requested by the Agents with sufficient prior notice, the Administrative Agent shall have received an environmental assessment report, from an environmental consulting firm reasonably acceptable to the Administrative Agent, as to any hazards, costs or liabilities under Environmental Laws to which any Loan Party or any of its Subsidiaries may be subject, the amount and nature of which and the Company’s plans with respect to which shall be reasonably acceptable to the Lenders, together with evidence, in form and substance reasonably satisfactory to the Lenders, that all applicable Environmental Laws shall have been complied with.  To the extent that either such report or any other information that may become available to the Lenders shall disclose any hazards, costs or liabilities under Environmental Laws or otherwise that the Lenders deem material, the Lenders shall be reasonably satisfied that such hazards, costs or liabilities were adequately reflected in the Company’s financial reserves shown on the financial statements delivered to the Lenders prior to the Closing Date or that, to the extent not so reflected, the Company has made adequate provision for such hazards, costs or liabilities.

(d)Legal Opinions.  The Administrative Agent shall have received, with a counterpart for each Lender, the following executed legal opinions:

(i)the executed legal opinion of Skadden, Arps, Slate, Meagher and Flom LLP, counsel to the Company and its Subsidiaries, substantially in the form of Exhibit E-1; and

(ii)the executed legal opinion of Cox & Smith Incorporated, counsel to the Company and its Subsidiaries, substantially in the form of Exhibit E-2.

Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require.

(e)Closing Certificates.  The Administrative Agent shall have received a certificate from the Company, dated the Closing Date, substantially in the form of Exhibit D, with appropriate insertions and attachments, satisfactory in form and substance to the Administrative Agent.

(f)Incumbency Certificates.  The Administrative Agent shall have received, in form and substance reasonably satisfactory to the Administrative Agent, a certificate of the Company and each Subsidiary of the Company, dated the Closing Date, as to the incumbency and signature of the officers of the Company and each such Subsidiary of the Company executing any Loan Document.

(g)Corporate Documents.  The Administrative Agent shall have received, with a counterpart for the Administrative Agent and a copy for each Lender, true and complete

53

copies (i) with respect to each Loan Party which is a corporation, of the certificate of incorporation and by-laws of each Loan Party, certified as of the Closing Date as complete and correct copies thereof in a manner reasonably satisfactory to the Administrative Agent; (ii) with respect to each Loan Party which is a limited liability company, of the articles of organization and regulations and other governing documents and agreements of each such Loan Party, certified as of the Closing Date as complete and correct copies thereof in a manner reasonably satisfactory to the Administrative Agent; and (iii) with respect to each Loan Party which is a limited partnership, of the limited partnership agreement, the certificate of limited partnership and other governing documents and agreements of each such Loan Party, certified as of the Closing Date as complete and correct copies thereof in a manner reasonably satisfactory to the Administrative Agent.

(h)Corporate and Legal Structure.  The Lenders shall be reasonably satisfied with the terms and conditions of the Transactions, including, without limitation, all legal and Tax aspects thereof.  The Lenders shall also be reasonably satisfied with the legal structure and the terms and conditions of the capitalization of the Company and each of the Guarantors.  The Lenders shall be reasonably satisfied with the terms and conditions of the Senior Subordinated Notes.  The Lenders shall be reasonably satisfied with the corporate and legal structure and capitalization of each Loan Party and each of its Subsidiaries the Capital Stock of which Subsidiaries is being pledged pursuant to the Loan Documents, including the terms and conditions of the charter, bylaws and each class of Capital Stock of each Loan Party and each such Subsidiary and of each agreement or instrument relating to such structure or capitalization.

(i)Governmental and Third Party Consents and Approvals.  All governmental and third party approvals and consents required in connection with the transactions contemplated by the Loan Documents and the Transaction Documents shall have been obtained (without the imposition of any conditions that are not acceptable to the Lenders) (other than any governmental and third party approvals and consents the absence of which could not reasonably be expected to have a Material Adverse Effect) and shall remain in effect; (ii) all applicable waiting periods in connection with the Transactions shall have expired without any adverse action being taken by any Governmental Authority; and (iii) no law or regulation shall be applicable, in the judgment of the Lenders, that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated by the Loan Documents or the Transaction Documents.  This subsection 6.1(i) shall not apply with respect to the issuance of the Convertible Preferred to the extent such issuance has not been consummated on or prior to the Closing Date.

(j)Senior Subordinated Notes.  The Company shall have received at least $150,000,000 in Net Cash Proceeds from the sale of the Senior Subordinated Notes and such proceeds shall have been deposited into a secured proceeds account for the repayment of the Existing Subordinated Notes or redemption of the Senior Subordinated Notes.

(k)Insurance.  The Lenders shall (i) be reasonably satisfied with the amount, types and terms and conditions of all insurance maintained by the Company and its Subsidiaries, (ii) receive evidence of the insurance required by the terms of the Security Documents, and (iii) receive certificates naming the Collateral Agent as additional insured and loss payee, as applicable, in each case with such responsible and reputable insurance companies or

54

associations, and in such amounts and covering such risks, as is reasonably satisfactory to the Lenders, including, without limitation, business interruption insurance.

(l)EBITDA; Loans.  The Lenders shall be satisfied that (i) EBITDA for the 12-month period ending as of the most recently ended fiscal quarter prior to the Closing Date, on a pro forma basis, is not less than $165 million and (ii) the Leverage Ratio on a pro forma basis after giving effect to the Transactions is no greater than 4.1:1.0.  No more than an aggregate of $5 million in Revolving Loans shall be outstanding on the Closing Date.

(m)Corporate Proceedings.  The Administrative Agent shall have received a copy of the resolutions, in form and substance reasonably satisfactory to the Administrative Agent, of the Board of Directors of each Loan Party authorizing (i) the execution, delivery and performance of the Transactions and each Loan Document to which it is or is to be a party and (ii) the borrowings contemplated hereunder, certified by the Secretary or an Assistant Secretary of each Loan Party as of the Closing Date, which certificate shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded.

(n)Actions to Perfect Liens.  The Collateral Agent shall have received evidence in form and substance reasonably satisfactory to it that all filings, recordings, registrations and other actions, including, without limitation, the filing of duly authorized financing statements on form UCC-1, necessary or, in the opinion of the Collateral Agent, desirable to perfect the Liens created by the Security Documents shall have been completed (or arrangements satisfactory to the Collateral Agent for the prompt completion thereof shall have been made).

(o)Existing Credit Agreement.  The Company’s existing credit agreement with Bank of America, N.A., as administrative agent, shall have been repaid in full, all fees due thereunder shall have been paid in full and the commitments thereunder shall have been terminated.

(p)Fees.  The Lenders, the Administrative Agent and the Arrangers shall have received all fees required to be paid in connection with this Agreement including the reasonable fees and expenses of counsel for the Administrative Agent and the Arrangers for which invoices have been presented on or before the Closing Date.

6.2Conditions to Each Extension of Credit.  The agreement of each Lender to make any Loan or any other extension of credit requested to be made by it on any date (including, without limitation, the extensions of credit being made on the Closing Date), and of the Issuing Bank to issue any Letter of Credit requested to be issued by it on any date, is subject to the satisfaction of the following conditions precedent:

(a)Representations and Warranties.  Each of the representations and warranties made by the Company, its Subsidiaries and any other Loan Party in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, except for representations and warranties stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date.

55

(b)No Default.  No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit or the issuing of Letters of Credit requested to be made on such date.

(c)Additional Matters.  All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request.

Each borrowing by and Letter of Credit issued on behalf of the Company hereunder shall constitute a representation and warranty by the Company as of the date thereof that the conditions contained in this subsection have been satisfied.

SECTION 7.  AFFIRMATIVE COVENANTS

The Company hereby agrees that, so long as the Commitments remain in effect or any Letter of Credit remains outstanding and unpaid (unless such Letter of Credit has been cash collateralized) or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document, the Company shall and (except in the case of delivery of financial information, reports and notices in respect of the Company) shall cause each of its Subsidiaries to:

7.1Financial Statements.  Furnish to the Administrative Agent, with an electronic and a hard copy:

(a)as soon as available, but in any event within 90 days after the end of each fiscal year of the Company, a copy of the Consolidated balance sheet of the Company and its Consolidated Subsidiaries as at the end of such year and the related Consolidated statements of earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a “going concern” or like qualification or exception, or qualification arising out of the scope of the audit, by independent certified public accountants of nationally recognized standing; and

(b)as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Company, the unaudited Consolidated balance sheet of the Company and its Consolidated Subsidiaries as at the end of such quarter and the related unaudited Consolidated statements of earnings and of cash flows of the Company and its Consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments and the absence of notes);

all such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP (except, in the case of any such unaudited financial statements, for the absence of footnotes and, except as approved by such accountants or officer, as the case may be, and disclosed therein).

56

7.2Certificates; Other Information.  Furnish to the Administrative Agent, with an electronic and a hard copy:

(a)concurrently with the delivery of the financial statements referred to in subsection 7.l(a), a compliance certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate;

(b)concurrently with the delivery of the financial statements referred to in subsections 7.1(a) and (b), a compliance certificate of a Responsible Officer (i) stating that, to the best of such Responsible Officer’s knowledge, during such period (A) no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the Company has complied with the requirements of subsection 7.10 with respect thereto and has, or concurrently herewith shall, deliver a supplement to Schedule 5.16 detailing the addition of any such Subsidiary), (B) neither the Company nor any of its Subsidiaries has changed its name, its principal place of business, its chief executive office or the location of any material item of tangible Collateral without complying with the requirements of this Agreement and the Security Documents with respect thereto and (C) the Company has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to be observed, performed or satisfied by it, and that such Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) setting forth in reasonable detail the calculations required to determine (A) compliance with subsection 8.1, (B) the Applicable Margin then in effect for each Type of Loan and (C) in the case of the compliance certificate delivered in connection with the financial statements delivered pursuant to subsection 7.1(a), the Excess Cash Flow for the relevant fiscal year (commencing with the fiscal year ended December 31, 2004);

(c)promptly after approval by the Board of Directors of the Company, but in any event not later than the last Business Day of the second calendar month of each fiscal year of the Company, a copy of the projections by the Company of the operating budget and cash flow budget of the Company and its Subsidiaries for such fiscal year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared on the basis of sound financial planning practice and that such Responsible Officer has no reason to believe they are incorrect or misleading in any material respect;

(d)concurrently with the delivery of the financial statements referred to in subsections 7.1(a) and (b), a comparison (with a discussion of material differences) in reasonable detail of the revenues and EBITDA (and, in the case of the financial statements referred to in subsection 7.1(a), asset utilization) of the Company and its Subsidiaries, on a divisional basis, for the period covered by the financial statements to the budgeted results for such period delivered to the Lenders pursuant to paragraph (c) above (it being understood that any such comparison and discussion shall be prepared in a manner consistent with past practice as disclosed to the Administrative Agent and any comparison so prepared shall satisfy the requirements of this paragraph);

57

(e)within fifteen days after the same are sent, copies of all financial statements and reports which the Company sends to its stockholders, and within five days after the same are filed, copies of all financial statements and reports which the Company may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; and

(f)as soon as practicable, such additional financial and other information as any Lender may from time to time reasonably request.

7.3Payment of Obligations.  Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature (other than Indebtedness), except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Company and its Subsidiaries.

7.4Conduct of Business and Maintenance of Existence.  Continue to (a) engage in businesses which are in the same, similar or reasonably related or complementary businesses as the businesses in which the Company and its Subsidiaries are engaged on the date hereof and (b) preserve, renew and keep in full force and effect its corporate or partnership (as the case may be) existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business except as otherwise permitted pursuant to subsection 8.5; comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, be reasonably expected to have a Material Adverse Effect.

7.5Maintenance of Property; Insurance.  Keep all property useful and necessary in its business in good working order and condition (ordinary wear and tear excepted); maintain with financially sound and reputable insurance companies (or, to the extent consistent with prudent business practice, a program of self-insurance) insurance on all the Collateral in accordance with the requirements of Section 5.2 of the Guarantee and Collateral Agreement and the requirements of each of the Mortgages and on all its other property in at least such amounts (including as to amounts of deductibles) and against at least such risks (but including in any event commercial general liability, product liability and business interruption) as are consistent with prudent business practice; and furnish to each Lender, upon written request, full information as to the insurance carried.

7.6Inspection of Property; Books and Records; Discussions.  Keep proper books, records and accounts in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Company and its Subsidiaries with officers and employees of the Company and its Subsidiaries and with its independent certified public accountants.

58

7.7Notices.  Promptly give notice to the Administrative Agent of:

(a)the occurrence of any Default or Event of Default;

(b)any (i) default or event of default under any Contractual Obligation of the Company or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between the Company or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect;

(c)any litigation or proceeding affecting the Company or any of its Subsidiaries in which the amount involved is $5,000,000 or more and not covered by insurance or in which injunctive or similar relief is sought and, in either case, if granted, could reasonably be expected to have a Material Adverse Effect;

(d)any of the following events where, individually or in the aggregate with any other events, the liability that could reasonably be expected to result would exceed $5,000,000, as soon as possible and in any event within 10 days after any Loan Party or any Commonly Controlled Entity knows or has reason to know thereof: (i) the occurrence or expected occurrence of any Reportable Event or termination under Section 4041(c) or 4042 of ERISA with respect to any Single Employer Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or any Loan Party or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan; and

(e)any development or event which could reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer of the Company setting forth details of the occurrence referred to therein and stating what action the Company proposes to take with respect thereto.  Notwithstanding the provisions of subsection 11.2, each notice pursuant to this subsection may be given by facsimile or by means of electronic mail over the Internet (containing attachments appropriate for posting to an Intralinks or similar website reasonably accessible to the Lenders).

7.8Environmental Laws.

(a)Comply with, and use its best efforts to ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply with and maintain, and use its best efforts to ensure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except, in each case, to the extent that failure to do so would not (either individually or together with all other such failures) be reasonably expected to have a Material Adverse Effect.

59

(b)Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except, in each case, to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not be reasonably expected to have a Material Adverse Effect.

7.9Further Assurances.  Upon the reasonable request of the Administrative Agent, promptly perform or cause to be performed any and all acts and execute or cause to be executed any and all documents (including, without limitation, financing statements and continuation statements) for filing under the provisions of the Uniform Commercial Code or any other Requirement of Law which are necessary or advisable to maintain in favor of the Administrative Agent, for the benefit of the Lenders, Liens on the Collateral that are duly perfected in accordance with all applicable Requirements of Law.

7.10Additional Collateral.

(a)With respect to any assets, other than leasehold interests, acquired after the Closing Date by the Company or any of its Domestic Subsidiaries (other than any joint venture that was formed or acquired in accordance with Section 8.9(i)) that are intended to be subject to the Lien created by any of the Security Documents but which are not so subject (other than any assets described in paragraph (b) or (c) of this subsection, and subject to paragraph (d) of this subsection), promptly (and in any event within 30 days after the acquisition thereof): (i) execute and deliver to the Collateral Agent such amendments to the relevant Security Documents or such other documents as the Collateral Agent (including Mortgages) shall reasonably deem necessary or advisable to grant to the Collateral Agent, for the benefit of the Lenders, a Lien on such assets, (ii) take all actions reasonably necessary or advisable to cause such Lien to be duly perfected in accordance with all applicable Requirements of Law as contemplated by such Security Documents, including, without limitation, the filing of financing statements in such jurisdictions as may be reasonably requested by the Collateral Agent, (iii) in the case of a Mortgage, deliver to the Collateral Agent such surveys, title insurance policies and other documents that the Collateral Agent reasonably requests, all in form and substance reasonably satisfactory to the Collateral Agent and (iv) if reasonably requested by the Collateral Agent, deliver to the Collateral Agent legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Collateral Agent.

(b)With respect to any Person that, subsequent to the Closing Date, becomes a Subsidiary (other than a joint venture that was formed or acquired in accordance with Section 8.9(i) or a Foreign Subsidiary), promptly: (i) execute and deliver to the Collateral Agent, for the benefit of the Lenders, a new pledge agreement or such amendments to the Guarantee and Collateral Agreement as the Collateral Agent shall deem necessary or advisable to grant to the Collateral Agent, for the benefit of the Lenders, a Lien on the Capital Stock of such Subsidiary which is owned by the Company or any of its Subsidiaries, (ii) deliver to the Collateral Agent the certificates representing such Capital Stock, together with undated stock powers executed and delivered in blank by a duly authorized officer of the Company or such Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a party to the Guarantee and Collateral

60

Agreement pursuant to an annex to the Guarantee and Collateral Agreement which is in form and substance reasonably satisfactory to the Collateral Agent, (B) to execute and deliver a Mortgage with respect to any parcel of real property owned by it, (C) to take all actions necessary or advisable to cause the Lien created by the Guarantee and Collateral Agreement or any such Mortgage to be duly perfected in accordance with all applicable Requirements of Law as contemplated by such Security Documents, including, without limitation, the filing of financing statements in such jurisdictions as may be requested by the Collateral Agent and (D) to execute and deliver such documents and certificates as the Collateral Agent or its counsel may reasonably request relating to the organization, existence and good standing of such Subsidiary, the authorization of the transactions contemplated hereby and by the other Loan Documents relating to such Subsidiary and any other legal matters relating to such Subsidiary and the Loan Documents to which it is or is to become a party (including, if requested by the Collateral Agent, satisfactory environmental reports or assessments with respect to each parcel of real property covered by a Mortgage), all in form and substance satisfactory to the Collateral Agent and its counsel, (iv) in the case of a Mortgage, deliver to the Collateral Agent such surveys, title insurance policies and other documents that the Collateral Agent reasonably requests, all in form and substance reasonably satisfactory to the Collateral Agent and (v) if requested by the Collateral Agent, deliver to the Collateral Agent legal opinions relating to the matters described in clauses (i), (ii) and (iii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Collateral Agent.

(c)With respect to any Person that, subsequent to the Closing Date, becomes a Foreign Subsidiary, promptly upon the request of the Collateral Agent: (i) to the extent permitted by applicable law, execute and deliver to the Collateral Agent a new pledge agreement or such amendments to the Guarantee and Collateral Agreement as the Collateral Agent shall deem necessary or advisable to grant to the Collateral Agent, for the benefit of the Lenders, a Lien on the Capital Stock of such Subsidiary which is owned by the Company or any of its Domestic Subsidiaries (provided that in no event shall more than 65% of the Capital Stock of any such Subsidiary be required to be so pledged), (ii) deliver to the Collateral Agent any certificates representing such Capital Stock, together with undated stock powers executed and delivered in blank by a duly authorized officer of the Company or such Domestic Subsidiary, as the case may be, and take or cause to be taken all such other actions under the law of the jurisdiction of organization of such Foreign Subsidiary as may be necessary or advisable to perfect such Lien on such Capital Stock and (iii) if requested by the Collateral Agent, deliver to the Collateral Agent legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Collateral Agent.

Notwithstanding the foregoing provisions of this subsection 7.10, (i) none of KCII, KCI International and KCII Holdings LLC shall be required to grant a Lien on the Capital Stock of EMD CV and IMD CV owned by them, (ii) neither KCI International nor KCII Holdings LLC shall be required to be Guarantors and (iii) only 65% of the Capital Stock of each of KCI International and KCII Holdings LLC shall be required to be pledged.

(d)Notwithstanding the foregoing provisions of this subsection 7.10 and at the reasonable request of the Company, assets will be excluded from the Collateral in circumstances where the Collateral Agent and the Company determine that the economic

61

detriment to the Company of entering into or maintaining such Guarantee or Security Document or taking or maintaining a security interest in such assets would be excessive in view of the related benefits therefrom to the Lenders (it being understood that if any owned real property (together with any related property) or the leasehold interest in and to any real property has a fair market value of less than $5 million, the Administrative Agent will not require a security interest in such real property).

7.11Interest Rate Protection.  No later than the 60th day after the Closing Date, Borrower shall enter into, and for a minimum of two years thereafter maintain, Interest Rate Protection Agreements that result in at least 50% of the Tranche B Loans being effectively subject to a fixed or maximum interest rate.

SECTION 8.  NEGATIVE COVENANTS

The Company hereby agrees that, so long as the Commitments remain in effect or any Letter of Credit remains outstanding and unpaid (unless such Letter of Credit has been cash collateralized) or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document, except with respect to any actions necessary to consummate the Transactions, the Company shall not, and (except with respect to subsection 8.1) shall not permit any of its Subsidiaries to, directly or indirectly:

8.1Financial Condition Covenants.

(a)Interest Coverage.  Permit for any period of four consecutive fiscal quarters ending at the end of any fiscal quarter set forth below the ratio of (i) EBITDA of the Company for such period to (ii) Consolidated Cash Interest Expense of the Company for such period to be less than the ratio set forth opposite such period below:

Fiscal Quarter Ending	Interest Coverage Ratio
December 31, 2003	4.30 to 1.00
March 31, 2004	4.30 to 1.00
June 30, 2004	4.30 to 1.00
September 30, 2004	4.30 to 1.00
December 31, 2004	4.60 to 1.00
March 31, 2005	4.60 to 1.00
June 30, 2005	4.60 to 1.00
September 30, 2005	4.60 to 1.00
December 31, 2005	5.25 to 1.00
March 31, 2006	5.25 to 1.00
June 30, 2006	5.25 to 1.00
September 30, 2006	5.25 to 1.00
December 31, 2006 and each Fiscal Quarter ending thereafter	5.50 to 1.00

62

(b)Leverage Ratio.  Permit the Leverage Ratio as of the last day of any fiscal quarter of the Company set forth below, to be greater than the ratio set forth opposite such fiscal quarter below;

Fiscal Quarter Ending	Ratio
December 31, 2003	4.30 to 1.00
March 31, 2004	4.30 to 1.00
June 30, 2004	4.30 to 1.00
September 30, 2004	4.30 to 1.00
December 31, 2004	3.75 to 1.00
March 31, 2005	3.75 to 1.00
June 30, 2005	3.75 to 1.00
September 30, 2005	3.75 to 1.00
December 31, 2005	3.00 to 1.00
March 31, 2006	3.00 to 1.00
June 30, 2006	3.00 to 1.00
September 30, 2006	3.00 to 1.00
December 31, 2006 and each Fiscal Quarter ending thereafter	2.50 to 1.00

(c)Minimum EBITDA.  Permit EBITDA of the Company for any period of four consecutive fiscal quarters ending at the end of any fiscal quarter set forth below to be less than the amount set forth opposite such period:

Fiscal Quarter Ending	EBITDA
December 31, 2003	156,400,000
March 31, 2004	156,400,000
June 30, 2004	156,400,000
September 30, 2004	156,400,000
December 31, 2004	180,000,000
March 31, 2005	180,000,000
June 30, 2005	180,000,000
September 30, 2005	180,000,000
December 31, 2005	210,000,000
March 31, 2006	210,000,000
June 30, 2006	210,000,000
September 30, 2006	210,000,000
December 31, 2006 and each Fiscal Quarter ending thereafter	240,000,000

8.2Limitation on Indebtedness.  Create, incur, assume or suffer to exist any Indebtedness, except:

(a)Indebtedness under this Agreement or any of the other Loan Documents;

63

(b)Indebtedness of the Company to any Subsidiary of the Company and of any Subsidiary of the Company to the Company or any other Subsidiary of the Company;

(c)Indebtedness of the Company and any of its Subsidiaries incurred to finance the acquisition of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise) in an aggregate principal amount not exceeding as to the Company and its Subsidiaries $40,000,000 at any time outstanding;

(d)Indebtedness of any Foreign Subsidiary incurred to finance the working capital requirements of such Foreign Subsidiary in an aggregate principal amount not exceeding, for all Foreign Subsidiaries at any time outstanding $40,000,000;

(e)Indebtedness outstanding on the date hereof and listed in Schedule 8.2(e) and, so long as the principal amount thereof is not increased, any refinancings, refundings, renewals, exchanges or extensions of such Indebtedness;

(f)Indebtedness of a Person which becomes a Subsidiary after the date hereof (and, so long as the principal amount thereof is not increased, any refinancings, refundings, renewals or extensions thereof), provided that (i) such Indebtedness existed at the time such Person became a Subsidiary and was not created in anticipation thereof and (ii) immediately after giving effect to the acquisition of such Person by the Company or any of its Subsidiaries no Default or Event of Default shall have occurred and be continuing;

(g)Indebtedness of the Company and its Subsidiaries under Interest Rate Protection Agreements contemplated by subsection 7.11 or otherwise entered into in the ordinary course of business (and not for speculative purposes) and Foreign Currency Protection Agreements entered into in the ordinary course of business (and not for speculative purposes);

(h)Indebtedness arising from the honoring by a bank of a check or similar instrument drawn against insufficient funds in the ordinary course, so long as such Indebtedness is extinguished within five Business Days of its incurrence;

(i)Indebtedness represented by workers’ compensation claims, self-insurance obligations, performance bonds, warranty or contractual service obligations or surety or appeal bonds, in each case to the extent incurred in the ordinary course of business in accordance with customary industry practices in amounts customary in the Company’s industry and in the case of Indebtedness represented by self-insurance obligations, in an aggregate amount not to exceed $40,000,000 at any time outstanding;

(j)Indebtedness in respect of (i) the Senior Subordinated Notes in an aggregate initial principal amount not to exceed $250,000,000 and (ii) any other Subordinated Debt the Net Cash Proceeds of which are used to refinance the Senior Subordinated Notes, provided that the aggregate initial principal amount of such Subordinated Debt may not exceed $250,000,000, provided further that (A) the aggregate principal amount of Indebtedness outstanding under this paragraph (j) may not exceed $250,000,000 and (B) no principal repaid in respect of any Indebtedness outstanding under this paragraph (j) may be reborrowed under the facility or agreement pursuant to which such Indebtedness was issued or incurred;

64

(k)Indebtedness in respect of the Senior Subordinated Notes (in addition to Indebtedness permitted under paragraph (j)(i) above) or any other Subordinated Debt (in addition to Indebtedness permitted under paragraph (j)(ii) above) in an aggregate initial principal amount not to exceed $100,000,000; provided, however, that the Company and its Subsidiaries may incur Indebtedness described in this clause (k) in an aggregate initial principal amount in excess of $100,000,000 so long as 100% of the Net Cash Proceeds from the issuance of such Indebtedness shall be applied to prepay the Loans or permanently reduce the commitments;

(l)additional Indebtedness of the Company and the Guarantors not exceeding in aggregate principal amount, together with (but without double-counting) the aggregate outstanding Guarantee Obligations incurred and permitted by subsection 8.4(b), $60,000,000 at any one time outstanding;

(m)Indebtedness existing on the Closing Date and evidenced by the Existing Subordinated Note Indenture Documents (provided that, such Indebtedness shall be extinguished within 90 days after the Closing Date);

(n)any Indebtedness resulting from any transaction permitted under subsection 8.12; and

(o)Indebtedness in respect of any management agreement between the Company and the Sponsors in an aggregate amount not to exceed $1,000,000.

8.3Limitation on Liens.  Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for:

(a)Liens for Taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Company or its Subsidiaries, as the case may be, in conformity with GAAP (or, in the case of Foreign Subsidiaries, generally accepted accounting principles in effect from time to time in their respective jurisdictions of organization);

(b)carriers’, warehousemen’s, landlord’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings;

(c)pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements;

(d)deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

(e)easements, rights-of-way, zoning ordinances, restrictions and other similar encumbrances existing or incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the

65

property subject thereto or materially interfere with the ordinary conduct of the business of the Company or such Subsidiary;

(f)Liens in existence on the date hereof listed in Schedule 8.3(f), securing Indebtedness permitted by subsection 8.2(e), provided that no such Lien is spread to cover any additional property after the Closing Date and that the principal amount of Indebtedness secured thereby is not increased;

(g)Liens securing Indebtedness of the Company and its Subsidiaries permitted by subsection 8.2(c) incurred to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created within 180 days of the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (iii) the principal amount of Indebtedness secured thereby is not increased;

(h)Liens on assets of any Foreign Subsidiary securing Indebtedness of such Foreign Subsidiary permitted by subsection 8.2(d);

(i)Liens on the property or assets (including proceeds thereof) of a Person which becomes a Subsidiary after the date hereof securing Indebtedness permitted by subsection 8.2(f), provided that (i) such Liens existed at the time such Person became a Subsidiary and were not created in anticipation thereof, (ii) any such Lien is not spread to cover any property or assets of such Person after the time such Person becomes a Subsidiary, and (iii) the principal amount of Indebtedness secured thereby is not increased;

(j)Liens (not otherwise permitted hereunder) which secure obligations not exceeding (as to the Company and all Subsidiaries) $60,000,000 in aggregate amount at any time outstanding, provided that no such Lien may cover Cash Equivalents, the Capital Stock of any Subsidiary or any of the assets described in Schedule 8.6(f);

(k)Liens created pursuant to the Security Documents;

(l)any interest or title of a lessor under any Financing Lease, provided that such Liens do not extend to any property or assets which are not leased property subject to such Financing Lease;

(m)any Lien resulting from any transaction permitted under subsection 8.12;

(n)Liens securing Indebtedness under Interest Rate Protection Agreements and Foreign Currency Protection Agreements, in each case entered into with a Person that was at the time of entering into such Interest Rate Protection Agreement or Foreign Currency Protection Agreement, as applicable, a Lender, and such Indebtedness is otherwise permitted hereunder;

(o)Liens on assets of a Subsidiary in favor of the Company or a Guarantor;

(p)Liens arising in the ordinary course of business by virtue of any contractual, statutory or common law provision relating to banker’s Liens, rights of set-off or similar rights and remedies covering deposit or securities accounts (including funds or other

66

assets credited thereto) or other funds maintained with a depository institution or securities intermediary;

(q)Liens arising out of judgments or awards not resulting in a Default, provided that, the Company or such Subsidiary, as applicable, shall in good faith be prosecuting an appeal or proceedings for review;

(r)Liens on any escrow account wherein funds or other assets have been deposited to (i) repay the Existing Subordinated Notes and/or (ii) to redeem the Senior Subordinated Notes;

(s)exceptions to title set forth in the title policy corresponding to any Mortgages; and

(t)restrictions on transfers of securities imposed by applicable securities laws.

8.4Limitation on Guarantee Obligations.  Create, incur, assume or suffer to exist any Guarantee Obligation except:

(a)Guarantee Obligations in existence on the date hereof and listed in Schedule 8.4(a);

(b)Guarantee Obligations incurred after the date hereof in an aggregate amount not to exceed, together with (but without double-counting) the aggregate outstanding principal amount of Indebtedness incurred and permitted by subsection 8.2(l), $60,000,000 at any one time outstanding;

(c)guarantees made by the Company of obligations of any of its Subsidiaries, or by any Subsidiary of the Company’s or another Subsidiary’s obligations, which obligations are otherwise permitted under this Agreement;

(d)Guarantee Obligations of Domestic Subsidiaries in respect of the Senior Subordinated Notes or other Subordinated Debt so long as (i) such Guarantee Obligations are subordinated to such Domestic Subsidiary’s Guarantor Obligations (as defined in the Guarantee and Collateral Agreement) on terms and conditions satisfactory to the Required Lenders (it being agreed that the subordination provisions in the Senior Subordinated Note Indenture are satisfactory to the Required Lenders) and (ii) such Domestic Subsidiary is a Guarantor (as defined in the Guarantee and Collateral Agreement);

(e)Guarantee Obligations arising pursuant to any Existing Subordinated Note Indenture Documents;

(f)guarantees by Foreign Subsidiaries of Indebtedness of other Foreign Subsidiaries permitted under subsection 8.2(d); and

(g)the Guarantees and any L/C Obligations.

67

8.5Limitation on Fundamental Changes.  Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except:

(a)any Subsidiary of the Company may be merged or consolidated with or into the Company (provided that the Company shall be the continuing or surviving entity) or with or into any one or more Subsidiaries of the Company (provided that (i) a Subsidiary shall be the continuing or surviving entity, (ii) the surviving entity must be a Guarantor if any merged or consolidated Subsidiary is a Guarantor and (iii) the percentage of the Capital Stock of the surviving entity owned directly or indirectly by the Company is at least equal to the higher of (A) the percentage of the Capital Stock of the merged or consolidated Subsidiary owned directly or indirectly by the Company immediately prior to such merger or consolidation and (B) the percentage of the Capital Stock of the surviving entity owned directly or indirectly by the Company immediately prior to such merger or consolidation);

(b)any Subsidiary may sell, lease, transfer or otherwise dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Company or any other Subsidiary of the Company, provided that (i) if the Subsidiary whose assets are so sold, leased, transferred or otherwise disposed of is a Guarantor, any Subsidiary to which such assets are so sold, leased, transferred or otherwise disposed of must also be a Guarantor, except that any Domestic Subsidiary may transfer the Capital Stock of any Foreign Subsidiary owned by it to a Foreign Subsidiary which is formed to be a holding company with respect to the Capital Stock of Foreign Subsidiaries, and (ii) the Company directly or indirectly owns at least the same percentage of the Capital Stock of any Subsidiary to which such assets are so sold, leased, transferred or otherwise disposed of as the Company owns of the Capital Stock of the Subsidiary whose assets are so sold, leased, transferred or otherwise disposed of;

(c)any Subsidiary may be merged with any other Person or sell or transfer all or substantially all of its property, business or assets in a transaction permitted by subsection 8.6(f) or 8.6(g); and

(d)any Subsidiary may be merged with any other Person to effect a Permitted Acquisition permitted by subsection 8.9(i) so long as the surviving entity is a Subsidiary.

8.6Limitation on Sale of Assets.  Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary’s Capital Stock to any Person other than the Company or any wholly owned Subsidiary, except:

(a)the sale or other disposition of obsolete or worn out property in the ordinary course of business;

(b)the sale or lease of inventory in the ordinary course of business;

68

(c)the sale or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof;

(d)dispositions resulting from any Casualty Event;

(e)as permitted by subsection 8.5(b) or in the nature of Investments permitted by Section 8.9(i) in respect of joint ventures;

(f)(i) the asset sales and other dispositions described in Schedule 8.6(f) and (ii) asset sales in connection with transactions permitted under subsection 8.12;

(g)sales of assets for fair market value by the Company and its Subsidiaries not otherwise permitted under this subsection, provided that the aggregate consideration (including assumed Indebtedness and the fair market value of non-cash consideration) of all such asset sales shall not exceed $20,000,000 in any year or $60,000,000 in the aggregate after the Closing Date; and

(h)the lease of real property in the ordinary course of business and consistent with past practice.

8.7Limitation on Dividends and Stock Purchases.  Declare or pay any dividend (other than dividends payable solely in common stock of the Company) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Company or any warrants or options to purchase any such Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Company or any Subsidiary, except that the Company may:

(a)repurchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company held by employees, officers, directors and consultants of the Company or any of its Subsidiaries pursuant to any equity subscription agreement, stock option agreement or stock ownership arrangement, provided that (A) the aggregate amount paid in any fiscal year for all such repurchased, redeemed, acquired or retired Capital Stock shall not exceed $10,000,000 (provided that, if the Company repurchased, redeemed or otherwise acquired or retired less than $10,000,000 of its Capital Stock in any fiscal year (or such increased maximum amount allowed after giving effect to this proviso), the Company may carry forward to the ensuing fiscal year the amount of such difference, and the maximum aggregate amount of all such repurchased, redeemed, acquired or retired Capital Stock for that ensuing fiscal year shall be increased by the amount of such difference; provided further that, taking into account the accumulation of all such amounts carried forward, the maximum aggregate amount shall not exceed $30,000,000 in any fiscal year), (B) no Event of Default shall have then occurred and be continuing or would result therefrom, and (C) the Company may not, nor will it permit any of its Subsidiaries to repurchase any Capital Stock issued to any officer, employee, director or consultant pursuant to the terms of the Management Equity Plan other than:

(i)a repurchase of any Capital Stock in connection with any Redemptions;

69

(ii)a repurchase of any Capital Stock that is made after the death or Permanent Disability of such officer, employee, director or consultant;

(iii)a repurchase of any common stock of the Company which has been owned by such officer, employee, director or consultant for a period of time greater than six months;

(iv)a repurchase of any Capital Stock in connection with any event described in subsection 9(1);

(v)a repurchase of any Capital Stock at any point in time in which all options issued and outstanding under the Management Equity Plan are subject to variable plan accounting pursuant to the accounting provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock issued to Employees” (APB25);

(vi)a repurchase of any Capital Stock to the extent necessary or advisable, pursuant to Section 10 or 13 of the Management Equity Plan; however, for purposes of clarity, the Company call right upon a participant’s termination of employment, except in the event of death or Permanent Disability, described in Section 10(a) of the Management Equity Plan shall not be considered necessary or advisable;

(vii)a repurchase of any Capital Stock to the extent used to satisfy Minimum Tax Withholding requirements associated with the exercise of such Capital Stock; and

(viii)a repurchase of any Capital Stock at any point subsequent to the Company’s adoption of the accounting provisions of Financial Accounting Standards Board Issuance No. 123 — “Accounting for Stock-Based Compensation” (FAS 123), or any other fair value method of accounting generally accepted in the United States, such that the repurchase of such Capital Stock would not trigger liability accounting for all options under the Management Equity Plan;

(b)exchange Capital Stock of the Company held by any employee, officer, director or consultant of the Company or any of its Subsidiaries for other Capital Stock of the Company;

(c)undertake the Redemptions; and

(d)pay cash dividends on the Convertible Preferred during the first six years after issuance so long as the Leverage Ratio, on a pro forma basis giving effect to the payment of such dividends, is less than 2.25:1 and no Event of Default has occurred and is continuing or would result therefrom.

8.8Limitation on Capital Expenditures.  Make or commit to make a Capital Expenditure, excluding (i) any such Capital Expenditure in connection with any asset acquired in connection with normal replacement and maintenance programs properly charged to current operations and (ii) Capital Expenditures not exceeding, in the aggregate for the Company and its Subsidiaries during any of the fiscal years of the Company set forth below, the amount set forth opposite such fiscal year below:

70

Fiscal Year	Amount
2003	85,000,000
2004	95,000,000
2005	100,000,000
2006	105,000,000
2007	110,000,000
2008	120,000,000
2009	130,000,000
2010 and each Fiscal Year thereafter	150,000,000

provided, that up to 100% of any such amount if not so expended in the fiscal year for which it is permitted above, may be carried over for expenditure in the three succeeding fiscal years.

8.9Limitation on Investments, Loans and Advances.  Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person (an “Investment”), except:

(a)extensions of trade credit in the ordinary course of business;

(b)investments in Cash Equivalents;

(c)loans and advances to employees of the Company or its Subsidiaries for travel, entertainment and relocation expenses in an aggregate amount for the Company and its Subsidiaries not to exceed $5,000,000 at any one time outstanding, provided that such loans and advances are in compliance with applicable laws;

(d)(i) Investments by the Company in any Guarantor and Investments by Subsidiaries in the Company and in any Guarantor, (ii) Investments by Subsidiaries that are not Guarantors in Subsidiaries that are not Guarantors and (iii) Investments not otherwise permitted hereunder by the Company or the Guarantors in Subsidiaries that are not Guarantors, provided that the aggregate amount of all Investments (including Investments in such Subsidiaries in the nature of sales and transfers of assets (including, pursuant to a transaction permitted under subsection 8.5) to the extent made for less than fair market value and Guarantee Obligations pursuant to subsection 8.4) made in any fiscal year pursuant to this clause (e)(iii) shall not exceed $20,000,000; provided, further, that (x) up to 100% of any such amount if not so expended in the fiscal year for which it is permitted, may be carried over for expenditure in the three succeeding fiscal years, and (y) the conversion of any Indebtedness owed to the Company or any Guarantor by any Subsidiary into equity of such Subsidiary shall not constitute an additional Investment in such Subsidiary by the Company or such Guarantor for purposes of the limitation contained in the immediately preceding proviso;

(e)Interest Rate Protection Agreements contemplated by subsection 7.11 and Foreign Currency Protection Agreements permitted hereunder;

71

(f)loans by the Company or its Subsidiaries to their employees in connection with management incentive plans in an aggregate amount not to exceed $4,000,000 at any one time outstanding;

(g)Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers;

(h)Investments made by the Company or any of its Subsidiaries as a result of consideration received in connection with a sale of assets permitted under subsection 8.6;

(i)Permitted Acquisitions;

(j)other Investments in an aggregate amount not to exceed $40,000,000 at any one time outstanding; and

(k)the Investments described in Schedule 8.9(k).

8.10Limitation on Optional Payments and Modifications of Subordinated and Other Debt Instruments.  (a)  Make any optional payment or prepayment on or redemption, purchase or defeasance of any Senior Subordinated Notes (other than any refinancing thereof with the Net Cash Proceeds of any Subordinated Debt permitted under subsection 8.2(j)(ii)) or any other Subordinated Debt (other than the Existing Subordinated Notes); provided, that the Company may make any optional payment or prepayment on, or redeem, purchase, defease or otherwise acquire any Senior Subordinated Notes or other Subordinated Debt so long as the Leverage Ratio, on a pro forma basis giving effect to such payment, prepayment, redemption, purchase, defeasance or other acquisition, is less than 2.25:1, such payment, prepayment, redemption, purchase, defeasance or other acquisition is not in an amount greater than 105% of the principal amount of such Senior Subordinated Notes or other Subordinated Debt being paid, prepaid, redeemed, purchased, defeased or otherwise acquired and no Event of Default has occurred and is continuing or would result therefrom, (b) amend, modify or change, or consent or agree to any amendment, modification or change to any of the terms relating to any Senior Subordinated Notes or any other Subordinated Debt (other than in connection with the payoff and redemption of the Existing Subordinated Notes and the termination of the Existing Subordinated Note Indenture Documents, and other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon or otherwise would not be adverse to the Lenders), or (c) amend the subordination provisions of the Senior Subordinated Notes, the Senior Subordinated Note Indenture or any other Subordinated Debt Documentation (other than in connection with the payoff and redemption of the Existing Subordinated Notes and the termination of the Existing Subordinated Note Indenture Documents).

8.11Limitation on Transactions with Affiliates.  Except for (i) transactions permitted under subsection 8.2, 8.4, 8.7, 8.9 and 8.17 and (ii) the payment of customary directors’ fees, indemnification and reimbursement of expenses to directors, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or

72

the rendering of any service, with any Affiliate unless such transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of the Company’s or such Subsidiary’s business and (c) upon fair and reasonable terms no less favorable to the Company or such Subsidiary, as the case may be, than it would obtain in a comparable arm’s length transaction with a Person which is not an Affiliate.  Notwithstanding the foregoing, the Company and its Subsidiaries shall be permitted to undertake the Transactions as contemplated herein.

8.12Limitation on Sales and Leasebacks.  Enter into any arrangement with any Person providing for the leasing by the Company or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Company or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Company or such Subsidiary, except for any sale and leaseback as to which the sale is permitted pursuant to subsections 8.6(f) or (g) and the proceeds are applied to the extent required pursuant to 4.3(d).

8.13Limitation on Negative Pledge Clauses.  Enter into with any Person any agreement, other than (a) purchase money mortgages or Financing Leases permitted by this Agreement (in which cases, any prohibition or limitation shall only be effective against the assets financed thereby), and (b) agreements with respect to the Indebtedness permitted under subsection 8.2(d) (which restrictions may only limit the granting of Liens on the assets of a Foreign Subsidiary), which prohibits or limits the ability of the Company or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired to secure the obligations of the Company and its Subsidiaries under the Loan Documents or the obligations of the Company and its Subsidiaries under any other document relating to any refinancing, refunding, renewal or extension of this Agreement or any amendment, restatement or other modification of any of the Loan Documents.

8.14Limitation on Changes in Fiscal Year.  Permit the fiscal year of the Company to end on a day other than December 31 in any calendar year.

8.15Limitation on Lines of Business.  Enter into any business, either directly or through any Subsidiary, except for those businesses which are in the same, similar or reasonably related or complementary businesses as the businesses in which the Company and its Subsidiaries are engaged on the date of this Agreement or which are directly related thereto (including, without limitation, ownership of interests in trusts which own certain aircraft).

8.16Limitation on Subsidiary Distributions.  Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends or make any other distributions in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the Company or any other Subsidiary of the Company, (b) make loans or advances to the Company or any other Subsidiary of the Company or (c) transfer any of its assets to the Company or any other Subsidiary of the Company; except for (i) in the case of clause (a) above, Liens on the Capital Stock of Subsidiaries permitted hereunder, (ii) such encumbrances or restrictions existing under or by reason of any restrictions existing under the Loan Documents, the Senior Subordinated Note Indenture Documents or the Existing Subordinated Note Indenture Documents, (iii) restrictions

73

in Indebtedness incurred by Foreign Subsidiaries permitted to be incurred hereunder, which shall be applicable only to such Foreign Subsidiary and its Subsidiaries, and (iv) in the case of clause (c) above, customary provisions in leases, sales agreements, joint venture agreements and other contracts restricting the assignment thereof.

8.17Limitation on Management Fees.  Pay management or similar fees to the Sponsors; provided that the Company may pay up to an aggregate amount not in excess of $750,000 to the Sponsors and may pay or reimburse the Sponsors for reasonable expenses actually incurred, provide customary indemnifications, and provide director fees and compensation consistent with that provided to other directors.

8.18Designated Senior Debt.  Designate any Indebtedness of any Loan Party (other than Indebtedness under this Agreement) as “Designated Senior Debt” or “Designated Guarantor Senior Debt” under and as defined in the Senior Subordinated Note Indenture or any other Subordinated Debt Documentation, in each case without the prior written consent of the Administrative Agent and the Required Lenders.

8.19Chief Executive Office.  Move its chief executive office and the office at which it maintains its records relating to the transactions contemplated by this Agreement and the Security Documents or change its state of organization unless (a) not less than 45 days’ prior written notice of its intention to do so, clearly describing the new location or state, shall have been given to the Administrative Agent and each Lender and (b) such action, reasonably satisfactory to the Administrative Agent and each Lender to maintain any security interest in the property subject to the Security Documents at all times fully perfected and in full force and effect shall have been taken.

8.20Limitations on Activities of Special Purpose Subsidiaries.  Permit KCI International or KCII to amend the provisions of KCI International’s certificate of incorporation or KCII’s operating agreement that restrict the ability of KCI International and KCII to incur Indebtedness, Guarantee Obligations or Liens, conduct any business other than holding Capital Stock of Subsidiaries of the Company or merging or consolidating with any other Person unless the governing documents of the survivor of such merger or consolidation contain similar restrictions.

SECTION 9.  EVENTS OF DEFAULT

If any of the following events shall occur and be continuing:

(a)The Company shall fail to pay any principal of any Loan when due in accordance with the terms thereof or hereof; or the Company shall fail to pay any interest on any Loan, or any other amount payable hereunder (including, without limitation, any fees), within three Business Days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or

(b)Any representation or warranty made or deemed made by the Company or any other Loan Party herein or in any other Loan Document or which is contained in any

74

certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or

(c)Any Loan Party shall default in the observance or performance of any agreement contained in Section 8 hereof or subsection 7.7(a); or

(d)The Company or any other Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after the earlier of (i) notice to the Company by any Lender or any Agent of such default and (ii) any Responsible Officer of any Loan Party becoming aware of such default; or

(e)The Company or any of its Subsidiaries shall (i) default in any payment of principal of or interest of any Indebtedness (other than the Loans) or in the payment of any Guarantee Obligation, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; provided, however, that no Default or Event of Default shall exist under this paragraph unless the aggregate amount of Indebtedness and/or Guarantee Obligations in respect of which any default or other event or condition referred to in this paragraph shall have occurred shall be equal to at least $15,000,000; or

(f)(i) The Company or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Company or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Company or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief of any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Company or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Company or any of its Subsidiaries shall take any action in

75

furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Company or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or

(g)(i) Any Person shall engage in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any “accumulated funding deficiency” (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan (other than a Multiemployer Plan) or any Lien in favor of the PBGC or a Plan shall arise on the assets of any Loan Party or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to terminate any Single Employer Plan, or the PBGC shall have notified any Loan Party or any Commonly Controlled Entity that it intends to seek such termination, or to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, or a notice of intent to terminate any Single Employer Plan shall have been filed by any Loan Party or any Commonly Controlled Entity, (v) any Loan Party or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any Loan Party or Commonly Controlled Entity shall file an application for a minimum funding waiver pursuant to Section 412(d) of the Code with respect to any Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or

(h)One or more judgments or decrees shall be entered against the Company or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance) of $15,000,000 or more, and all such judgments or decrees shall not have been vacated, paid, satisfied, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or

(i)(i) Any of the Security Documents shall cease, for any reason, to be in full force and effect, or the Company or any other Loan Party which is a party to any of the Security Documents shall so assert or (ii) the Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or

(j)Any Guarantee shall cease, for any reason, to be in full force and effect or any Guarantor shall so assert; or

(k)Any subordination provision in the Senior Subordinated Note Indenture or any other Subordinated Debt Documentation shall cease, for any reason, to be in full force and effect or any Loan Party shall so assert (other than in connection with the termination of the Existing Subordinated Note Indenture Documents); or

(l)(i) the Sponsors shall cease to beneficially own at least 35% or more of the outstanding Capital Stock of the Company having ordinary voting power in the election of directors of the Company, measured by voting power rather than number of shares, (ii) (x) any Person or “group” (within the meaning of Section 13(d) of the Securities Exchange Act of 1934,

76

as amended) (other than the Sponsors, the other shareholders of the Company existing on the Closing Date and the initial purchasers of the Convertible Preferred within 10 Business Days of the Closing Date) shall have beneficial ownership of 30% or more of the outstanding Capital Stock of the Company having ordinary voting power in the election of directors of the Company, measured by voting power rather than number of shares, and (y) the Sponsors, the other shareholders of the Company existing on the Closing Date and the initial purchasers of the Convertible Preferred within 10 Business Days of the Closing Date shall have beneficial ownership of less than 50% of the outstanding Capital Stock of the Company having ordinary voting power in the election of directors of the Company, measured by voting power rather than number of shares, (iii) the Board of Directors of the Company shall not consist of a majority of Continuing Directors; “Continuing Directors” shall mean the directors of the Company on the Closing Date and each other director, if such other director’s nomination for election to the Board of Directors of the Company is recommended by a majority of the then Continuing Directors or (iv) any “change of control” shall occur under the Senior Subordinated Note Indenture or any other Subordinated Debt Documentation representing Indebtedness in excess of $15,000,000;

then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section with respect to the Company, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Company declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Company, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable.

With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Company shall at such time deposit in a cash collateral account opened by the Collateral Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit.  The Company hereby grants to the Collateral Agent, for the benefit of the Issuing Bank and the L/C Participants, a security interest in such cash collateral to secure all Obligations under this Agreement and the other Loan Documents.  Amounts held in such cash collateral account shall be applied by the Collateral Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other Obligations.  Within a reasonable period after all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other Obligations shall have been paid in full, the

77

balance, if any, in such cash collateral account shall be returned to the Company.  The Company shall execute and deliver to the Collateral Agent, for the account of the Issuing Bank and the L/C Participants, such further documents and instruments as the Collateral Agent may request to evidence the creation and perfection of the within security interest in such cash collateral account.

Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived.

SECTION 10.  THE AGENTS

10.1Appointment.  Each Lender hereby irrevocably designates and appoints each Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes each Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto.  Notwithstanding any provision to the contrary elsewhere in this Agreement, neither Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against either Agent.  Without limiting the foregoing, the use of the term “agent” with respect to either Agent is used as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties.  The Agents and the Lenders hereby acknowledge and agree that the Administrative Agent shall be the only Agent which shall be a “Representative” of the Lenders under the Senior Subordinated Note Indenture (after execution and delivery thereof) and any other Subordinated Debt Documentation (after execution and delivery thereof).

The Issuing Bank shall act on behalf of the Lenders with respect to Letters of Credit issued or made under this Agreement and the documents associated therewith.  It is understood and agreed that the Issuing Bank (a) shall have all of the benefits and immunities (i) provided to the Agents in this Section 10 with respect to acts taken or omissions suffered by the Issuing Bank in connection with Letters of Credit issued under this Agreement and the documents associated therewith as fully as if the term “Agents”, as used in this Section 10, included the Issuing Bank with respect to such acts or omissions and (ii) as additionally provided in this Agreement and (b) shall have all of the benefits of the provisions of subsection 10.7 as fully as if the term “Agents”, as used in subsection 10.7, included the Issuing Bank.

10.2Delegation of Duties.  Each Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  Neither Agent shall be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care.

10.3Exculpatory Provisions.  Neither Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any

78

action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person’s own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Company or any other Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agents under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of the Company or any other Loan Party to perform its obligations hereunder or thereunder.  No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Company or any other Loan Party.

10.4Reliance by Agents.  Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Company or any other Loan Party), independent accountants and other experts selected by such Agent.  The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent.  Each Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the relevant Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.  Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the relevant Lenders entitled to so act, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.

10.5Notice of Default.  Neither Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent has received notice from a Lender or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”.  In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders.  The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Lenders entitled to so act, provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders (except to the extent that this Agreement expressly requires that such actions be taken or not be taken only with the consent or upon the authorization of the Required Lenders).

79

10.6Non-Reliance on Agents and Other Lenders.  Each Lender expressly acknowledges that neither Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by such Agent or any such other Person hereinafter taken, including any review of the affairs of the Company or any other Loan Party, shall be deemed to constitute any representation or warranty by such Agent or any such other Person to any Lender.  Each Lender represents to the Agents that it has, independently and without reliance upon any Agent-Related Person or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Company and the other Loan Parties and made its own decision to make its extensions of credit hereunder and enter into this Agreement.  Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Company and the other Loan Parties.  Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agents hereunder, the Agents shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Company or any other Loan Party which may come into the possession of the Agents or any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates.

10.7Indemnification.  Whether or not the transactions contemplated hereby are consummated, the Lenders agree to indemnify each Agent-Related Person (to the extent not reimbursed by the Company and without limiting the obligation of the Company to do so), ratably according to their respective Voting Percentages in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against such Agent-Related Person in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent-Related Person under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting from the relevant Agent-Related Person’s gross negligence or willful misconduct; provided, further, that the liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement, as the case may be, was incurred by or asserted against the Agent-Related Person in its capacity as such.  The agreements in this subsection shall survive the payment of the Loans and all other amounts payable hereunder.

10.8Agent in Its Individual Capacity.  Each Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company and the other Loan Parties as though such Agent were not an Agent hereunder and under the

80

other Loan Documents and without notice to or consent of the Lenders.  The Lenders acknowledge that, pursuant to such activities, each Agent and its Affiliates may receive information regarding the Company or the other Loan Parties or their respective Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or the other Loan Parties or their respective Affiliates) and acknowledge that neither Agent nor their respective Affiliates shall be under an obligation to provide such information to them.  With respect to the Loans made by it and with respect to any Letter of Credit issued or participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms “Lender” and “Lenders” shall include each Agent in its individual capacity.

10.9Successor Administrative Agent.

(a)The Administrative Agent may resign as Administrative Agent upon 10 days’ notice to the Lenders.  If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent (provided that it shall have been approved by the Company (which approval shall not be unreasonably withheld)), shall succeed to the rights, powers and duties of the Administrative Agent hereunder.  If no successor agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Company, a successor agent from among the Lenders.  Effective upon such appointment by the Required Lenders or by the Administrative Agent, the term “Administrative Agent” shall mean such successor agent, and the former Administrative Agent’s rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans.  After any retiring Administrative Agent’s resignation as Administrative Agent, the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.  If no successor agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.

(b)The Collateral Agent may resign as Collateral Agent upon 10 days’ notice to the Lenders.  If the Collateral Agent shall resign as Collateral Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent (provided that it shall have been approved by the Company (which approval shall not be unreasonably withheld)), shall succeed to the rights, powers and duties of the Collateral Agent hereunder.  If no successor agent is appointed prior to the effective date of the resignation of the Collateral Agent, the Collateral Agent may appoint, after consulting with the Lenders and the Company, a successor agent from among the Lenders.  Effective upon such appointment by the Required Lenders or by the Collateral Agent, the term “Collateral Agent” shall mean such successor agent, and the former Collateral Agent’s rights, powers and duties as Collateral Agent shall be terminated, without any other or further act or deed on the part of such former Collateral Agent or any of the parties to

81

this Agreement or any holders of the Loans.  After any retiring Collateral Agent’s resignation as Collateral Agent, the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent under this Agreement and the other Loan Documents.  If no successor agent has accepted appointment as Collateral Agent by the date which is 30 days following a retiring Collateral Agent’s notice of resignation, the retiring Collateral Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall assume and perform all of the duties of the Collateral Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.

10.10Agents and Arrangers.  Notwithstanding anything to the contrary contained herein, none of the entities listed on the cover page of this Agreement as a “Syndication Agent”, “Joint Lead Arranger and Joint Book Manager” or “Documentation Agent”, in their capacities as such, shall have any duties or obligations of any kind under this Agreement.

SECTION 11.  MISCELLANEOUS

11.1Amendments and Waivers.  Neither this Agreement nor any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this subsection (or, solely with respect to Schedule 5.16, in accordance with subsection 7.2(b) and with respect to Schedules 2, 3 and 6 to the Guarantee and Collateral Agreement, in accordance with that agreement).  The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, (a) enter into with the Company and the other Loan Parties written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of, amending, supplementing, modifying or adding any provisions of or to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders, the Company hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend the scheduled date of maturity of any Loan or any Reimbursement Obligation, or reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Lender’s Commitment, in each case without the consent of each Lender directly affected thereby, or (ii) consent to the assignment or transfer by the Company of any of its rights and obligations under this Agreement and the other Loan Documents or release all or substantially all of the Collateral or release any material Guarantor, in each case without the written consent of all the Lenders (subject to the provisions of subsection 7.10(d)), or (iii) amend, modify or waive any provision of this subsection or reduce the percentage specified in the definition of Required Lenders without the written consent of all the Lenders, or (iv) amend, modify or waive any provision of Section 10 without the written consent of the then Administrative Agent or (v) amend, modify or waive subsection 4.3(e) or 4.9 without the consent of the Required Tranche B Lenders, or reduce the percentage specified in the definition of Required Tranche B Lenders without the consent of all the Tranche B Lenders, or (vi) amend, modify or waive subsection 3.3 without the consent of Lenders the Voting Percentages of which aggregate at least 66-2/3% or (vii) amend, modify or waive Section 2 or

82

subsection 4.3(e) or 4.9 without the consent of the Required Revolving Credit Lenders, or reduce the percentage specified in the definition of Required Revolving Credit Lenders without the consent of all the Revolving Credit Lenders or (viii) amend, modify or waive subsection 2.5 through 2.12 or subsection 10.1 without the consent of the Issuing Bank or (ix) amend, modify or waive any provision of subsection 2.13, 2.14 or 2.15 without the consent of the Swing Line Lender.  Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Company, the Lenders, the Agents and all future holders of the Loans.  In the case of any waiver, the Company, the Lenders and the Agents shall be restored to their former positions and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.

11.2Notices.  All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand or by overnight courier, when delivered, (b) in the case of delivery by mail, three Business Days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Company and the Administrative Agent, and as set forth in Schedule 11.2 in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto:

The Company: 8023 Vantage Drive

San Antonio, Texas 78230-4726

Attention:  Chief Executive Officer

Telephone:  (210) 524-9000

Telecopy:  (210) 255-6998

with a copy to:

8023 Vantage Drive

San Antonio, Texas 78230-4726

Attention:  General Counsel

Telephone:  (210) 255-6331

Telecopy:  (210) 255-6993

The Administrative Agent:with respect to all matters other than Loan Notices:

Alice Lee

750 Seventh Avenue, 11th Floor

New York, NY  10020

Telephone: 212-762-2601

Telecopy: 212-762-0346

83

with a copy to:

James Morgan

1633 Broadway, 25th Floor

New York, NY 10019

Telephone: 212-537-1470

Telecopy: 212-537-1867/1866

with respect to Loan Notices (other than in connection with Letters of Credit):

James Morgan / Larry Benison

1633 Broadway, 25th Floor

New York, NY 10019

Telephone: 212-537-1470 / 1439

Telecopy: 212-537-1867 / 1866

with respect to Loan Notices in connection with Letters of Credit:

James Morgan / Larry Benison

1633 Broadway, 25th Floor

New York, NY 10019

Telephone: 212-537-1470 / 1439

Telecopy: 212-537-1867 / 1866

provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to subsection 2.2, 2.4, 2.6, 2.14, 3.2, 4.2 or 4.4 shall not be effective until received.

11.3No Waiver; Cumulative Remedies.  No failure to exercise and no delay in exercising, on the part of the Administrative Agent, the Collateral Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

11.4Survival of Representations and Warranties.  All representations and warranties made hereunder, in the other Loan Documents (or in any amendment, modification or supplement hereto or thereto) and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.

11.5Payment of Expenses and Taxes.  Subject to subsection 11.17, the Company agrees (a) to pay or reimburse the Agents and Agent-Related Persons for all their out-of-pocket costs and expenses incurred in connection with the development, preparation, syndication and execution and delivery of, and any amendment, supplement, waiver or

84

modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of one outside counsel to the Agents (including the reasonable allocated fees and expenses of in-house counsel), (b) to pay or reimburse each Lender and the Agents for all their respective costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to the Administrative Agent (including the allocated fees and expenses of in-house counsel), (c) to pay, indemnify, and hold each Lender, the Issuing Bank, the Agents and each Agent-Related Person harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other Taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) TO PAY, INDEMNIFY, AND HOLD EACH LENDER, THE ISSUING BANK, THE AGENTS AND THE AGENT-RELATED PERSONS AND THEIR RESPECTIVE DIRECTORS, TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS HARMLESS FROM AND AGAINST ANY AND ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WITH RESPECT TO THE EXECUTION, DELIVERY, ENFORCEMENT, PERFORMANCE AND ADMINISTRATION OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE TRANSACTION DOCUMENTS, OR THE USE OR PROPOSED USE OF THE PROCEEDS OF THE LOANS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND ANY SUCH OTHER DOCUMENTS, REGARDLESS OF WHETHER ANY AGENT OR LENDER IS A PARTY TO THE LITIGATION OR OTHER PROCEEDING GIVING RISE THERETO AND REGARDLESS OF WHETHER ANY SUCH LITIGATION OR OTHER PROCEEDING IS BROUGHT BY THE COMPANY OR ANY OTHER PERSON, INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING RELATING TO THE VIOLATION OF, NONCOMPLIANCE WITH OR LIABILITY UNDER, ANY ENVIRONMENTAL LAW APPLICABLE TO THE OPERATIONS OF THE COMPANY, ANY OF ITS SUBSIDIARIES OR ANY OF THE PROPERTIES (ALL THE FOREGOING IN THIS CLAUSE (d), COLLECTIVELY, THE “INDEMNIFIED LIABILITIES”), PROVIDED THAT THE COMPANY SHALL HAVE NO OBLIGATION HEREUNDER TO THE AGENTS, ANY LENDER OR THE ISSUING BANK OR ANY OF THEIR RESPECTIVE DIRECTORS, TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS WITH RESPECT TO INDEMNIFIED LIABILITIES ARISING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH PERSON.  WITHOUT LIMITING THE FOREGOING, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY AGREES NOT TO ASSERT, AND HEREBY WAIVES, AND SHALL CAUSE EACH OF ITS SUBSIDIARIES NOT TO ASSERT AND TO WAIVE, ALL RIGHTS OF CONTRIBUTION OR ANY OTHER RIGHTS OF RECOVERY WITH RESPECT TO ALL CLAIMS, DEMANDS,

85

PENALTIES, FINES, LIABILITIES, SETTLEMENTS, DAMAGES, COSTS AND EXPENSES OF WHATEVER KIND OR NATURE, UNDER OR RELATED TO ENVIRONMENTAL LAWS, THAT ANY OF THEM MIGHT HAVE BY STATUTE OR OTHERWISE AGAINST ANY AGENT OR LENDER.  The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder.

11.6Successors and Assigns; Participations and Assignments.

(a)This Agreement shall be binding upon and inure to the benefit of the Company, the Lenders, the Agents and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender.

(b)Any Lender may, in the ordinary course of its activities and in accordance with applicable law, at any time sell to one or more banks or other entities (“Participants”) participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents.  In the event of any such sale by a Lender of a participating interest to a Participant, such Lender’s obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Company and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Loan Documents.  No Lender shall be entitled to create in favor of any Participant, in the participation agreement pursuant to which such Participant’s participating interest shall be created or otherwise, any right to vote on, consent to or approve any matter relating to this Agreement or any other Loan Document except for those specified in clauses (i) and (ii) of the proviso to subsection 11.1.  The Company agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 11.7(a) as fully as if it were a Lender hereunder.  The Company also agrees that each Participant shall be entitled to the benefits of subsections 4.11, 4.12 and 4.13 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Lender, provided that, in the case of subsection 4.12, such Participant shall have complied with the requirements of said subsection and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred.

(c)Any Lender may, in the ordinary course of its activities and in accordance with applicable law, at any time and from time to time assign to any Lender or any branch or affiliate or a Related Fund thereof or, with the consent of the Administrative Agent (and, with

86

respect to assignments of Revolving Loans or Revolving Credit Commitments, the Issuing Bank and the Swing Line Lender) and (so long as no Event of Default is continuing) the Company, (which consent in each case shall not be unreasonably withheld or delayed), to an additional bank, financial institution or entity which is regularly engaged in making, purchasing or investing in loans (an “Assignee”) all or any part of its rights and obligations under this Agreement and the other Loan Documents pursuant to an Assignment and Assumption, substantially in the form of Exhibit A, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof or a Related Fund, by the Company, the Issuing Bank and the Swing Line Lender (in each case, if required) and the Administrative Agent) and delivered to the Administrative Agent for its acceptance and recording in the Register, provided that, (i) in the case of any such assignment to an additional bank or financial institution of less than all of the rights and obligations of the assigning Lender, (A) the sum of the aggregate principal amount of the Revolving Loans, the aggregate amount of the L/C Obligations and the aggregate amount of the Available Revolving Credit Commitments being assigned shall not be less than $3,000,000 and (B) the sum of the aggregate principal amount of the Tranche B Term Loans being assigned shall not be less than $1,000,000 except in the case of an assignment which will result in a group of Related Funds holding a Tranche B Commitment of not less than $1,000,000, (or, in each case, such lesser amount as may be agreed to by the Company and the Administrative Agent) (it being agreed, for the avoidance of doubt, that this minimum dollar threshold shall apply to each Lender or Assignee individually whether or not such Lender or Assignee is a branch or affiliate or Related Fund of any other Lender), (ii) assignments shall not be required to be made on a ratable basis between the Commitments and/or Loans held by any Lender.  Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Assumption, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Assumption, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto) and (iii) no consent of the Company shall be required for any reason with respect to assignments made during the primary syndication of the Tranche B Term Loan.

(d)The Administrative Agent, on behalf of the Company, shall maintain at the address of the Administrative Agent referred to in subsection 11.2 a copy of each Assignment and Assumption delivered to it and a register (the “Register”) for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amounts of the Loans owing to, and any Notes evidencing the Loans owned by, each Lender from time to time.  Notes and the Loans evidenced thereby may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer on the Register (and each Note shall expressly so provide).  Any assignment or transfer of all or part of such Loan(s) and the Note(s) evidencing the same shall be registered on the Register only upon surrender for registration of assignment or transfer of the Note(s) evidencing such Loan(s), accompanied by a duly executed Assignment and Assumption, and thereupon one or more new Note(s) in the same aggregate principal amount shall be issued, if requested, to the designated Assignee(s) and the old Note(s) shall be returned by the Agent to the Company, marked “cancelled”.  The entries in the Register shall be conclusive, in the absence of manifest error, and the Company, the Administrative Agent and the

87

Lenders shall treat each Person whose name is recorded in the Register as the owner of a Loan or other obligation hereunder (whether or not evidenced by a Note) as the owner thereof for all purposes of this Agreement and the other Loan Documents, notwithstanding any notice to the contrary.  Any assignment of any Loan or other obligation hereunder (whether or not evidenced by a Note) shall be effective only upon appropriate entries with respect thereto being made in the Register.

(e)Upon its receipt of an Assignment and Assumption executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Company, the Issuing Bank and the Swing Line Lender (in each case, if required) and the Administrative Agent), the Administrative Agent shall (i) promptly accept such Assignment and Assumption and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Company.  The Company and each Lender shall have access to the Register at all times during normal business hours upon reasonable advance notice to the Administrative Agent.

(f)The Company authorizes each Lender to disclose to any Participant or Assignee (each, a “Transferee”) and any prospective Transferee, subject to such Person’s agreeing to comply with the provisions of subsection 11.15, any and all financial and other information in such Lender’s possession concerning the Company and any of its Affiliates which has been delivered to such Lender by or on behalf of the Company pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Company in connection with such Lender’s credit evaluation of the Company and any of its Affiliates prior to becoming a party to this Agreement.

(g)Notwithstanding any other provision set forth in this Agreement, any Lender may, without the consent of the Company or the Administrative Agent, at any time (i) assign and pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank or (ii) pledge all or any portion of its rights (but not its obligations to make Loans or participate in Letters of Credit) hereunder to any trustee or holders of obligations owed, or securities issued, by such Lender as security for such obligations or securities or to any other representative of such holders.  No such assignment shall release the assigning Lender from its obligations hereunder.

11.7Adjustments; Set-off.

(a)If any Lender (a “Benefited Lender”) shall at any time receive any payment of all or part of its Loans, its Reimbursement Obligations or other amounts owing to it hereunder in respect of any participating interest in any Loan, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in subsection 9(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other relevant Lender, if any, in respect of such other relevant Lender’s relevant Loans, Reimbursement Obligations or other amounts owing to it hereunder in respect of any participating interest in any Loan, or interest thereon, such Benefited Lender shall purchase for cash from the other relevant Lenders a participating

88

interest in such portion of each such other relevant Lender’s relevant Loans, Reimbursement Obligations or other amounts owing to it hereunder in respect of any participating interest in any Loan, or shall provide such other relevant Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the relevant Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.

(b)In addition to any rights and remedies of the Lenders provided by law, subject to subsection 11.17, each Lender shall have the right, without prior notice to the Company, any such notice being expressly waived by the Company to the extent permitted by applicable law, upon any amount (including, without limitation, any amount owing to such Lender in respect of an undivided interest purchased by such Lender in any draft paid by the Issuing Bank under any Letter of Credit pursuant to subsection 2.8(a) or any participating interest in any Swing Line Loans or any participating interest purchased pursuant to subsection 11.6(b)) becoming due and payable by the Company hereunder (whether at the stated maturity, by acceleration or otherwise), to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any affiliate, branch or agency thereof to or for the credit or the account of the Company.  Each Lender agrees promptly to notify the Company and the Administrative Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application.

11.8Counterparts.  This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.  A set of the copies of this Agreement signed by all the parties shall be lodged with the Company and the Administrative Agent.

11.9Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

11.10Integration.  This Agreement and the other Loan Documents represent the agreement of the Company, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.

11.11GOVERNING LAW.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY,

89

AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

11.12Submission To Jurisdiction; Waivers.  The Company hereby irrevocably and unconditionally:

(a)submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;

(b)appoints CT Corporation System its authorized agent to accept and acknowledge service of any and all process which may be served in any suit, action or proceeding of the nature referred to in this subsection 11.12;

(c)consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

(d)agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to CT Corporation System at 111 Eighth Avenue, New York, New York 10011 or at such other New York State address of which the Administrative Agent shall have been notified pursuant thereto;

(e)agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

(f)waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages.

11.13Acknowledgements.  The Company hereby acknowledges that:

(a)it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;

(b)neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Company arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Administrative Agent and Lenders, on one hand, and the Loan Parties, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

(c)no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Loan Parties and the Lenders.

90

11.14WAIVERS OF JURY TRIAL.  THE COMPANY, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

11.15Confidentiality.  Each Lender agrees to keep confidential all non-public information provided to it by the Company and any other Loan Party pursuant to the Loan Documents, provided that nothing herein shall prevent any Lender from disclosing any such information (i) to the Administrative Agent or any other Lender, (ii) to any Transferee or prospective Transferee which agrees to comply with the provisions of this subsection, (iii) to its employees, directors, agents, attorneys, accountants and other professional advisors, (iv) upon the request or demand of any Governmental Authority having jurisdiction over such Lender, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) in connection with any litigation or similar proceeding to which each Lender is a party, (vii) which has been publicly disclosed other than in breach of this Agreement, (viii) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about such Lender’s investment portfolio, (ix) to any direct or indirect contractual counterparty in swap agreements or to such contractual counterparty’s professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section 11.15) or (x) in connection with the exercise of any remedy hereunder.

Notwithstanding anything contained herein to the contrary, each of the Company and each Lender (and each employee, representative or other agent of each thereof) may disclose to any and all persons, without limitation of any kind, the tax treatment and any facts that may be relevant to the tax structure of the transactions contemplated by the Loan Documents, provided, however, that neither the Company nor any Lender (and no employee, representative or other agent thereof) shall disclose any other information that is not relevant to understanding the tax treatment and tax structure of such transactions (including the identity of any party and any information that could lead another to determine the identity of any party) or any other information to the extent that such disclosure could reasonably result in a violation of any federal or state securities law.

11.16Conversion of Currencies.

(a)If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures in the relevant jurisdiction, the first currency could be purchased with such other currency on the Banking Day immediately preceding the day on which final judgment is given.

(b)The obligations of the Company in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the “Applicable Creditor”) shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than the currency

91

in which such sum is stated to be due hereunder (the “Agreement Currency”), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; subject to subsection 11.17, if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Company agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss.  The obligations of the Company contained in this subsection 11.16 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder.

11.17Usury Savings Clause.  It is the intention of the parties hereto to comply with applicable usury laws (now or hereafter enacted); accordingly, notwithstanding any provision to the contrary in this Agreement, any Notes, any of the other Loan Documents or any other document related hereto or thereto, in no event shall this Agreement or any such other document require the payment or permit the collection of interest in excess of the maximum amount permitted by such laws.  If from any circumstances whatsoever, fulfillment of any provision of this Agreement, any Notes, any of the other Loan Documents or of any other document pertaining hereto or thereto, shall involve transcending the limit of validity prescribed by applicable law for the collection or charging of interest, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if from any such circumstances the Administrative Agent and the Lenders shall ever receive anything of value as interest or deemed interest by applicable law under this Agreement, any Notes, any of the other Loan Documents or any other document pertaining hereto or otherwise an amount that would exceed the highest lawful rate, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing under the Loans or on account of any other indebtedness of the Company, and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of such indebtedness, such excess shall be refunded to the Company.  In determining whether or not the interest paid or payable with respect to any indebtedness of the Company to the Administrative Agent and the Lenders, under any specified contingency, exceeds the highest lawful rate, the Company, the Administrative Agent and the Lenders shall, to the maximum extent permitted by applicable law, (a) characterize any non-principal payment as an expense, fee or premium rather than as interest, (b) exclude voluntary prepayments and the effects thereof, (c) amortize, prorate, allocate and spread the total amount of interest throughout the full term of such indebtedness so that interest thereon does not exceed the maximum amount permitted by applicable law, and/or (d) allocate interest between portions of such indebtedness, to the end that no such portion shall bear interest at a rate greater than that permitted by applicable law.

11.18Release of Mortgages and Other Security Documents.

(a)At such time as the Loans, the Reimbursement Obligations and the other Obligations shall have been paid in full, the Commitments have been terminated and no Letter of Credit shall be outstanding (or any outstanding Letters of Credit have been cash collateralized), the Administrative Agent shall, at the request and sole expense of any Loan Party, take such actions as are reasonably necessary or desirable to release the relevant Collateral (other than the cash collateralizing any outstanding Letters of Credit) from the Liens created by the Mortgages

92

and other Security Documents, and cause the Mortgages and other Security Documents and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Loan Party thereunder to terminate.

(b)If any of the Collateral subject to a Mortgage or other Security Document shall be sold, transferred or otherwise disposed of by any Loan Party in a transaction permitted by the Credit Agreement, then the Administrative Agent, at the request and sole expense of such Loan Party, shall execute and deliver to such Loan Party all releases or other documents reasonably necessary or desirable for the release of the Lien created by such Mortgage or other Security Document on such Collateral.

[Signature pages to follow.]

93

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

KINETIC CONCEPTS, INC.
By:
	Name:
	Title:
MORGAN STANLEY SENIOR FUNDING, INC., as Administrative Agent
By:
	Name:
	Title:
MORGAN STANLEY & CO. INCORPORATED, as Collateral Agent
By:
	Name:
	Title:
CREDIT SUISSE FIRST BOSTON, as Syndication Agent
By:
	Name:
	Title:
JPMORGAN CHASE BANK, as Documentation Agent
By:
	Name:
	Title:

94

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Documentation Agent and Issuing Bank
By:
	Name:
	Title:
THE BANK OF NOVA SCOTIA, as Documentation Agent
By:
	Name:
	Title:

95

EXHIBIT A TO CREDIT AGREEMENT

FORM OF ASSIGNMENT AND ASSUMPTION

[FORM OF ASSIGNMENT AND ASSUMPTION]

ASSIGNMENT AND ASSUMPTION AGREEMENT

This Assignment and Assumption Agreement (the “Assignment”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”).  Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee.  The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, the interest in and to all of the Assignor’s rights and obligations under the Credit Agreement and any other documents or instruments delivered pursuant thereto that represents the amount and percentage interest identified below of all of the Assignor’s outstanding rights and obligations under the respective facilities identified below (including, to the extent included in any such facilities, Letters of Credit and Swing Line Loans) (the “Assigned Interest”).  Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment, without representation or warranty by the Assignor.

1.	Assignor:
2.	Assignee:		[and is an Affiliate of a Lender]
3.	Borrower:
4.	Administrative Agent:	Morgan Stanley Senior Funding, Inc.
5.	Credit Agreement:	The Credit Agreement dated as of August 11, 2003 (as amended, restated, supplemented or otherwise modified from time to time), among Kinetic Concepts, Inc., the Lenders parties thereto, Morgan Stanley Senior Funding, Inc., as Administrative Agent, Morgan Stanley & Co. Incorporated, as Collateral Agent, Credit Suisse First Boston, as Syndication Agent, Wells Fargo Bank, National Association, as Issuing Bank and JPMorgan Chase Bank, Wells Fargo Bank, National Association and The Bank of Nova Scotia, as Documentation Agents.

SCHEDULE 1 TO
ASSIGNMENT AND ASSUMPTION

ASSIGNOR:
Revolving Loan
Percentage interest assigned		%
Revolving Loan Commitment assigned	$
Aggregate outstanding principal amount of Revolving Loan Advances assigned	$
Tranche B Term Loan
Percentage interest assigned		%
Tranche B Commitment assigned	$
Outstanding principal amount of Tranche B Term Loan assigned	$
Letter of Credit Loan
Letter of Credit Commitment assigned	$

ASSIGNEE:
Revolving Loan Facility
Percentage interest assumed		%
Revolving Loan Commitment assumed	$
Aggregate outstanding principal amount of Revolving Loan Advances assumed	$
Tranche B Term Loan
Percentage interest assumed		%
Tranche B Commitment assumed	$
Outstanding principal amount of Tranche B Term Loan assumed	$
Letter of Credit Loan
Letter of Credit Commitment assumed	$

*If there are multiple assignors/assignees add additional columns as necessary.

The terms set forth in this Assignment are hereby agreed to:

ASSIGNOR
[NAME OF ASSIGNOR]
By:
	Name:
	Title:
ASSIGNEE
[NAME OF ASSIGNEE]
By:
	Name:
	Title:

[Consented to and] Accepted:
MORGAN STANLEY SENIOR FUNDING, INC., as Administrative Agent
By:
	Name:
	Title:]
[Consented to:
[WELLS FARGO BANK, NATIONAL ASSOCIATION,]
as Issuing Bank
By:
	Name:
	Title:]
[Consented to:
MORGAN STANLEY SENIOR FUNDING, INC.,
as Swing Line Lender
By:
	Name:
	Title:]
[Consented to:
KINETIC CONCEPTS, INC.
By:
	Name:
	Title:]

Annex 1

to Assignment and Assumption Agreement

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION AGREEMENT

1.Representations and Warranties

1.1Assignor.  The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claims and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with any Credit Document (as defined below), (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document delivered pursuant thereto, other than this Assignment (herein collectively, the “Credit Documents”), or any collateral thereunder, (iii) the financial condition of the Company, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Credit Document or (iv) the performance or observance by the Company, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Credit Document.

1.2Assignee.  The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all requirements of an Assignee set forth in subsection 11.6(c) of the Credit Agreement, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to subsections 5.1 and 7.1 thereof, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and to purchase the Assigned Interest on the basis of which it has made such analysis and decision, and (v) if it is a foreign Lender, attached to the Assignment is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Credit Documents are required to be performed by it as a Lender.

2.Payments.  From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to

but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

3.General Provisions.  This Assignment shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns.  This Assignment may be executed in any number of counterparts, which together shall constitute one instrument.  Delivery of an executed counterpart of a signature page of this Assignment by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment.  This Assignment shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.

EXHIBIT B TO CREDIT AGREEMENT

FORM OF GUARANTEE AND COLLATERAL AGREEMENT

To be delivered separately.

EXHIBIT C-1 TO CREDIT AGREEMENT

FORM OF REVOLVING CREDIT NOTE

[FORM OF REVOLVING CREDIT NOTE]

REVOLVING CREDIT NOTE

$	New York, New York
	, 2003

FOR VALUE RECEIVED, the undersigned, KINETIC CONCEPTS, INC., a Texas corporation (the “Company”), hereby unconditionally promises to pay to the order of                                               (the “Lender”), at the office of Morgan Stanley Senior Funding, Inc. located at 750 Seventh Avenue, 11^th Floor, New York, New York 10020 (or such other address as shall be specified from time to time by the Administrative Agent), in lawful money of the United States of America and in immediately available funds on the Revolving Credit Termination Date the principal amount of the aggregate unpaid principal amount of all Revolving Loans of the Lender made to the Company pursuant to subsection 2.1 of the Credit Agreement (as hereinafter defined).  The Company further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in subsection 4.6 of the Credit Agreement.

The holder of this Note is authorized to endorse on the schedules annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date, Type and amount of each Revolving Loan of the Lender and the date and amount of each payment or prepayment of principal thereof, each continuation thereof as the same Type, each conversion of all or a portion thereof to another Type and, in the case of Eurodollar Loans, the length of each Interest Period with respect thereto.  Each such endorsement shall constitute prima facie evidence of the accuracy of the information endorsed.  The failure to make any such endorsement (or any error therein) shall not affect the obligations of the Company in respect of any Revolving Loan.

This Note (a) is one of the Revolving Credit Notes referred to in the Credit Agreement, dated as of August 11, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Company, the Lender, the several other banks and financial institutions from time to time parties thereto (together with the Lender, the “Lenders”), Morgan Stanley Senior Funding, Inc., as Administrative Agent, Morgan Stanley & Co. Incorporated, as Collateral Agent, Credit Suisse First Boston, as Syndication Agent, Wells Fargo Bank, National Association, as Issuing Bank and JPMorgan Chase Bank, Wells Fargo Bank, National Association and The Bank of Nova Scotia, as Documentation Agents, (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement.  This Note is secured and guaranteed as provided in the Loan Documents.  Reference is hereby made to the Loan Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and the guarantees, the terms and conditions

upon which the security interests and guarantees were granted and the rights of the holder of this Note in respect thereof.

Upon the occurrence of any one or more of the Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement.

Except as otherwise provided in the Credit Agreement, all parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

KINETIC CONCEPTS, INC.
By:
	Name:
	Title:

Schedule A
to Revolving Credit Note

LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS

Date Amount of Base
Rate Loans Amount Converted to
Base Rate Loans Amount of Principal of
Base Rate Loans Repaid Amount of Base Rate
Loans Converted to
Eurodollar Loans Unpaid Principal Balance
of Base Rate Loans Notation Made By

Schedule B

to Revolving Credit Note

LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS

Date Amount of
Eurodollar Loans Amount Converted
to Eurodollar Loans Interest Period and
Eurodollar Rate with
Respect Thereto Amount of Principal of
Eurodollar Loans
Repaid Amount of Eurodollar
Loans Converted to
Base Rate Loans Unpaid Principal
Balance of Eurodollar
Loans Notation
Made By

EXHIBIT C-2 TO CREDIT AGREEMENT

FORM OF TRANCHE B TERM NOTE

[FORM OF TRANCHE B TERM NOTE]

TRANCHE B TERM NOTE

$	New York, New York
	, 2003

FOR VALUE RECEIVED, the undersigned, KINETIC CONCEPTS, INC., a Texas corporation (the “Company”), hereby unconditionally promises to pay to the order of                                         (the “Lender”), at the office of Morgan Stanley Senior Funding, Inc. located at 750 Seventh Avenue, 11^th Floor, New York, New York 10020 (or such other address as shall be specified from time to time by the Administrative Agent), in lawful money of the United States of America and in immediately available funds, the principal amount of                        DOLLARS ($               ), or, if less, the unpaid principal amount of the Tranche B Term Loan of the Lender outstanding pursuant to subsection 3.1 of the Credit Agreement (as hereinafter defined).  The principal amount of this Note shall be payable in the amounts and on the dates specified in subsection 3.3 of the Credit Agreement.  The Company further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in subsection 4.6 of the Credit Agreement.

The holder of this Note is authorized to endorse on the schedules annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date, Type and amount of the Tranche B Term Loan of the Lender and the date and amount of each payment or prepayment of principal with respect thereto, each conversion of all or a portion thereof to another Type, each continuation of all or a portion thereof as the same Type and, in the case of Eurodollar Loans, the length of each Interest Period with respect thereto.  Each such endorsement shall constitute prima facie evidence of the accuracy of the information endorsed.  The failure to make any such endorsement (or any error therein) shall not affect the obligations of the Company in respect of any Tranche B Term Loan.

This Note (a) is one of the Tranche B Term Notes referred to in the Credit Agreement, dated as of August 11, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Company, the Lender, the several other banks and financial institutions from time to time parties thereto (together with the Lender, the “Lenders”), Morgan Stanley Senior Funding, Inc., as Administrative Agent, Morgan Stanley & Co. Incorporated, as Collateral Agent, Credit Suisse First Boston, as Syndication Agent, Wells Fargo Bank, National Association, as Issuing Bank and JPMorgan Chase Bank, Wells Fargo Bank, National Association and The Bank of Nova Scotia, as Documentation Agents, (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement.  This Note is secured and guaranteed as provided in the Loan Documents.  Reference is hereby made to the Loan Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and the guarantees, the terms and conditions

upon which the security interests and guarantees were granted and the rights of the holder of this Note in respect thereof.

Upon the occurrence of any one or more of the Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement.

Except as otherwise provided in the Credit Agreement, all parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

KINETIC CONCEPTS, INC.
By:
	Name:
	Title:

Schedule A
to Tranche B Term Note

LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS

Date Amount of Base
Rate Loans Amount Converted to
Base Rate Loans Amount of Principal of
Base Rate Loans
Repaid Amount of Base Rate
Loans Converted to
Eurodollar Loans Unpaid Principal
Balance of Base Rate
Loans Notation
Made By

Schedule B
to Tranche B Term Note

LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS

Date Amount of
Eurodollar Loans Amount
Converted  to
Eurodollar Loans Interest Period and
Eurodollar Rate
with Respect
Thereto Amount of
Principal of
Eurodollar Loans
Repaid Amount of
Eurodollar Loans
Converted to Base
Rate Loans Unpaid Principal
Balance of
Eurodollar Loans Notation
Made By

EXHIBIT C-3 TO CREDIT AGREEMENT

FORM OF SWING LINE NOTE

[FORM OF SWING LINE NOTE]

SWING LINE NOTE

	New York, New York
[$10,000,000.00]	, 2003

FOR VALUE RECEIVED, the undersigned, KINETIC CONCEPTS, INC., a Texas corporation (the “Company”), hereby unconditionally promises to pay to the order of Morgan Stanley Senior Funding, Inc. (the “Swing Line Lender”), at the office of Morgan Stanley Senior Funding, Inc. located at 750 Seventh Avenue, 11^th Floor, New York, New York 10020 (or such other address as shall be specified from time to time by the Administrative Agent), in lawful money of the United States of America and in immediately available funds on the Revolving Credit Termination Date (or such earlier date on which the Swing Line Loans become due and payable pursuant to Section 9 of the Credit Agreement (as hereinafter defined)) the principal amount of [TEN] MILLION DOLLARS ([$10,000,000.00]) or, if less, the aggregate unpaid principal amount of the Swing Line Loans of the Swing Line Lender made to the Company pursuant to subsection 2.13 of the Credit Agreement (as hereinafter defined).  The Company further agrees to pay interest in like money at said office on the unpaid principal amount of Swing Line Loans from time to time outstanding at the rates and on the dates specified in subsection 4.6 of the Credit Agreement.

The holder of this Note is authorized to endorse on the schedule annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date and amount of each Swing Line Loan of the Swing Line Lender and the date and amount of each payment or prepayment of principal thereof.  Each such endorsement shall constitute prima facie evidence of the accuracy of the information endorsed.  The failure to make any such endorsement (or any error therein) shall not affect the obligations of the Company in respect of any Swing Line Loan.

This Note (a) is the Swing Line Note referred to in the Credit Agreement, dated as of August 11, 2003 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Company, the Swing Line Lender, the several other banks and financial institutions from time to time parties thereto (together with the Swing Line Lender, the “Lenders”), Morgan Stanley Senior Funding, Inc., as Administrative Agent, Morgan Stanley & Co. Incorporated, as Collateral Agent, Credit Suisse First Boston, as Syndication Agent, Wells Fargo Bank, National Association, as Issuing Bank and JPMorgan Chase Bank, Wells Fargo Bank, National Association and The Bank of Nova Scotia, as Documentation Agents, (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement.  This Note is secured and guaranteed as provided in the Loan Documents.  Reference is hereby made to the Loan Documents for a description of the properties and assets in which a security

interest has been granted, the nature and extent of the security and the guarantees, the terms and conditions upon which the security interests and guarantees were granted and the rights of the holder of this Note in respect thereof.

Upon the occurrence of any one or more of the Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement.

Except as otherwise provided in the Credit Agreement, all parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

KINETIC CONCEPTS, INC.
By:
	Name:
	Title:

Schedule

to Swing Line Note

LOANS AND REPAYMENTS

Date Amount of Swing Line
Loans Made Amount of Swing Line
Loans Repaid Unpaid Principal Balance
of Swing Line Loans Notation Made By

EXHIBIT D TO CREDIT AGREEMENT

FORM OF CLOSING CERTIFICATE

[FORM OF CLOSING CERTIFICATE OF THE COMPANY]

CLOSING CERTIFICATE OF THE COMPANY

Pursuant to subsection 6.1 of the Credit Agreement, dated as of August 11, 2003 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Kinetic Concepts, Inc., a Texas corporation (“KCI”), the several banks and other financial institutions from time to time parties thereto, Morgan Stanley Senior Funding, Inc., as Administrative Agent, Morgan Stanley & Co. Incorporated, as Collateral Agent, Credit Suisse First Boston, as Syndication Agent, Wells Fargo Bank, National Association, as Issuing Bank, and JPMorgan Chase Bank, Wells Fargo Bank, National Association and The Bank of Nova Scotia, as Documentation Agents, the undersigned hereby certifies that he is the duly elected and acting Chief Financial Officer of KCI, and that as such he is authorized to execute and deliver this Closing Certificate on behalf of KCI.  Unless otherwise defined herein, capitalized terms that are defined in the Credit Agreement and used herein are so used as so defined.

The undersigned further certifies, on behalf of KCI, to the best of his or her knowledge as follows:

Closing Date Items:

1.The representations and warranties of KCI set forth in the Credit Agreement and each of the other Loan Documents to which it is a party or that are contained in any certificate, document or financial or other statement furnished pursuant to or in connection with the Credit Agreement or any other Loan Document are true and correct in all material respects on and as of the date hereof with the same effect as if made on the date hereof, except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties are true and correct in all material respects as of each earlier date;

2.No Default or Event of Default has occurred and is continuing as of the date hereof or will occur after giving effect to the making of the extensions of credit requested to be made on the date hereof or the consummation on the date hereof of each of the transactions contemplated by the Loan Documents;

3.Since December 31, 2002, there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect;

4.There are no liquidation or dissolution proceedings pending or to my knowledge threatened against KCI, nor has any other event occurred affecting or threatening the corporate existence of KCI;

5.No governmental or third party consents or approvals are required that have not been obtained (other than any governmental or third party consents or approvals the absence of which could not reasonably be expected to have a Material Adverse Effect);

Senior Subordinated Notes:

6.Attached hereto as Exhibit A is a true and correct copy of each of the Purchase Agreement, the Registration Rights Agreement, and the Senior Subordinated Note Indenture;

7.KCI has received at least $150,000,000 in Net Cash Proceeds from the sale of the Senior Subordinated Notes;

LTM EBITDA, Leverage:

8.EBITDA for the 12-month period ending as of June 30, 2003, on a pro forma basis, is not less than $165 million; and

9.The Leverage Ratio, on a pro forma basis after giving effect to the Transactions, is not greater than 4.1:1.0.

*  *  *

2

IN WITNESS WHEREOF, KCI has caused this Closing Certificate to be executed this         day of August, 2003.

KINETIC CONCEPTS, INC.

By:

EXHIBIT A

Senior Subordinated Note Indenture Documents

[attached]

EXHIBIT E-1 TO CREDIT AGREEMENT

FORM OF LEGAL OPINION OF
SKADDEN, ARPS, SLATE, MEAGHER AND FLOM LLP

To be delivered separately.

EXHIBIT E-2 TO CREDIT AGREEMENT

FORM OF LEGAL OPINION OF
COX & SMITH INCORPORATED

To be delivered separately.

EXHIBIT F TO CREDIT AGREEMENT

FORM OF SWING LINE LOAN PARTICIPATION CERTIFICATE

[FORM OF SWING LINE LOAN PARTICIPATION CERTIFICATE]

SWING LINE LOAN PARTICIPATION CERTIFICATE

                             , 200    

[Name of Lender]

Dear Sirs:

Pursuant to subsection 2.15(c) of the Credit Agreement, dated as of August 11, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; terms defined in the Credit Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement), among Kinetic Concepts, Inc., the several banks and other financial institutions from time to time parties thereto, Morgan Stanley Senior Funding, Inc., as Administrative Agent, Morgan Stanley & Co. Incorporated, as Collateral Agent, Credit Suisse First Boston, as Syndication Agent, Wells Fargo Bank, National Association, as Issuing Bank and JPMorgan Chase Bank, Wells Fargo Bank, National Association and The Bank of Nova Scotia, as Documentation Agents, the undersigned hereby acknowledges receipt from you on the date hereof of                                   DOLLARS ($                            ) as payment for a participating interest in the following Swing Line Loan:

Date of Swing Line Loan:

Principal Amount of Swing Line Loan:

Very truly yours,

MORGAN STANLEY

SENIOR FUNDING INC.,

as Swing Line Lender

By:

Name:

Title:

EXHIBIT G TO CREDIT AGREEMENT

FORM OF EXEMPTION CERTIFICATE

[FORM OF EXEMPTION CERTIFICATE]

EXEMPTION CERTIFICATE

Reference is made to the Credit Agreement, dated as of August 11, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Kinetic Concepts, Inc., the several banks and other financial institutions from time to time parties thereto, Morgan Stanley Senior Funding, Inc., as Administrative Agent, Morgan Stanley & Co. Incorporated, as Collateral Agent, Credit Suisse First Boston, as Syndication Agent, Wells Fargo Bank, National Association, as Issuing Bank and JPMorgan Chase Bank, Wells Fargo Bank, National Association and The Bank of Nova Scotia, as Documentation Agents.  Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.                   (the “Non-U.S. Lender”) is providing this certificate pursuant to subsection 4.12(b)(i) of the Credit Agreement.  The Non-U.S. Lender hereby represents and warrants that:

1.The Non-U.S. Lender is the sole record and beneficial owner of the Loans in respect of which it is providing this certificate.

2.The Non-U.S. Lender is not a “bank” for purposes of Section 881(c)(3)(A) of the Code.  In this regard, the Non-U.S. Lender further represents and warrants that:

(a)The Non-U.S. Lender is not subject to regulatory or other legal requirements as a bank in any jurisdiction; and

(b)the Non-U.S. Lender has not been treated as a bank for purposes of any tax, securities law, or other filing or submission made to any Governmental Authority, any application made to a rating agency or qualification for any exemption from tax, securities law or other legal requirements.

3.The Non-U.S. Lender is not a 10% shareholder of the Company within the meaning of Section 881(c)(3)(B) of the Code.

4.The Non-U.S. Lender is not a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code.

IN WITNESS WHEREOF, the undersigned has duly executed this certificate.

[NAME OF NON-U.S. LENDER]

By:

Name:

Title:

Date:

EXHIBIT H TO CREDIT AGREEMENT

FORM OF NOTICE OF BORROWING

[FORM OF NOTICE OF BORROWING]

NOTICE OF BORROWING

Morgan Stanley Senior Funding, Inc.,
as Administrative Agent
under the Credit Agreement
referred to below

[Date]

Attention:                          

Ladies and Gentlemen:

The undersigned, Kinetic Concepts Inc., refers to the Credit Agreement dated as of August 11, 2003 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined), among the undersigned, the Lenders party thereto, Morgan Stanley Senior Funding, Inc., as Administrative Agent for the Lenders, Morgan Stanley & Co. Incorporated, as Collateral Agent, Credit Suisse First Boston, as Syndication Agent, Wells Fargo Bank, National Association, as Issuing Bank and JPMorgan Chase Bank, Wells Fargo Bank, National Association and The Bank of Nova Scotia, as Documentation Agents, and hereby gives you notice, irrevocably, pursuant to Section [2.2 or 3.2] of the Credit Agreement that the undersigned hereby requests a borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such borrowing (the “Proposed Borrowing”) as required by Section [2.2 or 3.2] of the Credit Agreement:

(i)The Business Day of the Proposed Borrowing is                           ,       .

(ii)The Proposed Borrowing that is requested is a [Tranche B Term Loan or a Revolving Loan].

(iii)The Type of Loan comprising the Proposed Borrowing is [Base Rate Loan] [Eurodollar Rate Loan].

(iv)The aggregate amount of the Proposed Borrowing is $                  .

(v)[The initial Interest Period for each Eurodollar Loan made as part of the Proposed Borrowing is                     month[s].]

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing:

(A)The representations and warranties contained in each Loan Document are correct in all material respects on and as of the date of the Proposed Borrowing, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date [, other than any such representations or warranties that, by their terms, refer to a specific date other than the date of the Proposed Borrowing, in which case, as of such specific date].

(B)No Default has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom.

Delivery of an executed counterpart of this Notice of Borrowing by telecopier shall be effective as delivery of an original executed counterpart of this Notice of Borrowing.

Very truly yours,
[NAME OF BORROWER]
By
	Title:

EX-10.3

Exhibit 10.3

EXECUTION COPY

GUARANTEE AND COLLATERAL AGREEMENT

made by

KINETIC CONCEPTS, INC.

and certain of its Subsidiaries

in favor of

MORGAN STANLEY & CO. INCORPORATED

as Collateral Agent

Dated as of August 11, 2003

TABLE OF CONTENTS

SECTION 1	DEFINED TERMS
1.1	Definitions
1.2	Other Definitional Provisions
SECTION 2	GUARANTEE
2.1	Guarantee
2.2	Right of Contribution
2.3	No Subrogation
2.4	Amendments, etc. with Respect to the Borrower Obligations
2.5	Guarantee Absolute and Unconditional
2.6	Reinstatement
2.7	Payments
SECTION 3	GRANT OF SECURITY INTEREST
SECTION 4	REPRESENTATIONS AND WARRANTIES
4.1	Representations of Guarantors
4.2	Title; No Other Liens
4.3	Perfected First Priority Liens
4.4	Chief Executive Office
4.5	Inventory and Equipment
4.6	Farm Products
4.7	Pledged Securities
4.8	Receivables
4.9	Intellectual Property
4.10	Commercial Tort Claims
4.11	Deposit Accounts
4.12	Letter of Credit Rights
SECTION 5	COVENANTS
5.1	Delivery of Instruments and Chattel Paper
5.2	Maintenance of Insurance
5.3	Maintenance of Perfected Security Interest; Further Documentation
5.4	Changes in Locations, Name, etc
5.5	Notices
5.6	Investment Property
5.7	Receivables
5.8	Intellectual Property
5.9	Government Contracts
5.10	Deposit Accounts; Post-Closing Covenant

5.11	Bailees and Warehouses
5.12	Commercial Tort Claims
SECTION 6	REMEDIAL PROVISIONS
6.1	Certain Matters Relating to Receivables
6.2	Communications with Account Debtors and Obligors; Grantors Remain Liable
6.3	Pledged Stock
6.4	Proceeds to be Turned Over To Collateral Agent
6.5	Application of Proceeds
6.6	Code and Other Remedies
6.7	Intellectual Property
6.8	Deficiency
SECTION 7	THE COLLATERAL AGENT
7.1	Collateral Agent’s Appointment as Attorney-in-Fact, etc.
7.2	Duty of Collateral Agent
7.3	Authorization of Financing Statements
7.4	Authority of Collateral Agent
SECTION 8	MISCELLANEOUS
8.1	Amendments in Writing
8.2	Notices
8.3	No Waiver by Course of Conduct; Cumulative Remedies
8.4	Enforcement Expenses; Indemnification
8.5	Successors and Assigns; Continuing Security Interest
8.6	Set-Off
8.7	Security Interest Absolute
8.8	Counterparts
8.9	Mortgages
8.10	Severability
8.11	Section Headings
8.12	Integration
8.13	GOVERNING LAW
8.14	Submission to Jurisdiction; Waivers
8.15	Acknowledgements
8.16	WAIVER OF JURY TRIAL
8.17	Additional Grantors
8.18	Releases

ii

SCHEDULES
Schedule 1	-	Notice Addresses of Guarantors
Schedule 2	-	Pledged Stock
Schedule 3	-	Pledged Debt
Schedule 4	-	Location, Chief Executive Office, Place Where Agreements Are Maintained, Type of Organization, Jurisdiction of Organization and Organizational Identification Number
Schedule 5	-	Locations of Inventory and Equipment
Schedule 6	-	Patents, Trademarks and Trade Names, Copyrights and IP Agreements
Schedule 7	-	Financing Statements
Schedule 8	-	Commercial Tort Claims
Schedule 9	-	Deposit Accounts
ANNEX
Annex 1	-	Assumption Agreement
EXHIBITS
Exhibit A	-	Form of Account Control Agreement
Exhibit B-1	-	Form of Intellectual Property Security Agreement
Exhibit B-2	-	Form of Intellectual Property Security Agreement for Patent Application
Exhibit C-1	-	Form of Intellectual Property Security Agreement Supplement
Exhibit C-2	-	Form of Intellectual Property Security Agreement Supplement for Patent Application

iii

GUARANTEE AND COLLATERAL AGREEMENT, dated as of August 11, 2003, made by each of the signatories hereto (together with any other Domestic Subsidiary that may become a party hereto as provided herein, the “Grantors”), in favor of MORGAN STANLEY & CO. INCORPORATED, as Collateral Agent (in such capacity, the “Collateral Agent”) for the banks and other financial institutions (the “Lenders”) from time to time parties to the Credit Agreement, dated as of the date hereof (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Kinetic Concepts, Inc. (the “Company”), the Lenders parties thereto, Morgan Stanley Senior Funding, Inc., as Administrative Agent, Credit Suisse First Boston, as Syndication Agent, Wells Fargo Bank, National Association, as Issuing Bank, and JPMorgan Chase Bank, Wells Fargo Bank, National Association and The Bank of Nova Scotia, as Documentation Agents.

W I T N E S S E T H:

WHEREAS, pursuant to the Credit Agreement, the Lenders have severally agreed to make extensions of credit to the Company upon the terms and subject to the conditions set forth therein;

WHEREAS, the Company is a member of an affiliated group of companies that includes each Grantor;

WHEREAS, the proceeds of the extensions of credit under the Credit Agreement will be used in part to enable the Company to make valuable transfers to one or more of the Grantors in connection with the operation of their respective businesses;

WHEREAS, the Company and the other Grantors are engaged in related businesses, and each Grantor will derive substantial direct and indirect benefit from the making of the extensions of credit under the Credit Agreement; and

WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective extensions of credit to the Company under the Credit Agreement that the Grantors shall have executed and delivered this Agreement to the Collateral Agent for the ratable benefit of the Agents and the Lenders;

NOW, THEREFORE, in consideration of the premises and to induce the Agents and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Company thereunder, each Grantor hereby agrees with the Collateral Agent, for the ratable benefit of the Agents and the Lenders, as follows:

SECTION 1  DEFINED TERMS

1.1Definitions.  (a)  Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement (provided that for purposes of this Agreement, the term “Lender” shall include any Issuing Bank and any Person which is a party to an Eligible Hedge Agreement), and the following terms which are defined in the UCC are used herein as so defined:  Accounts, Account Debtors, Chattel Paper, Commercial Tort Claims, Deposit Account, Documents, Electronic

Chattel Paper, Equipment, Farm Products, Goods, Health-Care-Insurance Receivable, Instruments, Inventory, Letter-of-Credit Right, Payment Intangible, Promissory Note, Security, Securities Intermediary, Security Entitlement and Software.

(b)The following terms shall have the following meanings:

“Agreement”:  this Guarantee and Collateral Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Borrower Obligations”:  the collective reference to the unpaid principal of and interest on the Loans and Reimbursement Obligations and all other obligations and liabilities of the Company (including, without limitation, interest accruing at the then applicable rate provided in the Credit Agreement after the maturity of the Loans and Reimbursement Obligations and interest accruing at the then applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Company, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) to any Agent or any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, this Agreement, the other Loan Documents, any Letter of Credit or any Eligible Hedge Agreement or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, guarantee obligations, reimbursement obligations, fees, commissions, indemnities, costs, expenses or otherwise (including, without limitation, all reasonable fees and disbursements of counsel to the Collateral Agent or any other Agent or to the Lenders that are required to be paid by the Company pursuant to the terms of any of the foregoing agreements).

“Collateral”:  as defined in Section 3.

“Collateral Account”:  any collateral deposit account established by the Collateral Agent in the name of the Collateral Agent and under the sole dominion and control of the Collateral Agent.

“Control”:  any appropriate method of gaining control of collateral under the UCC, including, without limitation, under Sections 8-106, 9-104, 9-105, 9-106 and 9-107 of the UCC.

“Copyrights”:  all copyrights arising under the laws of the United States or any other country or political subdivision thereof, whether registered or unregistered and whether for published or unpublished works, and, with respect to the foregoing: (i) all registrations and applications therefor, and (ii) all renewals thereof.

“Eligible Hedge Agreement”:  any Foreign Currency Protection Agreement and Interest Rate Protection Agreement entered into with any Person that is a Lender or an Affiliate of a Lender at the time of entering into such Foreign Currency Protection Agreement or Interest Rate Protection Agreement, as the case may be.

“General Intangibles”:  all “general intangibles” as such term is defined in Section 9-102 of the UCC and, in any event, shall include, without limitation, with respect to any

2

Grantor, all contracts, agreements, instruments and indentures in any form, and portions thereof, to which such Grantor is a party or under which such Grantor has any right, title or interest or to which such Grantor or any property of such Grantor is subject, as the same may from time to time be amended, supplemented or otherwise modified, including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (ii) all rights of such Grantor to damages arising thereunder and (iii) all rights of such Grantor to perform and to exercise all remedies thereunder, in each case to the extent the grant by such Grantor of a security interest pursuant to this Agreement in its right, title and interest in such contract, agreement, instrument or indenture is not prohibited by such contract, agreement, instrument or indenture without the consent of any other party thereto, would not give any other party to such contract, agreement, instrument or indenture the right to terminate its obligations thereunder, or is permitted with consent if all necessary consents to such grant of a security interest have been obtained from the other parties thereto (it being understood that the foregoing shall not be deemed to obligate such Grantor to obtain such consents); provided that the foregoing limitation shall not affect, limit, restrict or impair the grant by such Grantor of a security interest pursuant to this Agreement in any Receivable or any money or other amounts due or to become due under any such contract, agreement, instrument or indenture.

“Governmental Receivable”:  any Receivable of any Grantor with respect to which the obligor is a federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body.

“Guarantor Obligations”:  with respect to any Guarantor, the collective reference to (i) the Borrower Obligations and (ii) all obligations and liabilities of such Guarantor which may arise under or in connection with this Agreement or any other Loan Document to which such Guarantor is a party, in each case whether on account of guarantee obligations, reimbursement obligations, fees, commissions, indemnities, costs, expenses or otherwise (including, without limitation, all reasonable fees and disbursements of counsel to the Collateral Agent or any other Agent or to the Lenders that are required to be paid by such Guarantor pursuant to the terms of this Agreement or any other Loan Document).

“Guarantors”:  the collective reference to each Grantor other than the Company.

“Intellectual Property”:  the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, Copyrights, Patents, Trademarks, Trade Secrets, and IP Agreements and all rights (but not the obligation) to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.

“Intercompany Note”:  any promissory note evidencing loans made by any Grantor to the Company or any of its Subsidiaries.

“IP Agreement”:  any agreement, permit, consent, or order relating to the license, development, use or disclosure of any Copyrights, Patents, Trademarks, Trade Secrets or Software to which a Grantor is a party or a beneficiary, in each case to the extent the grant by such Grantor of a security interest pursuant to this Agreement in its right, title and interest in

3

such IP Agreement is not prohibited by such IP Agreement without the consent of any other party thereto, would not give any other party to such IP Agreement the right to terminate its obligations thereunder, or is permitted with consent if all necessary consents to such grant of a security interest have been obtained from the other parties thereto (it being understood that the foregoing shall not be deemed to obligate such Grantor to obtain such consents); provided that the foregoing limitation shall not affect, limit, restrict or impair the grant by such Grantor of a security interest pursuant to this Agreement in any Receivable or any money or other amounts due or to become due under any such IP Agreement.

“Issuers”:  the collective reference to each issuer of a Pledged Security.

“Investment Property”:  all “investment property” as such term is defined in Section 9-102(a)(49) of the UCC and, in any event, shall include, without limitation, the Pledged Securities.

“KCI USA”:  KCI USA, Inc., a Delaware corporation.

“Obligations”:  (i) in the case of the Company, the Borrower Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations.

“Patents”:  all United States and foreign patents and patent applications, including, without limitation: (i) all reissues, extensions, divisions, continuations, continuations-in-part, renewals and re-examinations thereof, (ii) utility models and statutory invention registrations, and (iii) all inventions and improvements claimed or disclosed therein.

“Pledged Account Banks”: as defined in section 5.10.

“Pledged Debt”:  all indebtedness listed on Schedule 3 (as such schedule may be supplemented in accordance with Section 5.1 hereof), together with all additional indebtedness (and the instruments, if any, evidencing such indebtedness) at any time issued to any Grantor and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all such indebtedness; provided, however, that accounts receivable and any promissory notes issued in connection with extensions of trade credit by any Grantor in the ordinary course of business shall not be included in Pledged Debt.

“Pledged Securities”:  the collective reference to the Pledged Debt and the Pledged Stock.

“Pledged Stock”:  the shares of Capital Stock listed on Schedule 2 (as such schedule may be supplemented in accordance with Section 5.6 hereof), together with any other shares, stock certificates, options or rights of any nature whatsoever in respect of the Capital Stock of any Person that may be issued or granted to, or held by, any Grantor while this Agreement is in effect and all dividends, distributions, return of capital, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares or other equity interests and all subscription warrants, rights or options issued thereon or with respect thereto; provided that, Pledged Stock shall not include any Capital Stock of a Person whose organizational documents (including, without

4

limitation, any joint venture agreement) prohibit the pledge or other encumbrance of such Capital Stock.

“Proceeds”:  all “proceeds” as such term is defined in Section 9-102 of the UCC and, in any event, shall include, without limitation, all dividends or other income from the Pledged Securities, collections thereon or distributions or payments with respect thereto.

“Receivable”:  any right to payment for goods sold or leased, for services rendered or for any other monetary obligation, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance, and in any event, shall include any Account.

“Scheduled Assets”:  as defined in Section 3.

“Securities Act”:  the Securities Act of 1933, as amended.

“Supporting Obligation”: all “supporting obligations” as such term is defined in Section 9-102 of the UCC and, in any event, shall include, without limitation, all security agreements, guaranties, leases and other contracts securing or otherwise relating to any such Accounts, Chattel Paper, Documents, Instruments, Goods represented by the sale or lease or delivery which gave rise to any of the foregoing, returned or repossessed merchandise and rights of stoppage in transit, replevin, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party.

“Trademarks”:  all trademarks, trade names, domain names, trade dress, designs, slogans, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers now existing or hereafter adopted or acquired, whether in the United States, any State thereof, or any other country or political subdivision thereof, and, with respect to any and all of the foregoing: (i) all applications, registrations, and renewals in connection therewith (provided that no security interest shall be granted in United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law), (ii) all goodwill associated therewith, and (iii) all common-law rights related thereto.

“Trade Secrets”:  all confidential and proprietary information, including, without limitation, know-how, trade secrets, manufacturing and production processes and techniques, inventions, research and development information, databases and data, including, without limitation, technical data, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information.

“UCC” means the Uniform Commercial Code as the same may from time to time be in effect in the State of New York; provided that if, by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection or the priority of any security interest granted herein is governed by the Uniform Commercial Code in effect in a jurisdiction other than New York, then, as to the perfection or the effect of perfection or non-perfection or the priority of such security interest, “UCC” shall mean the Uniform Commercial Code in effect in such other jurisdiction.

5

1.2Other Definitional Provisions.  (a)  The words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified.

(b)The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

(c)Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor’s Collateral or the relevant part thereof.

SECTION 2  GUARANTEE

2.1Guarantee.  (a)  Each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Collateral Agent, for the ratable benefit of the Agents and the Lenders and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Company when due (whether at the stated maturity, by acceleration or otherwise) of the Borrower Obligations.

(b)Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution provided in Section 2.2).

(c)Each Guarantor agrees that the Borrower Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of the Collateral Agent or any Lender hereunder.

(d)The guarantee contained in this Section 2 shall remain in full force and effect until all the Borrower Obligations and the obligations of each Guarantor under the guarantee contained in this Section 2 shall have been satisfied by payment in full, no Letter of Credit shall be outstanding (or any outstanding Letters of Credit have been cash collateralized) and the Commitments shall be terminated, notwithstanding that from time to time during the term of the Credit Agreement the Company may be free from any Borrower Obligations.

(e)No payment made by the Company, any of the Guarantors, any other guarantor or any other Person or received or collected by the Collateral Agent or any Lender from the Company, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Borrower Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Borrower Obligations or any payment

6

received or collected from such Guarantor in respect of the Borrower Obligations), remain liable for the Borrower Obligations up to the maximum liability of such Guarantor hereunder until the Borrower Obligations are paid in full, no Letter of Credit is outstanding (or any outstanding Letters of Credit have been cash collateralized) and the Commitments are terminated.

(f)The guarantee contained in this Agreement is a guarantee of payment and not of collection.

2.2Right of Contribution.  Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment.  Each Guarantor’s right of contribution shall be subject to the terms and conditions of Section 2.3.  The provisions of this Section 2.2 shall in no respect limit the obligations and liabilities of any Guarantor to the Agents and the Lenders, and each Guarantor shall remain liable to the Agents and the Lenders for the full amount guaranteed by such Guarantor hereunder.

2.3No Subrogation.  Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by any Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of the rights of any Agent or any Lender against the Company or any other Guarantor or any collateral security or guarantee or right of offset held by any Agent or any Lender for the payment of the Borrower Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Company or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Agents and the Lenders by the Company on account of the Borrower Obligations are paid in full, no Letter of Credit is outstanding (or any outstanding Letters of Credit have been cash collateralized) and the Commitments are terminated.  If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Borrower Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Agents and the Lenders segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Collateral Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Collateral Agent, if required), to be applied against the Borrower Obligations, whether matured or unmatured, in such order as the Collateral Agent may determine.

2.4Amendments, etc. with Respect to the Borrower Obligations.  Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Borrower Obligations made by any Agent or any Lender may be rescinded by such Agent or such Lender, as the case may be, and any of the Borrower Obligations continued, and the Borrower Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by any Agent or any Lender, and the Credit Agreement, the other Loan Documents, any Eligible Hedge Agreement and any other documents executed and delivered in connection therewith may be amended, modified,

7

supplemented or terminated, in whole or in part, as the Collateral Agent (or the relevant Lenders) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by any Agent or any Lender for the payment of the Borrower Obligations may be sold, exchanged, waived, surrendered or released.  No Agent or Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Borrower Obligations or for the guarantee contained in this Section 2 or any property subject thereto.

2.5Guarantee Absolute and Unconditional.  Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Borrower Obligations and notice of or proof of reliance by any Agent or any Lender upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2; the Borrower Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2; and all dealings between the Company and any of the Guarantors, on the one hand, and the Agents and the Lenders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2.  Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Company or any of the Guarantors with respect to the Borrower Obligations.  Each Guarantor understands and agrees that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of the Credit Agreement, any other Loan Document, any Eligible Hedge Agreement, any of the Borrower Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by any Agent or any Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Company or any other Person against any Agent or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Company or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Company for the Borrower Obligations, or of such Guarantor under the guarantee contained in this Section 2, in bankruptcy or in any other instance other than the express written release of such Guarantor from this Agreement by the Collateral Agent.  When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the Collateral Agent or any Lender may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the Company, any other Guarantor or any other Person or against any collateral security or guarantee for the Borrower Obligations or any right of offset with respect thereto, and any failure by the Collateral Agent or any Lender to make any such demand, to pursue such other rights or remedies or to collect any payments from the Company, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Company, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of any Agent or any Lender against any Guarantor.  For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.

2.6Reinstatement.  The guarantee contained in this Section 2 shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of

8

any of the Borrower Obligations is rescinded or must otherwise be restored or returned by any Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made.

2.7Payments.  Each Guarantor hereby guarantees that payments hereunder will be paid to the Collateral Agent without set-off or counterclaim in Dollars at the office of the Collateral Agent located at Morgan Stanley & Co. Incorporated, 750 Seventh Avenue, 11^th Floor, New York, New York 10020, Attn: Alice Lee (or such other address as shall be specified from time to time by the Collateral Agent).

SECTION 3  GRANT OF SECURITY INTEREST

Each Grantor hereby grants to the Collateral Agent, for the ratable benefit of the Agents and the Lenders, a security interest in such Grantor’s right, title and interest in and to all of the following property, wherever located, whether now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the “Collateral”), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of such Grantor’s Obligations:

(a)all Accounts, including, without limitation, Health-Care-Insurance Receivables and all amounts owed to such Grantor for the licensing of Intellectual Property rights;

(b)all Chattel Paper, including, without limitation, equipment leases and conditional sales agreements;

(c)all Documents;

(d)all Equipment (other than any vehicles the ownership of which is evidenced by a certificate of title);

(e)all General Intangibles, including, without limitation, Payment Intangibles and Software;

(f)all Instruments, including, without limitation, Promissory Notes;

(g)all Intellectual Property;

(h)all Inventory;

(i)all Investment Property;

(j)all Deposit Accounts;

9

(k)all Commercial Tort Claims listed on Schedule 8 hereto and any additional Commercial Tort Claims;

(l)all Letter-of-Credit Rights;

(m) all books and records pertaining to any and/or all of the Collateral; and

(n)to the extent not otherwise included, all Proceeds, Supporting Obligations and products of any and all of the foregoing Collateral;

provided that, notwithstanding the foregoing, no Lien or security interest is or shall be granted hereunder in, and the Collateral shall not include, (i) any asset or property described on Schedule 8.6(f) to the Credit Agreement (the “Scheduled Assets”), except that this limitation shall cease to apply to any such asset which is owned by any Grantor on the earlier of (the “Triggering Date”) (A) the date which is one year after the Closing Date and (B) the date on which the Administrative Agent sends a notice to such effect to the Company after the occurrence and during the continuation of an Event of Default (and any such asset shall automatically be subject to the Liens and security interests granted hereunder as of the Triggering Date), (ii) any Governmental Receivable (or any General Intangibles or Chattel Paper related thereto) to the extent that the grant of such Lien or security interest is not permitted by any applicable law, (iii) any Capital Stock of an entity organized under the laws of any jurisdiction outside of the United States of America to the extent such Capital Stock constitutes more than 65% of all the issued and outstanding shares of all classes of the Capital Stock of such entity, (iv) the Capital Stock of EMD CV and IMD CV owned by KCII, KCI International and/or KCII Holdings LLC (v) any Capital Stock of KCI International and KCII Holdings LLC to the extent such Capital Stock constitutes more than 65% of all the issued and outstanding shares of all classes of the Capital Stock of any such entity, (vi) Welcome Lodge and any property located on and used in connection therewith or (vii) any secured proceeds account in which the proceeds from the issuance of the Senior Subordinated Notes are deposited.  It is understood and agreed that, notwithstanding the foregoing, no Lien or security interest shall be granted on any Scheduled Asset to the extent the consent of any third party is required for the granting of such Lien or security interest in such Scheduled Asset unless such consent has been obtained.  The relevant Grantor or Grantors shall use their reasonable best efforts to obtain such consent such that any such Scheduled Asset that has not been sold or otherwise disposed of on or prior to the Triggering Date shall become subject to the Liens and security interests granted hereunder as of the Triggering Date or as soon thereafter as practicable.  All rights of the Collateral Agent and the security interests granted to the Collateral Agent hereunder, and all obligations of each Grantor hereunder, shall be absolute and unconditional, irrespective of, among other things, any lack of validity or enforceability of any other Loan Document.

SECTION 4  REPRESENTATIONS AND WARRANTIES

To induce the Agents and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit thereunder, each Grantor hereby represents and warrants to each Agent and each Lender that:

10

4.1Representations of Guarantors.  In the case of each Guarantor, the representations and warranties set forth in Section 5 of the Credit Agreement as they relate to such Guarantor or to the Loan Documents to which such Guarantor is a party, each of which is hereby incorporated herein by reference, are true and correct in all material respects, and each Agent and each Lender shall be entitled to rely on each of them as if they were fully set forth herein, provided that each reference in each such representation and warranty to the Company’s knowledge shall, for the purposes of this Section 4.1, be deemed to be a reference to such Guarantor’s knowledge.

4.2Title; No Other Liens.  (a)  Except for the security interest granted to the Collateral Agent for the ratable benefit of the Agents and the Lenders pursuant to this Agreement and the other Liens permitted to exist on the Collateral by the Credit Agreement, such Grantor owns or has rights in and the power to transfer each item of the Collateral free and clear of any and all Liens, claims, options or rights of others.  Except as set forth on Schedule 7, no financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such (i) as have been filed in favor of the Collateral Agent, for the ratable benefit of the Agents and the Lenders, pursuant to this Agreement, (ii) as are being terminated within 5 days of the Closing Date or (iii) as may have been filed in connection with Liens permitted by the Credit Agreement.

(b)  Such Grantor has exclusive possession and control of the Inventory and Equipment other than (i) any Inventory and Equipment in an aggregate amount not to exceed $1,000,000 stored at any leased premises or warehouse for which a landlord’s or warehouseman’s agreement, in form and substance satisfactory to the Collateral Agent, is in effect and (ii) Inventory and Equipment being leased to customers by KCI USA and KCI Licensing, Inc.

4.3Perfected First Priority Liens.  Except as provided in Sections 5.8(i) and 5.9, the security interests granted pursuant to this Agreement (x) upon completion of the filings and other actions contemplated hereby (which, in the case of all filings and other documents, have been delivered to the Collateral Agent in completed and duly executed and authorized form, as appropriate), will constitute valid perfected security interests in all of the Collateral in favor of the Collateral Agent, for the ratable benefit of the Agents and the Lenders, as collateral security for such Grantor’s Obligations, enforceable in accordance with the terms hereof against all creditors of such Grantor and upon the Collateral Agent obtaining Control of the Collateral that consists of Deposit Accounts, Investment Property, Letter-of-Credit Rights and Electronic Chattel Paper, against all Persons purporting to purchase any Collateral from such Grantor other than purchasers of inventory in the ordinary course of business and (y) are prior to all other Liens on the Collateral in existence on the date hereof except for Liens permitted by the Credit Agreement which have priority over the Liens on the Collateral.

4.4Chief Executive Office.  On the date hereof, such Grantor’s exact legal name, as described in Section 9-503(a) of the UCC, is correctly set forth in Schedule 4 hereto.  Such Grantor has only the trade names, domain names and marks listed on Schedule 6 hereto.  On the date hereof, such Grantor is located (within the meaning of Section 9-307 of the UCC) and has its chief executive office and the office in which it maintains all originals of all chattel paper that evidence Receivables of such Grantor, in the state or jurisdiction set forth in Schedule 4

11

hereto.  The information set forth in Schedule 4 hereto with respect to such Grantor is true and accurate in all respects.  Such Grantor has not previously changed its name, location, chief executive office, place where it maintains its agreements, type of organization, jurisdiction of organization or organizational identification number from those set forth in Schedule 4 hereto.

4.5Inventory and Equipment.  On the date hereof, all of such Grantor’s Inventory and the Equipment (other than mobile goods) are kept at the locations listed on Schedule 5, except with respect to Inventory and Equipment being leased to customers by KCI USA and KCI Licensing, Inc. in the ordinary course of business.  Within the 5 years preceding the execution of this Agreement, such Grantor’s Inventory and Equipment has not been located anywhere other than in the states specified on Schedule 5.

4.6Farm Products.  None of the Collateral constitutes, or is the Proceeds of, Farm Products.

4.7Pledged Securities.  (a)  The shares of Pledged Stock pledged by such Grantor hereunder constitute all the issued and outstanding shares of all classes of the Capital Stock of each Issuer owned by such Grantor, provided that (i) in the case of Pledged Stock where the Issuers are Foreign Subsidiaries or are KCI International or KCII Holdings LLC, such Pledged Stock does not constitute more than 65% of all the issued and outstanding shares of all classes of the Capital Stock of such Foreign Subsidiary or KCI International or KCII Holdings LLC and (ii) the Pledged Stock does not include any Capital Stock of EMD CV and IMD CV owned by KCII, KCI International and/or or KCII Holdings LLC.

(b)The Pledged Debt constitutes all of the outstanding indebtedness evidenced by promissory notes (other than indebtedness issued in connection with extensions of trade credit by any Grantor in the ordinary course of business) owed to such Grantor by the issuers thereof and, as of the date hereof, is outstanding in the principal amount indicated on Schedule 3 hereto.

(c)All the shares of the Pledged Stock have been duly authorized and validly issued and are fully paid and nonassessable.

(d)The Pledged Debt constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

(e)Such Grantor is the record and beneficial owner of, and has good and marketable title to, the Pledged Securities pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except the security interest created by this Agreement and Liens permitted by Section 8.3 of the Credit Agreement.  All Pledged Securities consisting of certificated securities and instruments have been delivered to the Collateral Agent.

12

4.8Receivables.  (a)  No amount payable to such Grantor under or in connection with any Receivable that is part of the Collateral is evidenced:  (i) by any Instrument which has not been delivered to and possessed by the Collateral Agent; (ii) by any Chattel Paper (other than Electronic Chattel Paper) that has not been clearly labeled and identified as being subject to the security interest created hereby in accordance with, and within the time periods specified in, Section 5.1; or (iii) by any Electronic Chattel Paper of which the Collateral Agent does not have Control pursuant to Section 9-105 of the UCC.

(b)The amounts represented by such Grantor to the Lenders from time to time as owing to such Grantor in respect of the Receivables that are part of the Collateral will at such times be accurate in all material respects.

4.9Intellectual Property.  (a)  Schedule 6 lists (i) all active U.S. Patents, Trademark registrations and Copyright registrations, and applications for any of the foregoing, filed by or issued to each Grantor in its own name as of the date hereof; (ii) all active material foreign or multinational Patents, Trademark registrations and Copyright registrations, and applications for any of the foregoing, filed by or issued to each Grantor in its own name as of the date hereof; and (iii) all material IP Agreements by and between any Grantor and a third party.

(b)To each Grantor’s knowledge, on the date hereof, all material Intellectual Property owned by such Grantor is valid and enforceable. On the date hereof, all material Intellectual Property owned by such Grantor is subsisting, unexpired, and unencumbered (except for the interest granted the Collateral Agent for the ratable benefit of the Agents and the Lenders pursuant to this Agreement and the other Liens permitted to exist on the Intellectual Property of such Grantor by the Credit Agreement), and is not abandoned.

(c)No holding, decision or judgment has been rendered by any Governmental Authority (other than decisions by the U.S. Patent and Trademark Office and similar agencies worldwide during routine patent and trademark prosecution) which would limit, cancel or question the validity or enforceability of, or such Grantor’s rights in, any Intellectual Property owned by any Grantor in any respect that could reasonably be expected to have a Material Adverse Effect.

(d)Except as set forth in Schedule 6, no action or proceeding is pending (other than routine patent and trademark prosecution in the ordinary course of business), or, to the knowledge of any Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question the validity of any Intellectual Property owned by any Grantor or such Grantor’s ownership interest therein and (ii) which, if adversely determined, would have a material adverse effect on the value of any Intellectual Property having material economic value that is owned by any Grantor.

(e)Each Grantor has made all filings, recordations and other acts and has paid all required fees and taxes necessary to maintain and protect its interest in its Intellectual Property Collateral required to be listed in Section 4.9(a) and all other material Intellectual Property owned by such Grantor.

13

(f)To each Grantor’s knowledge, the conduct of the Grantor’s business (including, for example, the use of such Grantor’s Intellectual Property in connection with the conduct of the Grantor’s business) does not infringe the Intellectual Property rights of any other Person.

4.10Commercial Tort Claims.  As of the date hereof, the Grantor has no Commercial Tort Claims other than those listed on Schedule 8 hereto.

4.11Deposit Accounts.  As of the date hereof, such Grantor has no Deposit Accounts, other than (i) the Deposit Accounts listed on Schedule 9 hereto, (ii) Deposit Accounts for security deposits and petty cash having a cash balance in the aggregate of no more than $250,000 at any one time and (iii) Deposit Accounts for payroll, taxes and employee benefits.  For Deposit Accounts listed on Schedule 9 hereto there are legal, binding and enforceable control agreements in effect for each such Deposit Account (other than such Deposit Accounts indicated by an asterisk on Schedule 9 and Deposit Accounts maintained with the Collateral Agent).

4.12Letter of Credit Rights.  As of the date hereof, such Grantor is not the beneficiary or assignee under any letter of credit.

SECTION 5  COVENANTS

Each Grantor covenants and agrees with the Agents and the Lenders that, from and after the date of this Agreement until the Obligations shall have been paid in full, no Letter of Credit shall be outstanding (or any outstanding Letters of Credit have been cash collateralized) and the Commitments shall have terminated:

5.1Delivery of Instruments and Chattel Paper.  If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument, such Instrument shall be immediately delivered to the Collateral Agent, duly indorsed in a manner satisfactory to the Collateral Agent, to be held as Collateral pursuant to this Agreement.  To the extent any such Instrument constitutes Pledged Debt, the Grantor delivering such Instrument to the Collateral Agent shall also deliver a supplement to Schedule 3 hereto, reflecting such additional Pledged Debt.  If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Chattel Paper, upon request of the Collateral Agent after the occurrence of an Event of Default which is continuing, such Chattel Paper shall be immediately delivered to the Collateral Agent, duly indorsed in a manner satisfactory to the Collateral Agent, to be held as Collateral pursuant to this Agreement.  Unless an Event of Default shall have occurred and be continuing, each Grantor shall be entitled to retain possession of all Collateral consisting of Chattel Paper (other than Electronic Chattel Paper), and shall hold all such Chattel Paper in trust for the Collateral Agent, for the ratable benefit of the Agents and the Lenders.  Upon the request of the Collateral Agent following the occurrence of an Event of Default, such Grantor shall cause all of its Chattel Paper (other than Electronic Chattel Paper) to bear a legend, conspicuously noted on such Chattel Paper, to the following effect:

14

“THIS CHATTEL PAPER IS SUBJECT TO A SECURITY INTEREST IN FAVOR OF MORGAN STANLEY & CO. INCORPORATED, AS COLLATERAL AGENT.  COMMUNICATIONS REGARDING THIS SECURITY INTEREST SHOULD BE DIRECTED TO MORGAN STANLEY & CO. INCORPORATED, AS COLLATERAL AGENT, 750 SEVENTH AVENUE, 11^TH FLOOR, NEW YORK, NEW YORK 10020, ATTN: ALICE LEE.”

Each Grantor shall take all reasonable and necessary steps to facilitate the Collateral Agent having Control, pursuant to Section 9-105 of the UCC, of all Collateral consisting of Electronic Chattel Paper.

5.2Maintenance of Insurance.  (a)  Such Grantor will maintain, with financially sound and reputable companies, insurance policies (i) insuring the Inventory and Equipment against loss by fire, explosion, theft and such other casualties as may be reasonably satisfactory to the Collateral Agent and (ii) insuring such Grantor, the Agents and the Lenders against liability for personal injury and property damage relating to such Inventory and Equipment, such policies to be in such amounts and covering such risks as is commercially reasonable and prudent with respect to the business and properties of the Grantors and which is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Grantors operate.

(b)All such insurance shall (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days after notice to the Collateral Agent thereof, (ii) name the Collateral Agent as an additional insured party or loss payee, as its interests may appear, and, (iii) if reasonably requested by the Collateral Agent, include a breach of warranty clause.

(c)The Company shall deliver to the Collateral Agent during the month of January in each calendar year a report of a reputable insurance broker with respect to insurance then maintained with third parties required by the Loan Documents and a certificate of a Responsible Officer of the Company as to the self-insurance arrangements of the Grantors then in effect, and such supplemental reports with respect thereto as the Collateral Agent may from time to time reasonably request.

5.3Maintenance of Perfected Security Interest; Further Documentation.  (a)  Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in Section 4.3 and shall defend such security interest against the claims and demands of all Persons whomsoever; provided, however, that with respect to Collateral with an aggregate value not to exceed $500,000, such Grantor shall not be required to maintain such security interest or take such actions.

(b)Such Grantor hereby agrees that it shall: (i) cause the Equipment to be maintained and preserved in the same condition, repair and working order as when new, ordinary wear and tear excepted, other than any Equipment that is obsolete or that is no longer useful in the ordinary course of business of such Grantor, and make or cause to be made all repairs, replacements and other improvements in connection therewith which are

15

necessary so that such Grantor may properly conduct its business; and (ii) at the request of the Collateral Agent following the occurrence of an Event of Default, mark conspicuously each document included in Inventory and, each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral Agent indicating that such document or Collateral is subject to the security interest granted hereby.

(c)Such Grantor will furnish to the Collateral Agent and the Lenders from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail.

(d)At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the priority of the security interests described in Section 4.3.  Each Grantor will promptly take such further actions as the Collateral Agent may reasonably request to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral of such Grantor.

5.4Changes in Locations, Name, etc.  Such Grantor will not, except upon 15 days’ prior written notice to the Collateral Agent and delivery to the Collateral Agent of all documents reasonably requested by the Collateral Agent to maintain the validity, perfection and priority of the security interests provided for herein:

(i)change its state of organization from that referred to in Section 4.4;

(ii)change the location of its chief executive office (and, if such Grantor only has one place of business, its sole place of business) from that referred to in Section 4.4; or

(iii)change its name, identity or corporate structure to such an extent that any financing statement filed by the Collateral Agent in connection with this Agreement would become misleading.

5.5Notices.  Such Grantor will advise the Collateral Agent and the Lenders promptly, in reasonable detail, of:

(a)any Lien (other than security interests created hereby or Liens permitted under the Credit Agreement) on any of the Collateral which would adversely affect the ability of the Collateral Agent to exercise any of its remedies hereunder; and

(b)the occurrence of any other event which could reasonably be expected to have a material adverse effect on the aggregate value of such Grantor’s Collateral or on the security interests created hereby.

16

5.6Investment Property.  (a)  If such Grantor shall become entitled to receive or shall receive any stock certificate (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights in respect of the Capital Stock of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the same as the agent of the Agents and the Lenders and hold the same in trust for the Agents and the Lenders and deliver the same forthwith to the Collateral Agent in the exact form received, duly indorsed by such Grantor to the Collateral Agent, if required, together with an undated stock power covering such certificate duly executed in blank by such Grantor, to be held by the Collateral Agent, subject to the terms hereof, as additional collateral security for the Obligations.  At such time as such Grantor delivers such stock certificate, option or rights in respect of Capital Stock of any Issuer to the Collateral Agent, such Grantor shall also deliver a supplement to Schedule 2 hereto, reflecting such additional Pledged Stock.  Any sums paid upon or in respect of the Pledged Securities upon the liquidation or dissolution of any Issuer shall be paid over to the Collateral Agent to be held by it hereunder as additional collateral security for the Obligations, and in case any distribution of capital shall be made on or in respect of the Pledged Securities or any property shall be distributed upon or with respect to the Pledged Securities pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the Collateral Agent, be delivered to the Collateral Agent to be held by it hereunder as additional collateral security for the Obligations.  If any sums of money or property so paid or distributed in respect of the Pledged Securities shall be received by such Grantor, such Grantor shall, until such money or property is paid or delivered to the Collateral Agent, hold such money or property in trust for the Agents and the Lenders, segregated from other funds of such Grantor, as additional collateral security for the Obligations.

(b)Without the prior written consent of the Collateral Agent, such Grantor will not (i) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of any Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Pledged Securities or Proceeds thereof (except pursuant to a transaction not prohibited by the Credit Agreement), (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Pledged Securities or Proceeds thereof, or any interest therein, except for the security interests created by this Agreement and other Liens permitted by Section 8.3 of the Credit Agreement or (iv) enter into any agreement or undertaking restricting the right or ability of such Grantor or the Collateral Agent to sell, assign or transfer any of the Pledged Securities or Proceeds thereof.

(c)In the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Pledged Securities issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Collateral Agent promptly in writing of the occurrence of any of the events described in Section 5.6(a) with respect to the Pledged Stock issued by it and (iii) the terms of Section 6.3(a) shall apply to it, mutatis mutandis, with respect to all actions that

17

may be required of it pursuant to Section 6.3(a) with respect to the Pledged Securities issued by it.

(d)Each Grantor shall (i) at all times maintain its Investment Property (other than, subject to Section 6.4, Cash Equivalents) under the “control” (within the meaning of Section 9-106 of the UCC) of the Collateral Agent and (ii) and shall not permit any other Person (other than the Collateral Agent) to exercise or obtain “control” (within the meaning of Section 9-106 of the UCC) of any of its Investment Property (including Cash Equivalents) in connection with the grant of a Lien by such Grantor to or for the benefit of such Person or any other Person (other than the Collateral Agent).  Without limiting the foregoing, if requested by the Collateral Agent with respect to any Security Entitlement of such Grantor, such Grantor shall, and shall cause the relevant Securities Intermediary to, enter into a control agreement in form and substance satisfactory to the Collateral Agent for the purpose of perfecting the security interest in such Security Entitlement granted pursuant to this Agreement.  Each Grantor agrees not to permit the issuer of any interest in a partnership or limited liability company owned by it to be designated as a “Security” under the UCC in effect in any jurisdiction unless such Grantor shall have taken all of the actions required, including any required filings, to maintain the perfection of the security interests granted in such interests hereunder.

5.7Receivables.  (a)  Other than in the ordinary course of business consistent with its past practice and other than in connection with any Receivable which is not material in amount, such Grantor will not (i) grant any extension of the time of payment of any Receivable that is part of the Collateral, (ii) compromise or settle any such Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any such Receivable, (iv) allow any credit or discount whatsoever on any Receivable or (v) amend, supplement or modify any such Receivable in any manner that could adversely affect the value thereof.

(b)Such Grantor will deliver to the Collateral Agent a copy of each material demand, notice or document received by it that questions or calls into doubt the validity or enforceability of more than 5% of the aggregate amount of the then outstanding Receivables.

(c)Upon the request of the Collateral Agent following the occurrence of an Event of Default, such Grantor will mark conspicuously each chattel paper included in Receivables, and at the request of the Collateral Agent, each of its records pertaining to such Collateral with a legend, in form and substance satisfactory to Collateral Agent, indicating that such chattel paper of Collateral is subject to the security interest granted hereby.

5.8Intellectual Property.  (a)  Each Grantor will (i) continue to use (either itself or through licensees) each material Trademark owned by such Grantor on each and every trademark class of goods or services applicable to its current line as reflected in its current catalogs, brochures and price lists in order to maintain such Trademark in full force free from any claim of abandonment for non-use, (ii) maintain (and require each licensee to maintain) as in the past the quality of products and services offered under each Trademark owned by such

18

Grantor, (iii) use (and require each licensee to use) each Trademark owned by such Grantor with the appropriate notice of registration and all other notices and legends required by applicable Requirements of Law, (iv) not adopt or use any mark which is confusingly similar or a colorable imitation of each Trademark owned by such Grantor unless the Collateral Agent, for the ratable benefit of the Agents and the Lenders, shall obtain a perfected security interest in such mark pursuant to this Agreement, and (v) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any material Trademark owned by such Grantor may lapse or become invalidated or impaired in any way.

(b)Each Grantor will not knowingly do any act, or omit to do any act, whereby any material Patent owned by such Grantor may become forfeited, abandoned or dedicated to the public.

(c)Each Grantor (i) will employ each material Copyright owned by such Grantor and (ii) will not do (or permit any licensee or sublicensee thereof to do) any act or knowingly omit doing any act whereby any material Copyright owned by such Grantor may lapse or become invalidated or otherwise impaired.  Such Grantor will not do any act or omit to do any act whereby any material Copyright owned by such Grantor may fall into the public domain.

(d)Each Grantor will not do any act that knowingly infringes the intellectual property rights of any other Person.

(e)Each Grantor will notify the Collateral Agent and the Lenders immediately if it knows, or has reason to know, that any application or registration relating to any material Intellectual Property owned by such Grantor may become forfeited, abandoned or dedicated to the public, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court or tribunal in any country) regarding such Grantor’s ownership of, or the validity of, such Intellectual Property or such Grantor’s right to register the same or to own and maintain the same.

(f)Each Grantor agrees to execute or otherwise authenticate an agreement, in substantially the form set forth in Exhibit B-1 and Exhibit B-2 hereto or otherwise in form and substance satisfactory to the Collateral Agent (an “Intellectual Property Security Agreement”), for recording the security interest granted hereunder to the Collateral Agent in Intellectual Property owned by such Grantor with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other Governmental Authorities necessary to perfect the security interest hereunder in such Intellectual Property.

(g)Each Grantor agrees that should it obtain an ownership interest in any Intellectual Property that is not on the date hereof a part of the Intellectual Property of such Grantor (“After-Acquired Intellectual Property”) (i) the provisions of this Agreement shall automatically apply thereto, and (ii) any such After-Acquired Intellectual Property and, in the case of Trademarks, the goodwill symbolized thereby, shall automatically become part of the Intellectual Property of such Grantor subject to the

19

terms and conditions of this Agreement with respect thereto.  At the time of delivery of the next financial statement required to be delivered pursuant to Sections 7.1(a) and (b) of the Credit Agreement, each Grantor shall give written notice to the Collateral Agent identifying (i) all active Patents, Trademark registrations and Copyright registrations, and applications for any of the foregoing, filed by or issued to each Grantor in its own name, and (ii) all material IP Agreements by and between any Grantor and a third party included in the After-Acquired Intellectual Property acquired during the applicable time period covered by such financial statement, and such Grantor shall execute and deliver to the Collateral Agent with such written notice, or otherwise authenticate, an agreement substantially in the form of Exhibit C-1 or Exhibit C-2 hereto or otherwise in form and substance satisfactory to the Collateral Agent (an “IP Security Agreement Supplement”) covering such After-Acquired Intellectual Property which IP Security Agreement Supplement shall be recorded by the Collateral Agent with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other Governmental Authorities necessary to perfect the security interest hereunder in such After-Acquired Intellectual Property.

(h)Each Grantor will take all reasonable and necessary steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each material application (and to obtain the relevant registration) and to maintain each registration of material Intellectual Property owned by such Grantor, including, without limitation, filing of applications for renewal, affidavits of use and affidavits of incontestability.

(i)In the event that any material Intellectual Property owned by a Grantor is infringed, misappropriated or diluted by a third party, such Grantor shall (i) take such actions as such Grantor shall reasonably deem appropriate under the circumstances to protect such Intellectual Property and (ii) if such Intellectual Property isof material economic value, promptly notify the Collateral Agent after it learns thereof and sue for infringement, misappropriation or dilution, to seek injunctive relief where appropriate and to recover any and all damages for such infringement, misappropriation or dilution.

(j)Except upon an Event of Default, it is understood and agreed that no filings shall be made, and no other actions shall be required or taken, in any country other than the United States of America in order to perfect the security interest granted hereunder in any Intellectual Property.

(k)No later than September 30, 2003, each Grantor will take all action necessary to perfect the Collateral Agent’s first priority lien in Intellectual Property Collateral, including, without limitation, the filing of all releases and corrections to chains of title with the relevant Governmental Authority.

5.9Government Contracts.  Each Grantor shall, to the extent practicable, provide reasonable advance notice to the Collateral Agent (i) prior to or, if such advance notice is not practicable, shall provide notice to the Collateral Agent promptly after, entering into a contract with a Governmental Authority and (ii) prior to or, if such advance notice is not

20

practicable, shall provide notice to the Collateral Agent promptly after, the sale of goods or the provision of services to a Governmental Authority resulting in the creation of a Governmental Receivable if the amounts owing to any of the Grantors under such contract or Governmental Receivable, in the aggregate together with the amounts owing to any Grantors under all such contracts then in effect (including any such contract entered into prior to the Closing Date) and/or Governmental Receivables then outstanding (including any such Governmental Receivables arising prior to the Closing Date), but without duplication, exceed $10,000,000 at any time, and shall, in such event at the request of the Collateral Agent, provide any notices and make any filings required under the Assignment of Claims Act and any other amendments or modifications to this Agreement in order to grant, maintain and/or perfect, to the extent permitted by applicable law, the security interest in all such contracts and Governmental Receivables granted pursuant to this Agreement.  Notwithstanding the foregoing, this Section 5.9 shall not apply to Medicare or Medicaid Receivables prior to the occurrence of an Event of Default.

5.10Deposit Accounts; Post-Closing Covenant.  (a)  Each Grantor shall enter into an account control agreement by September 30, 2003, in form and substance satisfactory to the Collateral Agent, with each financial institution with which such Grantor maintains a Deposit Account indicated with an asterisk on Schedule 9.  Each Grantor shall maintain all Deposit Accounts only with the Collateral Agent or banks (“Pledged Account Banks”) that have agreed, in a record authenticated by the Grantor, the Collateral Agent and the applicable Pledged Account Banks to (i) comply with instructions originated by the Collateral Agent directing the disposition of funds in the Deposit Account without the further consent of the Grantor and (ii) waive or subordinate in favor of the Collateral Agent all claims of the Pledged Account Bank (including, without limitation, claims by way of a security interest, lien or right of setoff or right of recoupment) to such Deposit Account, in form and substance satisfactory to the Collateral Agent; provided that, (x) Deposit Accounts for security deposits and petty cash having a cash balance in the aggregate of no more than $250,000 at any one time and (y) Deposit Accounts for payroll, taxes and employee benefits may be maintained at any bank without having to obtain an account control agreement with respect to such Deposit Accounts.  Each Grantor hereby grants to the Collateral Agent, for the benefit of the Collateral Agent and the Lenders, a continuing lien upon, and security interest in, all such accounts and all funds at any time paid, deposited, credited or held in such accounts (whether for collection, provisionally or otherwise) or otherwise in the possession of such financial institutions, and each such financial institution shall act as the Collateral Agent’s agent in connection therewith.

5.11Bailees and Warehouses.  Except with respect to Inventory and Equipment being leased to customers by KCI USA and KCI Licensing, Inc., no Collateral in excess of $1,000,000 in the aggregate shall at any time be in the possession or control of any warehouse, bailee or any of any Grantor’s agents or processors without the Collateral Agent’s prior written consent and unless the Collateral Agent, if the Collateral Agent has so requested, has received warehouse receipts or bailee lien waivers satisfactory to the Collateral Agent prior to the commencement of such possession or control.  Upon and during the continuance of an Event of Default, each Grantor shall, upon the request of the Collateral Agent, notify any such warehouse, bailee, agent, processor or lessor of the Liens, shall instruct such Person to hold all such Collateral for the Collateral Agent’s account subject to the Collateral Agent’s instructions and shall obtain an acknowledgement from such Person that such Person holds the Collateral for the Collateral Agent’s benefit.

21

5.12Commercial Tort Claims.  Each Grantor shall notify the Collateral Agent of any Commercial Tort Claim which arises in which such Grantor is a claimant wherein the amount sought in such Commercial Tort Claim is in excess of $500,000.  If the Collateral Agent requests, such Grantor shall execute a security agreement in form similar to this Agreement and take all other necessary action to provide the Collateral Agent a security interest in such Commercial Tort Claim as if it were part of the Collateral hereunder.

SECTION 6  REMEDIAL PROVISIONS

6.1Certain Matters Relating to Receivables.  (a)  The Collateral Agent shall have the right to make test verifications of the Receivables that are part of the Collateral in any manner and through any medium that it reasonably considers advisable, and each Grantor shall furnish all such assistance and information as the Collateral Agent may require in connection with such test verifications.  At any time and from time to time after the occurrence and during the continuation of and Event of Default, upon the Collateral Agent’s reasonable request and at the expense of the relevant Grantor, such Grantor shall cause independent public accountants or others satisfactory to the Collateral Agent to furnish to the Collateral Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Receivables that are part of the Collateral.

(b)If required by the Collateral Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of Receivables that are part of the Collateral, when collected by any Grantor, (i) shall be forthwith (and, in any event, within two Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Collateral Agent if required, in a Collateral Account maintained under the sole dominion and control of the Collateral Agent, subject to withdrawal by the Collateral Agent for the account of the Agents and the Lenders only as provided in Section 6.5, and (ii) until so turned over, shall be held by such Grantor in trust for the Agents and the Lenders, segregated from other funds of such Grantor.  Each such deposit of Proceeds of Receivables shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit.

(c)At the Collateral Agent’s reasonable request, each Grantor shall deliver to the Collateral Agent all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Receivables that are part of the Collateral, including, without limitation, all original orders, invoices and shipping receipts.

6.2Communications with Account Debtors and Obligors; Grantors Remain Liable.  (a)  The Collateral Agent in its own name or in the name of others may at any time after the occurrence and during the continuance of an Event of Default communicate with Account Debtors and obligors under the Collateral to verify with them to the Collateral Agent’s satisfaction the existence, amount and terms of any such Collateral.

(b)Upon the request of the Collateral Agent at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall notify Account

22

Debtors and obligors on the Collateral that such Collateral has been assigned to the Collateral Agent for the ratable benefit of the Agents and the Lenders and that payments in respect thereof shall be made directly to the Collateral Agent.

(c)Anything herein to the contrary notwithstanding, each Grantor shall remain liable under the Collateral to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto.  No Agent or Lender shall have any obligation or liability under any Collateral (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by any Agent or any Lender of any payment relating thereto, nor shall any Agent or any Lender be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Collateral (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

6.3Pledged Stock.  (a)  Unless an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given notice to the relevant Grantor of the Collateral Agent’s intent to exercise its corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted to receive all cash dividends paid in respect of the Pledged Stock and all payments made in respect of the Pledged Debt, in each case paid in the normal course of business of the relevant Issuer and consistent with past practice, to the extent permitted in the Credit Agreement, and to exercise all voting and corporate rights with respect to the Pledged Securities, provided, however, that no vote shall be cast or corporate right exercised or other action taken which, in the Collateral Agent’s reasonable judgment, would impair the Collateral or which would be inconsistent with or result in any violation of any provision of the Credit Agreement, this Agreement or any other Loan Document.

(b)If an Event of Default shall occur and be continuing and the Collateral Agent shall give notice of its intent to exercise such rights to the relevant Grantor or Grantors, (i) the Collateral Agent shall have the right to receive any and all cash dividends, payments or other Proceeds paid in respect of the Pledged Securities and make application thereof to the Obligations in such order as the Collateral Agent may determine, and (ii) any or all of the Pledged Securities shall be registered in the name of the Collateral Agent or its nominee, and the Collateral Agent or its nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to such Pledged Securities at any meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Pledged Securities as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Securities upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any Issuer, or upon the exercise by any Grantor or the Collateral Agent of any right, privilege or option pertaining to such Pledged Securities, and in connection therewith, the right to deposit and deliver any and all of the Pledged Securities with any committee, depositary, transfer

23

agent, registrar or other designated agency upon such terms and conditions as the Collateral Agent may determine), all without liability except to account for property actually received by it, but the Collateral Agent shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.

(c)Each Grantor hereby authorizes and instructs each Issuer of any Pledged Securities pledged by such Grantor hereunder to (i) comply with any instruction received by it from the Collateral Agent in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Grantor, and each Grantor agrees that each Issuer shall be fully protected in so complying, and (ii) upon the occurrence of an Event of Default, pay any dividends or other payments with respect to the Pledged Securities directly to the Collateral Agent.

6.4Proceeds to be Turned Over To Collateral Agent.  In addition to the rights of the Collateral Agent and the Lenders specified in Section 6.1 with respect to payments of Receivables, if an Event of Default shall occur and be continuing, all Proceeds received by any Grantor consisting of cash, checks, Cash Equivalents and other near-cash items shall be held by such Grantor in trust for the Agents and the Lenders, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to the Collateral Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Collateral Agent, if required).  All Proceeds received by the Collateral Agent hereunder shall be held by the Collateral Agent in a Collateral Account maintained under its sole dominion and control.  All Proceeds while held by the Collateral Agent in a Collateral Account (or by such Grantor in trust for the Agents and the Lenders) shall continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in Section 6.5.

6.5Application of Proceeds.  (a) At such intervals as may be agreed upon by the Company and the Collateral Agent, or, if an Event of Default shall have occurred and be continuing, at any time at the Collateral Agent’s election, the Collateral Agent may apply all or any part of Proceeds held in any Collateral Account in payment of the Obligations (after payment of any amounts payable to the Collateral Agent pursuant to Section 8.4 of this Agreement), in the following manner:

(i)first, paid to the Agents for any amounts then owing to the Agents pursuant to Section 11.5 of the Credit Agreement or otherwise under the Loan Documents, ratably in accordance with such respective amounts then owing to the Agents; and

(ii)second, ratably (A) paid to the Lenders for any amounts then owing to them under the Loan Documents ratably in accordance with such respective amounts then owing to such Lenders and (B) used to cash collateralize outstanding Letters of Credit.

(b)Any balance of such Proceeds remaining after the Obligations shall have been paid in full, no Letters of Credit shall be outstanding (or all outstanding Letters of

24

Credit shall have been cash collateralized) and the Commitments shall have terminated, shall be paid over to the Company or to whomsoever may be lawfully entitled to receive the same.

6.6Code and Other Remedies.  If an Event of Default shall occur and be continuing, the Collateral Agent, on behalf of the Agents and the Lenders, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC or any other applicable law.  Without limiting the generality of the foregoing, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate, realize upon the Collateral or take possession of any Collateral not yet in its possession without demand or legal process, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Collateral Agent or any Lender or elsewhere upon such terms and conditions and at such prices as are commercially reasonable, for cash or on credit or for future delivery without assumption of any credit risk.  The Collateral Agent and each Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived and released, and may pay for the Collateral by crediting the Obligations.  Each Grantor further agrees that upon and during the continuance of an Event of Default, at the Collateral Agent’s request, it shall assemble the Collateral and make it available to the Collateral Agent at places which the Collateral Agent shall reasonably select, whether at such Grantor’s premises or elsewhere.  The Collateral Agent and each Lender shall have the right to occupy any premises owned or leased (subject to any required landlord consent) by any of the Grantors where the Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate their rights and remedies hereunder or under law, without obligation to such Grantor in respect of such occupation.  The Collateral Agent shall apply the net proceeds of any action taken by it pursuant to this Section 6.6, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Agents and the Lenders hereunder, including, without limitation, reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Collateral Agent may elect, and only after such application and after the payment by the Collateral Agent of any other amount required by any provision of law, including, without limitation, Section 9-615(a)(3) of the UCC, need the Collateral Agent account for the surplus, if any, to any Grantor.  To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against any Agent or any Lender arising out of the exercise by them of any rights hereunder.  If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.

25

6.7Intellectual Property.  If any Event of Default shall occur and be continuing, in the event of any sale or other disposition of any of the Intellectual Property of any Grantor in accordance with this Section 6, the goodwill symbolized by any Trademarks subject to such sale or other disposition shall be included therein, and such Grantor shall supply to the Collateral Agent or its designee such Grantor’s know-how and expertise, and documents and things relating to any Intellectual Property subject to such sale or other disposition, and such Grantor’s customer lists and other records and documents relating to such Intellectual Property and to the manufacture, distribution, advertising and sale of products and services of such Grantor.

6.8Deficiency.  Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Obligations and the reasonable fees and disbursements of any attorneys employed by any Agent or any Lender to collect such deficiency.

SECTION 7  THE COLLATERAL AGENT

7.1Collateral Agent’s Appointment as Attorney-in-Fact, etc.  (a)  Each Grantor hereby irrevocably constitutes and appoints the Collateral Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Collateral Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following:

(i)in the name of such Grantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Receivable that is part of the Collateral or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Collateral Agent for the purpose of collecting any and all such moneys due under any such Receivable or with respect to any other Collateral whenever payable;

(ii)in the case of any Intellectual Property, execute and deliver, and have recorded, any and all agreements, instruments, documents and papers as the Collateral Agent may request to evidence the Agents’ and the Lenders’ security interest in such Intellectual Property and the goodwill and general intangibles of such Grantor relating thereto or represented thereby;

26

(iii)pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof;

(iv)execute, in connection with any sale provided for in Section 6.6, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and

(v)(1) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Collateral Agent or as the Collateral Agent shall direct; (2) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (3) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (5) defend any suit, action or proceeding brought against such Grantor with respect to any Collateral; (6) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Collateral Agent may deem appropriate; (7) assign any Intellectual Property included in the Collateral (along with the goodwill of the business to which any such Intellectual Property pertains), throughout the world for such term or terms, on such conditions, and in such manner, as the Collateral Agent shall in its sole discretion determine; and (8) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes, and do, at the Collateral Agent’s option and such Grantor’s expense, at any time, or from time to time, all acts and things which the Collateral Agent deems necessary to protect, preserve or realize upon the Collateral and the Collateral Agent’s and the Lenders’ security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do.

Anything in this Section 7.1(a) to the contrary notwithstanding, the Collateral Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 7.1(a) unless an Event of Default shall have occurred and be continuing.

(b)If any Grantor fails to perform or comply with any of its agreements contained herein, the Collateral Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement.

27

(c)The reasonable expenses of the Collateral Agent incurred in connection with actions undertaken as provided in this Section 7.1, together with interest thereon at a rate per annum equal to the rate per annum at which interest would then be payable on past due Base Rate Loans under the Credit Agreement, from the date of payment by the Collateral Agent to the date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Collateral Agent on demand.

(d)All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.

7.2Duty of Collateral Agent.  The Collateral Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the UCC or otherwise, shall be to deal with it in the same manner as the Collateral Agent deals with similar property for its own account.  No Agent or Lender nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof.  The powers conferred on the Agents and the Lenders hereunder are solely to protect the Agents’ and the Lenders’ interests in the Collateral and shall not impose any duty upon any Agent or any Lender to exercise any such powers.  The Agents and the Lenders shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.

7.3Authorization of Financing Statements.  Pursuant to Sections 9-502 and 9-509 of the UCC and any other applicable law, each Grantor hereby authorizes the Collateral Agent to file or record financing statements or continuation statements, and amendments thereto, and other filing or recording documents or instruments with respect to the Collateral or other statutory liens held by the Collateral Agent in such form and in such offices as the Collateral Agent reasonably determines appropriate to perfect the security interests of the Collateral Agent under this Agreement.  Such financing statements may describe the Collateral in the same manner as described in this Agreement or may contain an indication or description of the Collateral that describes such property in any other manner as the Collateral Agent may determine is necessary or advisable to ensure the perfection of the security interest in Collateral granted to the Collateral Agent in connection herewith, including, without limitation, describing such property as “all assets” or “all personal property.”  A photographic or other reproduction or summation of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction.  Each Grantor ratifies its authorization for the Collateral Agent to have filed such financing statements, continuation statements or amendments filed prior to the date hereof.

7.4Authority of Collateral Agent.  Each Grantor acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action

28

taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Agents and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Grantors, the Collateral Agent shall be conclusively presumed to be acting as agent for the Agents and the Lenders with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority.

SECTION 8  MISCELLANEOUS

8.1Amendments in Writing.  None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with subsection 11.1 of the Credit Agreement.

8.2Notices.  All notices, requests and demands to or upon the Collateral Agent or any Grantor hereunder shall be effected in the manner provided for in subsection 11.2 of the Credit Agreement, provided that any such notice, request or demand to or upon any Grantor shall be addressed to such Grantor at its notice address set forth on Schedule 1.

8.3No Waiver by Course of Conduct; Cumulative Remedies.  The Agents and the Lenders shall not by any act (except by a written instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default.  No failure to exercise, nor any delay in exercising, on the part of any Agent or any Lender, any right, power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  A waiver by any Agent or any Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which such Agent or such Lender, as the case may be, would otherwise have on any future occasion.  The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.

8.4Enforcement Expenses; Indemnification.  (a)  Each Guarantor agrees to pay or reimburse each Agent and Lender for all its costs and expenses incurred in collecting against such Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Agreement and the other Loan Documents to which such Guarantor is a party, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to the Collateral Agent.

(b)Each Guarantor agrees to pay, and to save the Agents and the Lenders harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral.

29

(c)Each Guarantor agrees to pay, and to save the Agents and the Lenders harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement to the extent the Company would be required to do so pursuant to subsection 11.5 of the Credit Agreement.

(d)The agreements in this Section 8.4 shall survive repayment of the Obligations and all other amounts payable under the Credit Agreement and the other Loan Documents.

8.5Successors and Assigns; Continuing Security Interest.  This Agreement shall be binding upon each Grantor and its respective successors and assigns and shall inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Agents and the Lenders and their successors and assigns, provided that no Grantor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Collateral Agent.  This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until the latest of (i) the payment in full in cash of the Obligations, (ii) the termination of the Commitments and (iii) the expiration, termination or cash collateralization of all Letters of Credit and all Eligible Hedge Agreements.  Without limiting the generality of the foregoing clause, any Lender may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitments, the Loan owing to it and the Note or Notes, if any, held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, in each case as provided in Section 11.6 of the Credit Agreement.

8.6Set-Off.  Each Grantor hereby irrevocably authorizes each Agent and each Lender at any time and from time to time while an Event of Default pursuant to Section 9(a) of the Credit Agreement shall have occurred and be continuing, without notice to such Grantor or any other Grantor, any such notice being expressly waived by each Grantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Agent or such Lender to or for the credit or the account of such Grantor, or any part thereof in such amounts as such Agent or such Lender may elect, against and on account of the obligations and liabilities of such Grantor to such Agent or such Lender hereunder and claims of every nature and description of the Agents or the Lenders against such Grantor, in any currency, whether arising hereunder, under the Credit Agreement, any other Loan Document or otherwise, as such Agent or such Lender may elect, whether or not such Agent or such Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured.  Each Agent and each Lender shall notify such Grantor promptly of any such set-off and the application made by such Agent or such Lender of the proceeds thereof, provided that the failure to give such notice shall not affect the validity of such set-off and application.  The rights of the Agents and each Lender under this Section 8.6 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Agents or such Lender may have.

30

8.7Security Interest Absolute.  The obligations of each Grantor under this Agreement are independent of the Obligations of any other Loan Party under or in respect of the Loan Documents, and a separate action or actions may be brought and prosecuted against each Grantor to enforce this Agreement, irrespective of whether any action is brought against such Grantor or any other Loan Party or whether such Grantor or any other Loan Party is joined in any such action or actions.  All rights of the Collateral Agent and the other Agents and Lenders and the pledge, assignment and security interest hereunder, and all obligations of each Grantor hereunder, shall be irrevocable, absolute and unconditional irrespective of, and each Grantor hereby irrevocably waives (to the maximum extent permitted by applicable law) any defenses it may now have or may hereafter acquire in any way relating to, any or all of the following:

(a)any lack of validity or enforceability of any Loan Document or any other agreement or instrument relating thereto;

(b)any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of any other Loan Party under or in respect of the Loan Documents or any other amendment or waiver of or any consent to any departure from any Loan Document, including, without limitation, any increase in the Obligations resulting from the extension of additional credit to any Loan Party or any of its Subsidiaries or otherwise;

(c)any taking, exchange, release or non-perfection of any Collateral or any other collateral, or any taking, release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations;

(d)any manner of application of any Collateral or any other collateral, or proceeds thereof, to all or any of the Obligations, or any manner of sale or other disposition of any Collateral or any other collateral for all or any of the Obligations or any other Obligations of any other Loan Party under or in respect of the Loan Documents or any other assets of any Loan Party or any of its Subsidiaries;

(e)any change, restructuring or termination of the corporate structure or existence of any Loan Party or any of its Subsidiaries;

(f)any failure of any Agent or Lender to disclose to any Loan Party any information relating to the business, condition (financial or otherwise), operations, performance, assets, nature of assets, liabilities or prospects of any other Loan Party now or hereafter known to such Agent or Lender (each Grantor waiving any duty on the part of the Agents and Lenders to disclose such information);

(g)the failure of any other Person to execute this Agreement or any other Security Document, guaranty or agreement or the release or reduction of liability of any other Grantor or other grantor or surety with respect to the Obligations; or

(h)any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by any Agent or Lender that might otherwise constitute a defense available to, or a discharge of, such Grantor or any other Grantor or a third party grantor of a security interest (other than the defense of

31

payment or performance in full or the release of such Grantor from its obligations hereunder in accordance with Section 8.18).

This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by any Agent or Lender or by any other Person upon the insolvency, bankruptcy or reorganization of any Loan Party or otherwise, all as though such payment had not been made.

8.8Counterparts.  This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

8.9Mortgages.  In the event that any of the Collateral hereunder is also subject to a valid and enforceable Lien under the terms of any Mortgage and the terms of such Mortgage are inconsistent with the terms of this Agreement, then with respect to such Collateral, the terms of such Mortgage shall be controlling in the case of fixtures and real estate leases, letting and licenses of, and contracts and agreements relating to the lease of, real property, and the terms of this Agreement shall be controlling in the case of all other Collateral.

8.10Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

8.11Section Headings.  The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

8.12Integration.  This Agreement and the other Loan Documents represent the agreement of the Grantors, the Agents and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Agents or any Lender relative to subject matter hereof and thereof not expressly set forth or referred to herein or in the other Loan Documents.

8.13GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE ADMINISTRATIVE AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

32

8.14Submission to Jurisdiction; Waivers.  Each Grantor hereby irrevocably and unconditionally:

(a)submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;

(b)appoints CT Corporation System as its authorized agent to accept and acknowledge service of any and all process which may be served in any suit, action or proceeding of the nature referred to in this Section 8.14;

(c)consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

(d)agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to CT Corporation System at 111 Eighth Avenue, New York, New York 10011 or at such other New York State address of which the Collateral Agent shall have been notified pursuant thereto;

(e)agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

(f)waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

8.15Acknowledgements.  Each Grantor hereby acknowledges that:

(a)it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party;

(b)the Agents and the Lenders have no fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Grantors, on the one hand, and the Agents and the Lenders, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

(c)no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among any of the Lenders or among the Grantors and the Lenders.

33

8.16WAIVER OF JURY TRIAL.  EACH GRANTOR AND, BY ACCEPTANCE OF THE BENEFITS HEREOF, EACH AGENT AND LENDER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

8.17Additional Grantors.  Each Subsidiary of the Company that is required to become a party to this Agreement pursuant to subsection 7.10 of the Credit Agreement shall become a Grantor for all purposes of this Agreement upon execution and delivery by such Subsidiary to the Collateral Agent of an Assumption Agreement in the form of Annex 1 hereto.

8.18Releases.  (a)  At such time as the Loans, the Reimbursement Obligations and the other Obligations shall have been paid in full, the Commitments have been terminated and no Letter of Credit or Eligible Hedge Agreement shall be outstanding (or all outstanding Letters of Credit shall have been cash collateralized), the Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Collateral Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors.  At the request and sole expense of any Grantor following any such termination, the Collateral Agent shall deliver to such Grantor any Collateral held by the Collateral Agent hereunder, and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.

(b)If any of the Collateral shall be sold, transferred or otherwise disposed of by any Grantor in a transaction permitted by the Credit Agreement, then the Collateral Agent, at the request and sole expense of such Grantor, shall execute and deliver to such Grantor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral.  At the request and sole expense of the Company, a Guarantor shall be released from its obligations hereunder in the event that all the Capital Stock of such Guarantor shall be sold, transferred or otherwise disposed of, or such Guarantor shall be dissolved, in a transaction not prohibited by the Credit Agreement; provided that the Company shall have delivered to the Collateral Agent, at least seven Business Days prior to the date of the proposed release, a written request for release identifying the relevant Guarantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Company stating that such transaction is in compliance with the Credit Agreement and the other Loan Documents.

[Signature page to follow.]

34

IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and Collateral Agreement to be duly executed and delivered as of the date first above written.

KINETIC CONCEPTS, INC.
By:
	Name:
	Title:
KCI HOLDING COMPANY, INC.
KCI INTERNATIONAL, INC.
KCI LICENSING, INC.
KCI REAL HOLDINGS, L.L.C.
KCI USA REAL HOLDINGS, L.L.C.
KCI USA, INC.
MEDCLAIM, INC.
By:
	Name:
	Title:
KCI PROPERTIES LIMITED
By:	KCI USA Real Holdings, L.L.C.,
	its General Partner
By:
	Name:
	Title:
KCI REAL PROPERTY LIMITED
By:	KCI USA Real Holdings, L.L.C.,
	its General Partner
By:
	Name:
	Title:

35

ACKNOWLEDGEMENT AND CONSENT*

The undersigned hereby acknowledges receipt of a copy of the Guarantee and Collateral Agreement dated as of August 11, 2003 (the “Agreement”), made by the Grantors parties thereto for the benefit of Morgan Stanley & Co. Incorporated, as Collateral Agent.  The undersigned agrees for the benefit of the Agents and the Lenders as follows:

First:The undersigned will be bound by the terms of the Agreement and will comply with such terms insofar as such terms are applicable to the undersigned.

Second:The undersigned will notify the Administrative Agent promptly in writing of the occurrence of any of the events described in Section 5.6(a) of the Agreement.

Third:The terms of Section 6.3(a) of the Agreement shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Section 6.3(a) of the Agreement.

[NAME OF ISSUER]

By

Title

Address for Notices:

Fax:

*              Only required to be delivered by Issuers which are Subsidiaries but not Grantors.

EX-10.4

Exhibit 10.4

SECURITY AND CONTROL AGREEMENT

Kinetic Concepts, Inc., a Texas corporation (the “Pledgor”), U.S. BANK NATIONAL ASSOCIATION as trustee for the registered holders from time to time (the “Holders”) of the Notes (as defined herein) issued by the Pledgor under the Indenture referred to below (in such capacity, the “Trustee”), and as securities intermediary hereunder for the benefit of the Holders of the Notes (in such capacity, the “Securities Intermediary”), hereby enter into this SECURITY AND CONTROL AGREEMENT (this “Security Agreement”), as of and on August 11, 2003.

All references herein to the “UCC” are to the Uniform Commercial Code in effect from time to time in the State of New York.  Capitalized terms not otherwise defined herein have the meaning given them in the Indenture referred to below.

RECITALS

A.            Pledgor is issuing on the date hereof $205,000,000 aggregate principal amount of 7 3/8% Senior Subordinated Notes due 2013 (together with any notes that may from time to time be issued in substitution therefor, the “Notes”).  The Notes will be issued pursuant to an indenture, dated as of the date hereof, by and among the Pledgor, the guarantors signatory thereto and the Trustee (as amended, restated, supplemented or otherwise modified from time to time, the “Indenture”).

B.            The Pledgor has agreed that, on the date hereof, $199,875,000 constituting all of the net proceeds from the sale of the Notes (the “Secured Proceeds”) will be paid directly to the Securities Intermediary, to be applied in accordance with the express terms of this Security Agreement.

C.            The Securities Intermediary shall use the Secured Proceeds to purchase U.S. Government Obligations (as defined in the Indenture), as more fully described in 3(f) below (the “Pledged Securities”), and shall deposit the Pledged Securities and all remaining cash of the Secured Proceeds, if any, in, or credit the Pledged Securities and all remaining cash of the Secured Proceeds, if any, to, an account (the “Securities Account”) maintained by the Trustee with the Securities Intermediary for the benefit of the Holders of the Notes, as such account is further described in the next recital.

D.            The Trustee has opened an account with the Securities Intermediary, at the Securities Intermediary’s office at 60 Livingston Avenue, St. Paul, Minnesota 55107.  This account bears Account No. 33586701, is in the name of “U.S. Bank National Association,” and will serve as the Securities Account.  The Securities Account is the “Secured Proceeds Account” referred to in the Indenture.

E.             It is a condition precedent to the issuance of the Notes that the Pledgor (i) grant to the Trustee, for the Trustee’s benefit and the ratable benefit of the Holders of the Notes a first-priority lien on and security interest in the Pledged Securities (including all remaining Secured Proceeds, if any, after the purchase of the U.S. Government Obligations and all proceeds from such securities) and related collateral to secure the Pledgor’s payment of its Obligations (as

defined below), and (ii) execute and deliver this Security Agreement to create and perfect that first-priority lien and security interest.

NOW, THEREFORE, in view of the foregoing and in consideration of the mutual promises herein and the benefits to be received therefrom, the Pledgor, the Trustee, and the Securities Intermediary hereby adopt each of the foregoing recitals and further agree as follows:

SECTION 1.         Grant of Security Interest.  The Pledgor hereby grants to the Trustee, for its benefit and for the ratable benefit of the Holders of the Notes, a continuing first-priority lien on and security interest in all of the Pledgor’s right, title and interest in, to and under the following in each case whether now owned or hereafter acquired by the Pledgor, wherever located and whether now or hereafter existing or arising, whether investment property, general intangibles, other rights, interests, claims, or otherwise (collectively, the “Pledged Collateral”): (a) the Securities Account, all “Financial Assets” (as defined in UCC § 8-102(a)(9)) held therein (including the Pledged Securities) and all dividends, interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Financial Assets, and all “Security Entitlements” (as defined in UCC Section 8102(a)(17)) with respect thereto, (b) any successor or other account into which Financial Assets held in the Securities Account may be transferred or held at any time and all Security Entitlements with respect thereto, (c) all proceeds of any and all of the foregoing (including proceeds, collateral and supporting obligations that constitute property of the types described in the foregoing clauses (a) and (b) and this clause (c)) and to the extent not otherwise included, cash.

SECTION 2.         Security for Obligations.  This Security Agreement and the security interest granted hereby secure (i) the Pledgor’s prompt and complete payment of all amounts due, whether at maturity, upon acceleration or mandatory prepayment, or otherwise, under the Notes and (ii) the Pledgor’s timely and full payment of all its other obligations under the Notes (including, without limitation, its obligation to make an offer to redeem the Notes pursuant to Section 4.23 of the Indenture), the Indenture, the Registration Rights Agreement and this Security Agreement (collectively, the “Obligations”).

SECTION 3.         Delivery of Pledged Securities: Maintenance of Securities Account; Governing Law

(a)           Upon the Securities Intermediary’s acquisition of Pledged Securities or any other Pledged Collateral, the Securities Intermediary shall promptly make appropriate book entries indicating that the Trustee is the sole “Entitlement Holder” (as defined in UCC § 8-102(a)(7)) with respect thereto.  Subject to the other terms and conditions of this Security Agreement, all funds or other property held by the Trustee under this Security Agreement shall be held in the Securities Account and be subject to the Trustee’s exclusive dominion and control (including “control” as defined in UCC § 8-106), for the benefit of the Trustee and for the ratable benefit of the Holders of the Notes, and segregated from all other funds or other property otherwise held by the Trustee.

(b)           The Securities Intermediary shall cause all securities or other property underlying any Financial Assets credited to the Securities Account, including all Pledged

2

Securities, to be registered in the name of the Securities Intermediary, endorsed to the Securities Intermediary or in blank, or credited to another securities account maintained in the name of the Securities Intermediary.  In no case will any Financial Asset credited to the Securities Account be registered in the name of, payable to the order of, or specially endorsed to the Pledgor, unless it has been specially endorsed to the Securities Intermediary or in blank.

(c)           The Securities Intermediary shall not disburse or dispose of any Pledged Collateral except in accordance with the terms hereof.

(d)           Concurrently with the execution and delivery of this Security Agreement, the Trustee and the Securities Intermediary are delivering to the Pledgor and to Morgan Stanley & Co. Incorporated, as representative of the several placement agents for the Notes, a certificate, in the form of Exhibit A hereto, duly executed by an officer of each of the Trustee and the Securities Intermediary, confirming that (i) the Trustee has established and will maintain the Securities Account with the Securities Intermediary, and (ii) the Securities Intermediary has received the Secured Proceeds, has used the Secured Proceeds to acquire Pledged Securities or a Securities Entitlement thereto, and has credited the same to the Securities Account, in accordance with this Security Agreement.

(e)           Concurrently with the execution and delivery of this Security Agreement, the Pledgor shall duly file the proper financing statements in the office of the Secretary of State of Texas, covering the Pledged Collateral described in this Security Agreement.

(f)            Pledged Securities purchased from the Secured Proceeds shall consist solely of short-term U.S. Government Obligations with a maturity date not later than November 26, 2003 or Money Market Funds investing in such obligations.  As used herein “Money Market Funds” means money market funds having a rating in the highest investment category granted thereby by a recognized credit rating agency at the time of acquisition, including any fund for which the Trustee or an Affiliate of the Trustee serves as an investment advisor, administrator, shareholder servicing agent, custodian or subcustodian, notwithstanding that (A) the Trustee or an Affiliate of the Trustee charges and collects fees and expenses from such funds for services rendered (provided that such charges, fees and expenses are on terms consistent with terms negotiated at arm’s length) and (B) the Trustee charges and collects fees and expenses for services rendered, pursuant to this Agreement;

(g)           This Security Agreement and the Securities Account shall be governed by the laws of the State of New York.

SECTION 4.         Entitlement Orders; Subordination of Lien, Waiver of Set-Off, etc.

(a)           The Trustee shall be the sole Entitlement Holder of, and have the sole power to originate “Entitlement Orders” (as defined in UCC § 8102(a)(8)) with respect to, the Pledged Collateral.  The Securities Intermediary shall comply with Entitlement

3

Orders issued by the Trustee with respect to the Pledged Collateral, without further consent of the Pledgor or any other Person.

(b)           Notwithstanding anything to the contrary herein, if at any time the Securities Intermediary shall receive conflicting orders from the Trustee and the Pledgor, the Securities Intermediary shall follow the orders of the Trustee and not the Pledgor.

(c)           The Securities Intermediary hereby agrees that any security interest in any of the Pledged Collateral that it has or may in the future acquire shall be subordinate to the Trustee’s security interest created hereby.  The Financial Assets held in the Securities Account will not be subject to deduction, set-off, banker’s lien, or any other right in favor of any Person other than the Trustee (except that the Securities Intermediary may set off or deduct all amounts due to it as customary fees for the routine operation and maintenance of the Securities Account and for the customary fees owed to the Trustee).

(d)           In the event of any conflict between this Security Agreement and any other agreement to which the parties hereunder are parties thereto, the terms of this Security Agreement shall prevail.

(e)           The Securities Intermediary hereby confirms and agrees that:

(i)            It has not entered into any agreement (other than this Security Agreement and the Indenture) with the Pledgor with respect to the Securities Account;

(ii)           It has not granted, and until the termination of this Security Agreement will not grant, control (including without limitation, “control” as defined in UCC § 8-106 over or with respect to any Pledged Collateral to any Person other than the Trustee (for the benefit of Holders of the Notes).  It has not entered into, and until the termination of this Security Agreement will not enter into, any agreement with any Person in which it agrees to comply with Entitlement Orders, relating to the Pledged Collateral, from any Person other than the Trustee or which purports to limit or condition its obligation under this Section 4 to comply with the Trustee’s Entitlement Orders.

(iii)          It has not entered into, and until the termination of this Security Agreement will not enter into, any agreement purporting to limit or condition its obligation to comply with the Trustee’s Entitlement Orders as provided in this Section 4.

SECTION 5.         Adverse Claims.  The Securities Intermediary does not know of any claim to, or interest in, any Pledged Collateral other than those of the Trustee (for the benefit of Holders of the Notes) and the Pledgor.  If any Person asserts or attempts to enforce any Lien or adverse claim (including by means of writ, garnishment, judgment, warrant of attachment, execution or similar process) against any Pledged Collateral, the Securities Intermediary will promptly notify the Trustee and the Pledgor thereof.

4

SECTION 6.         Disbursement; Redemption

SECTION 6.1       Disbursement.

If the Pledgor delivers to the Trustee a written request substantially in the form of Exhibit B hereto (a “Redemption Disbursement Request”) containing the certifications described therein, together with the other material described therein, then as soon as practicable after receipt thereof the Trustee shall instruct the Securities Intermediary to liquidate the assets in the Securities Account and deliver the net liquidation proceeds (after deducting any applicable Securities Intermediary and Trustee fees and charges) as directed in the Redemption Disbursement Request, on the disbursement date set forth therein, which disbursement date must be (x) no more than twenty and no less than two Business Days after the Trustee’s receipt of the Redemption Disbursement Request, and (y) no later than 5:00 p.m. New York time on November 7, 2003.

SECTION 6.2       Entitlement Orders; Redemption.

(a)           If at any time the Securities Intermediary shall receive any order from the Trustee directing transfer or redemption of any financial asset relating to the Securities Account, the Securities Intermediary shall comply with such entitlement order without further consent by the Pledgor or any other person.  If the Pledgor is otherwise entitled to issue Entitlement Orders (as defined in UCC § 8-102(a)(8)) and such orders conflict with any Entitlement Order issued by the Trustee, the Securities Intermediary shall follow the orders issued by the Trustee.

(b)           If the Trustee does not receive a Redemption Disbursement Request by 5:00 p.m. New York time on November 7, 2003 (such event constituting an “Event of Failure”), the Trustee shall:

(i)            as soon as practicable instruct the Securities Intermediary to liquidate the assets in the Securities Account and deliver the net liquidation proceeds (after deducting any applicable Securities Intermediary and Trustee fees and charges) to the account of the Trustee; and

(ii)           apply the net liquidation proceeds, received in accordance with the foregoing clause (i), to make an offer to redeem the outstanding Notes (the “Special Redemption Offer”), for a price equal to 100% of their principal amount, plus accrued and unpaid interest thereon through the redemption date, if any, all in accordance with Section 4.23 of the Indenture.  The Special Redemption Offer must occur no later than five Business Days after the Event of Failure.

SECTION 6.3       General Provisions.

(a)           Nothing in this Security Agreement shall afford the Pledgor any right to issue Entitlement Orders with respect to any Pledged Collateral.

(b)           Nothing in this Section 6 shall limit the Trustee’s rights and powers under this Security Agreement.

SECTION 7.         Representations and Warranties.  The Pledgor hereby represents and warrants that, as of the date hereof:

5

(a)           The Pledgor’s execution and delivery of, and its performance of its obligations under, this Security Agreement will not (i) contravene any provision of applicable law or statute, the Pledgor’s organizational documents, any material agreement or other material instrument binding upon the Pledgor or any of its affiliates, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Pledgor or any of its affiliates, or (ii) result in the creation or imposition of any Lien on any of the Pledgor’s assets, except for the security interest granted to the Trustee herein.  No consent, approval, authorization or order of, qualification with, or other action by any governmental or regulatory body or agency or any third party is required for (i) the Pledgor’s execution, delivery or performance of this Security Agreement, or (ii) the Pledgor’s grant of, or the perfection and maintenance of, the security interest created hereby (including its first-priority nature), assuming the Securities Intermediary’s compliance with its obligations hereunder.  Notwithstanding the foregoing, a breach of any of the representations and warranties in this Section 7(a) will not constitute a default under this Security Agreement unless that breach causes a material adverse effect on (i) the validity or enforceability of this Security Agreement or any other material agreement executed in connection with the transactions contemplated herein or in the Indenture, or (ii) the Pledgor’s ability to perform its material obligations under the Notes and the Indenture.

(b)           The Pledgor has duly and validly authorized, executed, and delivered this Security Agreement.  Assuming the Trustee’s and Security Intermediary’s due authorization, execution and delivery of this Security Agreement and its enforceability against the Trustee and the Securities Intermediary in accordance with its terms, this Security Agreement constitutes the Pledgor’s valid and binding agreement, enforceable against the Pledgor in accordance with its terms, except as (i) may be limited by bankruptcy, insolvency, fraudulent transfer, preference, reorganization, moratorium, or similar laws now or hereafter in effect relating to or affecting creditors’rights or remedies generally, (ii) the availability of equitable remedies may be limited by equitable principles of general applicability and the discretion of the court considering the matter, (iii) the exculpation provisions and rights to indemnification hereunder may be limited by federal and state securities laws and public policy considerations, and (iv) applicable law may limit the enforceability of the waiver of rights and defenses in and other provisions of Sections 13(b), 16.10, and 16.15 hereof.

(c)           The Pledgor is the legal and beneficial owner of the Pledged Securities and other Pledged Collateral.  The Pledgor owns the Pledged Securities and other Pledged Collateral free and clear of any Lien or claim of any person or entity (except for the security interest granted to the Trustee herein).  No financing statement or other instrument similar in effect covering the Pledgor’s interest in the Pledged Securities is on file in any public office, other than any financing statement filed under this Security Agreement.

(d)           Upon the Trustee’s acquisition of a Security Entitlement in the Pledged Collateral in accordance herewith, and the Securities Intermediary’s performance of its obligations hereunder, the security interest granted to the Trustee herein will constitute a first-priority security interest in the Pledged Collateral (subject to the limitations in UCC

6

§ 9-315 with respect to proceeds), enforceable as such against all creditors of the Pledgor and against any Person purporting to purchase any of the Pledged Collateral from the Pledgor, except insofar as enforcement may be affected by general equitable principles (whether in a proceeding in equity or at law).

(e)           There are no legal or governmental proceedings pending or, to the best of the Pledgor’s knowledge, threatened to which the Pledgor or any of its affiliates is a party or relating to any property of the Pledgor or any affiliate that would materially adversely affect the Pledgor’s power or ability to perform its obligations under this Security Agreement, the Notes, or the Indenture.

(f)            No law or governmental regulation (including, without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System) applicable to the Pledgor prohibits the grant of the security interest to the Trustee hereunder.

(g)           The Pledgor is a corporation whose jurisdiction of organization is Texas.  The Pledgor will not change its form or jurisdiction of organization without giving at least 30 days’ prior written notice to the Trustee.

(h)           No Event of Default (as defined below) exists.

SECTION 8.         Pledgor’s Covenants.  In addition to its other agreements herein, the Pledgor covenants and agrees with the Trustee and the Holders of the Notes that from and after the date hereof until the Termination Date:

(a)           It will, promptly upon request by the Trustee, execute and deliver or cause to be executed and delivered, or use its commercially reasonable efforts to procure, all assignments, instruments and other documents, in form and substance reasonably satisfactory to the Trustee, and take any other action that is necessary or desirable to perfect, further evidence the perfection of, continue the perfection of, or protect the first priority of, the Trustee’s security interest in the Pledged Collateral, to protect the Pledged Collateral against rights, claims, or interests asserted therein by third persons (other than any right, claim, or interest created by the Trustee on behalf of the Holders of the Notes), to enable the Trustee to enforce its rights and remedies hereunder, and to effect the purposes of this Security Agreement.  The Pledgor will promptly pay all reasonable costs incurred in connection with any of the foregoing;

(b)           It will not (and will not purport to) (i) sell or otherwise dispose of, or grant any option or warrant with respect to, its beneficial interest in, any of the Pledged Collateral or its interest therein, or (ii) create or permit to exist any Lien or other adverse interest in or with respect to any of the Pledged Collateral (other than the security interest granted herein);

(c)           It will not (i) enter into any agreement or understanding that, directly or indirectly, restricts or inhibits or purports to restrict or inhibit the Trustee’s rights or remedies hereunder, including, without limitation, the Trustee’s right to dispose of the Pledged Collateral as provided herein, or (ii) fail to pay or discharge any tax, assessment or

7

levy of any nature with respect to its beneficial interest in the Pledged Collateral later than five days before the date of any proposed sale under any judgment, writ or warrant of attachment with respect to its beneficial interest; and

(d)           It will at all times remain the sole beneficial owner of the Pledged Collateral (subject to the security interest granted to the Trustee herein).

SECTION 9.         Securities Intermediary’s Representations, Warranties and Covenants.  The Securities Intermediary represents and warrants that it is, as of the date hereof, and it agrees that for so long as it maintains the Securities Account and acts as securities intermediary under this Security Agreement it shall be, a “Securities Intermediary” (as defined in the UCC and in 31 C.F.R. § 357.2).  In furtherance of the foregoing, and in addition to its other representations, warranties, and agreements herein, the Securities Intermediary hereby:

(a)           represents and warrants that it is a financial institution that, in the ordinary course of its business, maintains securities accounts for others and is acting in that capacity with respect to the Securities Account;

(b)           covenants that, as Securities Intermediary hereunder and with respect to the Securities Account, it shall not take any action inconsistent with, and represents and warrants that it is not and so long as this Security Agreement remains in effect will not become party to any agreement whose terms are materially inconsistent with, and would prevent the Trustee and the Pledgor from substantial enjoyment of the benefits contemplated by, this Security Agreement;

(c)           agrees to treat any item of property credited to the Securities Account as a Financial Asset;

(d)           agrees, so long as it serves as Securities Intermediary under this Security Agreement, to maintain the Securities Account as a securities account and maintain appropriate books and records in respect thereof in accordance with its usual procedures and subject to the terms of this Security Agreement;

(e)           agrees, with the other parties to this Security Agreement, that its jurisdiction, for purposes of UCC §§ 9-301, 9-305 and 8-110(e) and 31 C.F.R. 357.11(b) as it pertains to this Security Agreement, the Securities Account and all Security Entitlements relating thereto, shall be the State of New York; and

(f)            agrees that it will maintain the Securities Account, at its office at the address set forth in the Recitals hereof, segregated from all other accounts, and will not change the name on the account or its account number without the Trustee’s prior written consent.

SECTION 10.       Power of Attorney.  Upon the occurrence and continuation of an Event of Default, in addition to all of the powers granted to the Trustee under the Indenture, the Pledgor hereby appoints and constitutes the Trustee as the Pledgor’s attorney-in-fact, with full authority in its place and its name to take, from time to time in the Trustee’s discretion, any action and to execute any instrument that the Trustee may deem necessary or advisable to

8

accomplish the purposes of this Security Agreement.  The Trustee’s authority under this Section 10 shall include, without limitation, the authority to endorse and negotiate any checks or instruments representing proceeds of Pledged Collateral in the name of the Pledgor, execute and give receipt for any certificate of ownership or any document constituting Pledged Collateral, transfer title to any item of Pledged Collateral, sign the Pledgor’s name on all financing statements (to the extent permitted by applicable law) or any other document deemed necessary or appropriate by the Trustee to preserve, protect or perfect the security interest in the Pledged Collateral and to file the same, prepare, file and sign the Pledgor’s name on any notice of Lien, and to take any other actions arising from or incident to the powers granted to the Trustee in this Security Agreement.  This power of attorney is coupled with an interest and is irrevocable.  Notwithstanding anything to the contrary herein, the Trustee has no duty or obligation to exercise any of the powers in this Section 10.  The Pledgor hereby authorizes the Trustee to file one or more financing or continuation statements, and amendments thereto, including, without limitation, one or more financing statements indicating that such statements cover all assets or all personal property (or words of similar effect) of such Pledgor, in each case without the signature of the Pledgor, and regardless of whether any particular asset described in such financing statement falls within the scope of the UCC or the granting clause of this Agreement.

SECTION 11.       No Assumption of Duties; Reasonable Care.  The Trustee and the Securities Intermediary undertake to perform only those duties that are expressly and specifically set forth herein.  This Security Agreement does not, and may not be interpreted to, impose any implied duties or obligations on either of them, including, without limitation, any obligation to monitor the Pledgor’s performance of its obligations hereunder.  The Pledgor acknowledges that the Trustee and Securities Intermediary have not participated in the selection of financial assets to be deposited in or credited to the Securities Account.  Except as provided by applicable law or by the Indenture, the Trustee shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral if the Trustee accords the Pledged Collateral treatment substantially similar to that which the Trustee accords similar property held by the Trustee for similar accounts, it being understood that the Trustee shall not have any responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities or other matters relative to any Pledged Collateral, whether or not the Trustee has or is deemed to have knowledge of such matters, (ii) monitoring the Pledgor’s compliance with its covenants herein, or (iii) any loss on any investment (including without limitation any loss resulting from the sale of a Financial Asset held in or credited to the Securities Account before its maturity).

SECTION 12.       Indemnity.

(a)           The Pledgor hereby indemnifies, holds harmless, and agrees to defend the Trustee, the Securities Intermediary, and each of their respective directors, officers, employees, attorneys, and agents (each, an “Indemnified Person”) from and against any and all claims, actions, obligations, liabilities and expenses, including reasonable defense costs, reasonable investigative fees and costs and reasonable legal fees and expenses and damages, arising from the performance by the Trustee and the Securities Intermediary of their respective obligations under this Security Agreement.  The Pledgor shall, upon demand by any Indemnified Person, promptly pay or reimburse that Indemnified Person for all such expenses, costs, fees and damages.  Notwithstanding the foregoing, the Pledgor (i) shall not be obligated to indemnify any Indemnified Person from any claim,

9

action, obligation, liability or expense against or incurred by that Indemnified Person that is judicially determined (the determination having become final) to be directly attributable to the gross negligence or willful misconduct of that Indemnified Person, and (ii) shall, upon that final judicial determination, be entitled to recover from that Indemnified Person all amounts therefore paid hereunder, provided that before any such judicial determination becomes final, the Pledgor must promptly pay all amounts demanded by any Indemnified Person.

(b)           In addition, and without limiting the provisions of the foregoing Section 12(a), if the Trustee is required to take any action hereunder to enforce its rights with respect to the Pledged Collateral, the Trustee’s rights and duties shall be as set forth in Article VII of the Indenture, and the Trustee shall be entitled to the benefit of the indemnity and compensation provisions and all other protections and exculpatory provisions therein.

SECTION 13.       Remedies Upon Event of Default.  As used herein, “Event of Default” means (i) any Event of Default as that term is defined in the Indenture, and (ii) any breach by the Pledgor of its representations, warranties, covenants, or agreements herein.  If any Event of Default occurs before the Termination Date and is continuing:

(a)           The Trustee (for the benefit of the Holders of the Notes) shall have, in addition to all other rights given by law, by this Security Agreement, or by the Indenture, all of the rights and remedies with respect to the Pledged Collateral of a secured party under the UCC.  In addition, with respect to any Pledged Collateral that shall then be in or shall thereafter come into the possession or custody or under the control of the Trustee, the Trustee may, upon the written direction of a majority in aggregate principal amount of the Holders of the Notes, sell or cause the same to be sold at any broker’s board or at public or private sale, in one or more sales or lots, for cash or on credit or for future delivery, without assumption of any credit risk.  The purchaser of any Pledged Collateral so sold shall thereafter hold the same absolutely, free from any claim, encumbrance or right of any kind whatsoever of, or created by or through, the Pledgor.  The Trustee shall give the Pledgor such notice of the time and place of any public sale of the Pledged Collateral as is feasible and reasonable under the circumstances, except no notice of sale shall be required if the Trustee determines, in its reasonable judgment, that (i) an immediate sale is necessary because the Pledged Collateral threatens to decline speedily in value or (ii) the Pledged Collateral is or becomes of a type regularly sold on a recognized market.  To the extent permitted by applicable law, the Pledgor agrees that any sale of the Pledged Collateral conducted in conformity with reasonable commercial practices of banks, insurance companies, commercial finance companies, or other financial institutions disposing of property similar to the Pledged Collateral shall be deemed to be commercially reasonable.  Subject to the other provisions of this Section 13(a), notice mailed to the Pledgor as provided in Section 16.1 hereof at least 10 days before the time of the sale or disposition shall constitute reasonable notice.  The Trustee or any Holder of Notes may, in its own name or in the name of a designee or nominee, buy any of the Pledged Collateral at any public sale and, if permitted by applicable law, at any private sale.  All expenses (including court costs and reasonable attorneys’ fees, expenses and disbursements) of, or incident to, the enforcement of any of the provisions

10

hereof shall be recoverable from the proceeds of the sale or other disposition of the Pledged Collateral.

(b)           The Pledgor shall use its reasonable best efforts to do or cause to be done all other acts as may be necessary to make a sale of all or a portion of the Pledged Collateral under this Section 13 valid and binding and in compliance with any applicable requirements of law.  The Pledgor agrees that a breach of any of its covenants in this Section 13 will cause irreparable injury to the Trustee and the Holders of the Notes, that the Trustee and the Holders of the Notes would have no adequate remedy at law in respect of that breach and, as a consequence, that each of its covenants in this Section 13 shall be specifically enforceable against the Pledgor.  The Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of these covenants except for a defense that no Event of Default has occurred.

(c)           The Trustee may, without notice to the Pledgor except as required by law and at any time or from time to time, charge, setoff and otherwise apply all or any part of the Obligations against the Securities Account or any part thereof.

SECTION 14.       Expenses.  Except as provided in any fee agreement to the contrary, the Pledgor shall, promptly upon demand, pay to each of the Trustee and the Securities Intermediary any and all reasonable expenses, including, without limitation, the reasonable fees, expenses and disbursements of counsel, experts and agents, that either the Trustee or the Securities Intermediary may incur in connection with (a) the review, negotiation and administration of this Security Agreement, (b) the maintenance and administration of the Securities Account and the custody, preservation, or sale of, collection from, or other realization upon, any of the Pledged Collateral, (c) the exercise or enforcement of any of the rights of the Trustee and the Holders of the Notes hereunder, (d) the Pledgor’s failure to perform or observe any of the provisions hereof, or (e) any claim covered by Section 12 hereof.

SECTION 15.       Security Interest Absolute.  All rights of the Trustee and the Holders of the Notes and the security interest granted to the Trustee hereunder, and all obligations of the Pledgor hereunder, shall be absolute and unconditional under all circumstances, including but not limited to:

(a)           any lack of validity or enforceability of the Indenture or any other agreement or instrument relating thereto;

(b)           any change in the time, manner or place of payment or performance of, or in any other term of, any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Indenture;

(c)           any taking, exchange, surrender, release or non-perfection of any other collateral or any taking, release, amendment, or waiver of any provision of any guaranty for all or any of the Obligations;

(d)           any change, restructuring or termination of the corporate structure or existence of the Pledgor or any of its affiliates; or

11

(e)           to the extent permitted by applicable law, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Pledgor in respect of the Obligations or of this Security Agreement.

SECTION 16.       Miscellaneous Provisions.

SECTION 16.1     Notices.  Any notice or communication given hereunder shall be sufficiently given if in writing and delivered in person or mailed by first class mail, commercial courier service or telecopier communication, addressed as follows:

if to the Pledgor:

Kinetic Concepts, Inc.
8023 Vantage Drive,
San Antonio, Texas 78230
Attn:  General Counsel
Fax: (210) 255-6204

with a copy to:

Thomas Ivey
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Ave, 11^th Floor
Palo Alto, CA 94301
Fax: (650)-470-4646

if to the Trustee:

U.S. Bank National Association
60 Livingston Ave.
St. Paul, Minnesota 55107-2292
Attn: Corporate Trust Services

if to the Securities Intermediary:

U.S. Bank National Association
60 Livingston Ave.
St. Paul, Minnesota 55107-2292
Attn: Corporate Trust Services

SECTION 16.2     Severability.  The provisions of this Security Agreement are severable.  If a court in any jurisdiction holds that a clause or provision is invalid, illegal or unenforceable, in whole or in part, then that holding shall affect the validity or enforceability of that clause or provision in that jurisdiction only, without effect in any other jurisdiction or with respect to any other clause or provision hereof.

12

SECTION 16.3     Headings.  The headings in this Security Agreement are included for convenience of reference only, are not to be considered a part hereof, and do not modify or restrict any of the terms or provisions hereof.

SECTION 16.4     Counterpart Originals.  This Security Agreement may be signed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same agreement.  A photocopy or other reproduction of this Security Agreement or any financing statement covering the Pledged Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

SECTION 16.5     Benefits of Security Agreement.  Nothing in this Security Agreement, express or implied, shall give to any person, other than the parties hereto, their successors hereunder, all Indemnified Persons, and (subject to the provisions of the Indenture) the Holders of the Notes, any legal or equitable right, remedy or claim.  Other than the Persons identified in the preceding sentence, there are and shall be no third-party beneficiaries of this Security Agreement.  No Holder of Notes shall have any independent rights hereunder, other than those rights granted to individual Holders of the Notes under the Indenture.

SECTION 16.6     Amendments, Waivers and Consents.  Any amendment or waiver of any provision of this Security Agreement and any consent to any departure by the Pledgor from any provision of this Security Agreement shall be effective only if made or duly given in compliance with all of the terms and provisions of the Indenture.  Neither the Trustee nor any Holder of Notes shall be deemed, by any act, delay, indulgence, omission or otherwise, to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof.  A failure to exercise, a delay in exercising, or a waiver of any right, power or privilege hereunder by the Trustee or any Holder of Notes shall not preclude any subsequent exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies provided herein are cumulative, may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law.

SECTION 16.7     Interpretation of Agreement.  Acceptance of or acquiescence in a course of performance rendered under this Security Agreement shall not be relevant to determine the meaning of this Security Agreement, even if the accepting or acquiescing party had knowledge of the nature of the performance and an opportunity to object thereto.

SECTION 16.8     Continuing Security Interest: Termination.

(a)           This Security Agreement shall create a continuing security interest in and to the Pledged Collateral, shall be binding upon the Pledgor, its transferees, successors and assigns, shall inure, together with the rights and remedies of the Trustee hereunder, to the benefit of the Trustee, the Securities Intermediary, the Holders of the Notes and their respective successors, transferees and assigns, and shall remain in full force and effect until the Termination Date.  On or as soon as practicable after the Termination Date, the Trustee shall, at the Pledgor’s expense, take any reasonable action necessary to release the security interest created hereby, including the execution and delivery of any termination statements prepared and delivered to it by the Pledgor.  Any redelivery of the Pledged Collateral hereunder to the Pledgor shall be without warranty by or recourse to the Trustee in its

13

capacity as such, except as to the absence of any Liens on the Pledged Collateral created by or arising through the Trustee, and shall be at the reasonable expense of the Pledgor.

(b)           This Security Agreement will terminate on the date on which all assets in the Securities Account have been liquidated and applied in accordance with any applicable provision of Section 6 hereof (the “Termination Date”).

(c)           Notwithstanding the foregoing, the Pledgor’s obligations under Sections 12 and 14 shall survive this Security Agreement’s termination.

SECTION 16.9     Survival of Representations and Covenants.  All representations, warranties and covenants of the Pledgor herein shall survive execution and delivery of this Security Agreement, and shall terminate only on the Termination Date.

SECTION 16.10  Waivers.  The Pledgor waives presentment and demand for payment of any of the Obligations, protest and notice of dishonor or default with respect to any of the Obligations, and all other notices to which the Pledgor might otherwise be entitled, except as otherwise expressly provided herein or in the Indenture.

SECTION 16.11  Authority of the Trustee and Securities Intermediary.

(a)           Each of the Trustee and Securities Intermediary may exercise all rights and powers granted hereunder, together with any powers reasonably incident hereto.  The Trustee and the Securities Intermediary may perform any of their respective duties hereunder or in connection with the Pledged Collateral by or through agents or employees and shall be entitled to retain counsel and to rely conclusively upon the advice of counsel concerning their rights, powers and duties hereunder.  The Trustee and the Securities Intermediary shall not be responsible for the validity, effectiveness or sufficiency hereof or of any document or security furnished in accordance herewith and shall be entitled to indemnification hereunder from any claims related thereto.  The Trustee, the Securities Intermediary, and their respective directors, officers, employees, attorneys and agents may conclusively rely on any communication, instrument or document reasonably believed by them to be genuine and correct and to have been signed or sent by the proper person or persons.

(b)           The Pledgor acknowledges that, as between the Pledgor and the Trustee, with respect to any action or inaction by the Trustee in connection with the performance of its duties hereunder, the Trustee shall be conclusively presumed to be acting as agent for the Holders of the Notes with full and valid authority so to act or refrain from acting, and the Pledgor may not make any inquiry respecting that authority.

(c)           No provision of this Security Agreement shall require either the Trustee or the Securities Intermediary to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties or the exercise of any of its rights and powers hereunder.  If, notwithstanding the foregoing, the Trustee determines to advance funds, the Trustee shall be entitled to reimbursement thereof from the Pledgor within ten days of demand therefor, together with interest at the maximum rate permitted by law.

14

SECTION 16.12  Removal or Resignation of the Securities Intermediary.  The Securities Intermediary may resign by notice to, or be removed by notice from, the Trustee at any time, except that in either case the Securities Intermediary’s duties hereunder shall not terminate until the Trustee has appointed a successor Securities Intermediary, who has accepted the appointment (by delivery of an agreement substantially in the form hereof), and until all assets held by the retiring Securities Intermediary have been transferred to the successor Securities Intermediary in accordance with the Trustee’s instruction.

SECTION 16.13  [Intentionally deleted]

SECTION 16.14  Final Expression.  This Security Agreement, together with the Indenture and any other agreement executed in connection herewith, is intended by the parties as a final expression of this Security Agreement and is intended as a complete and exclusive statement of the terms and conditions thereof, subject to any amendment duly made in accordance herewith.

SECTION 16.15  CHOICE OF LAW; SUBMISSION TO JURISDICTION: WAIVER OF JURY TRIAL; WAIVER OF DAMAGES.

(a)           THIS SECURITY AGREEMENT, THE SECURITIES ACCOUNT, AND THE SECURITIES ENTITLEMENTS RELATED THERETO SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK INCLUDING, WITHOUT LMTATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAW AND RULES 327.  ANY DISPUTE ARISING FROM, RELATED TO, OR IN CONNECTION WITH ANY OF THE FOREGOING, OR THE RELATIONSHIP AMONG OR THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO, SHALL LIKEWISE BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.  REGARDLESS OF ANY PROVISION OF ANY OTHER AGREEMENT, FOR PURPOSES OF THE UCC, NEW YORK SHALL BE DEEMED TO BE THE SECURITIES INTERMEDIARY’S JURISDICTION.

(b)           THE PLEDGOR AGREES THAT THE TRUSTEE MAY, IN ITS CAPACITY AS TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, PROCEED AGAINST THE PLEDGOR OR THE PLEDGED COLLATERAL IN ANY COURT HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR THE PLEDGED COLLATERAL, AS THE CASE MAY BE, TO ENABLE THE TRUSTEE TO ASSERT A CLAIM OR EXERCISE ITS RIGHTS AND REMEDIES UNDER THIS SECURITY AGREEMENT.  THE PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIM, SETOFF, OR CROSSCLAIM AGAINST THE TRUSTEE IN ANY PROCEEDING BROUGHT BY THE TRUSTEE UNDER THIS SECURITY AGREEMENT OR THE INDENTURE OTHER THAN A COUNTERCLAIM, SETOFF, OR CROSSCLAIM THAT, IF NOT ASSERTED IN THAT PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED.  THE PLEDGOR WAIVES ANY OBJECTION BASED ON THE GROUNDS OF IMPROPER VENUE OR FORUM NON CONVENIENS TO THE TRUSTEE’S COMMENCEMENT

15

AND PROSECUTION OF SUCH A PROCEEDING IN ANY COURT IN THE CITY OF NEW YORK.

(c)           THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES, THE TRUSTEE, THE SECURITIES INTERMEDIARY, NOR ANY OTHER INDEMNIFIED PERSON SHALL BE LIABLE TO THE PLEDGOR FOR LOSSES ARISING FROM, RELATING TO, OR IN CONNECTION WITH THIS SECURITY AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR IN THE INDENTURE OR THE DUTIES IMPOSED HEREUNDER, UNLESS A COURT DETERMINES (THE DETERMINATION HAVING BECOME FINAL) THAT THE LOSSES RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON ON WHOM THE PLEDGOR SEEKS TO IMPOSE LIABILITY.

(d)           TO THE EXTENT PERMITTED BY LAW, THE PLEDGOR WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER OF NOTES IN CONNECTION WITH ANY JUDICIAL PROCEEDING TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED AGAINST THE PLEDGOR RELATING TO THIS SECURITY AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION, THIS SECURITY AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT AGAINST THE PLEDGOR.

SECTION 16.16  No Conflict.

The Pledgor acknowledges that U.S. Bank, National Association (“U.S. Bank”), is acting in two capacities in the transactions contemplated herein: as Trustee under the Indenture and as Securities Intermediary under this Security Agreement.  The Pledgor has requested that U.S. Bank serve in those two capacities and anticipates that it will enjoy significant benefits from U.S. Bank’s agreement to do so.  Accordingly, the Pledgor consents to U.S. Bank’s service in those two capacities and agrees that, if any dispute arises hereunder between the Pledgor and U.S. Bank, the Pledgor will not assert that U.S. Bank’s service in those two capacities presented either an actual or a potential conflict of interest.

16

IN WITNESS WHEREOF, the Pledgor, the Trustee and the Securities Intermediary have each caused this Security Agreement to be duly executed and delivered as of the date first above written.

Pledgor:
KINETIC CONCEPTS, INC.:
By:
	Name:
	Title:
Trustee:
U.S. BANK NATIONAL ASSOCIATION as Trustee
By:
	Name:
	Title:
U.S. BANK NATIONAL ASSOCIATION as Securities Intermediary
By:
	Name:
	Title:

17

EXHIBIT A

CERTIFICATE

On and as of August 11, 2003, and in accordance with Section 3(d) of the Security and Control Agreement, dated of even date herewith (the “Security Agreement”), by and among Kinetic Concepts, Inc. (the “Pledgor”), U.S. Bank National Association, as indenture trustee (the “Trustee”) for the holders of the Pledgor’s $205,000,000 aggregate principal amount of 7 3/8% Senior Subordinated Notes due 2013 (the “Notes,”), and U.S. Bank, National Association, as securities intermediary (the “Securities Intermediary”), the undersigned officers of the Trustee and the Securities Intermediary, on behalf of the Trustee and the Securities Intermediary respectively, hereby make the following certifications to the Pledgor and the initial purchasers of the Notes.  Capitalized terms used and not defined in this certificate have the meanings given them in the Security Agreement or in the documents referenced therein.

1.             Substantially contemporaneously with the execution and delivery of this Certificate, the Trustee has established and will maintain the Securities Account with the Securities Intermediary.  The Securities Intermediary has received $199,875,000 from the net proceeds from the sale of the Notes and has used those funds to purchase the Pledged Securities (or will do so as soon as practicable).  The Securities Intermediary has made or will (upon purchase of the Pledged Securities) make appropriate book entries in its records establishing that the Pledged Securities and the Trustee’s Security Entitlement thereto have been credited to and are held in the Securities Account.

2.             The Trustee has established and maintained and will maintain the Securities Account, all Security Entitlements thereto, and all rights with respect to the Pledged Collateral solely in its capacity as Trustee and has not asserted and will not assert any claim to or interest in the Pledged Collateral except in that capacity.

3.             The Trustee and the Securities Intermediary have acquired their Security Entitlements to the Pledged Securities for value and without notice of any adverse claim thereto but, with the Pledgor’s permission, have not performed any UCC searches with respect thereto.  Without limiting the generality of the foregoing, neither the Pledged Securities nor the Security Entitlements thereto of the Securities Intermediary and the Trustee are, to their knowledge, subject to any Lien granted by either of them in favor of any other securities intermediary or any other person.

4.               Each signatory represents and warrants that he or she is duly authorized to execute this certificate.

A - 1

IN WITNESS WHEREOF, the undersigned officers have executed this Certificate on behalf of the Trustee and the Securities Intermediary, respectively, on the date first shown above.

U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:
	Name:
	Title:
U.S. BANK NATIONAL ASSOCIATION, as Securities Intermediary
By:
	Name:
	Title:

A - 2

EXHIBIT B

REDEMPTION DISBURSEMENT REQUEST

[Issuer Letterhead.]

[date]

U.S. BANK, NATIONAL ASSOCIATION
60 Livingston Ave.
St. Paul, Minnesota 55107-2292

Attention: Corporate Trust Services

Ladies and Gentlemen:

I am the [title] of Kinetic Concepts, Inc. (the “Company”).  I refer you to the Security and Control Agreement, dated as of August 11, 2003 (the “Security Agreement”), among the Company and you in your separate capacities as Trustee under the Indenture identified in the Security Agreement’s Recitals and as Securities Intermediary under the Security Agreement.  Unless otherwise indicated, capitalized terms used but not otherwise defined herein have the meanings given them, as applicable, in the Security Agreement or in the documents referenced therein.

The Company hereby requests, in accordance with Section 6 of the Security Agreement, that you cause the liquidation of the assets in the Securities Account and deliver net liquidation proceeds (after deducting any applicable Securities Intermediary and Trustee fees and charges) to the Paying Agent under the Indenture on behalf of the Company on                          , 2003 (the “Disbursement Date,” which day is (x) a Business Day not more than twenty nor less than two Business Days after the date hereof and (y) on or before 5:00 p.m. New York time on November 7, 2003), in accordance with the wire instructions given below.

The Company hereby certifies that its representations and warranties in the Security Agreement are true in all material respects on the date hereof and will be true on the Disbursement Date, and that no Event of Default has occurred and is continuing on the date hereof.

The Company further certifies that:

B - 1

1.             The Redemption will occur on the Disbursement Date for consideration not in excess of the amount required to redeem the Existing Notes (as defined in the Indenture) in accordance with the indenture governing the Existing Notes.

2.             The Company will use all amounts delivered in accordance with this Request solely to pay a portion of the redemption consideration and related costs and expenses in connection with the redemption of the outstanding Existing Notes.

3.             The Company makes the foregoing certifications in accordance with the Indenture and Security Agreement but acknowledges that you have no obligation to monitor our use of any funds released in connection herewith.

B - 2

The undersigned signatory represents and warrants that [he/she] is authorized to execute this Request on the Company’s behalf and that to the best of [his/her] knowledge, all of the Company’s certifications herein are true and correct.

	Very truly yours,
	KINETIC CONCEPTS, INC.
	By:
		Name:
		Title:
Wire Instructions:
[to come]

B - 3

EX-10.5

Exhibit 10.5

EXECUTION COPY

KINETIC CONCEPTS, INC.

SERIES A PREFERRED STOCK PURCHASE AGREEMENT

KINETIC CONCEPTS, INC.

SERIES A PREFERRED STOCK PURCHASE AGREEMENT

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

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

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

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

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

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

1.Representations and Warranties.

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

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

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

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

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

2

regulations, or pursuant to valid exemptions therefrom.

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

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

3

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

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

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

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

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

4

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

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

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

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

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

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

5

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

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

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

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

6

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

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

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

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

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

7

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

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

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

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

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

8

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

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

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

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

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

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

9

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

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

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

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

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

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

10

(A)	“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”
(B)	“THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE ALSO SUBJECT TO AN INVESTORS’ RIGHTS AGREEMENT DATED AS OF AUGUST 11, 2003 (THE “INVESTORS’ RIGHTS AGREEMENT”), WHICH CONTAINS PROVISIONS REGARDING (I) CERTAIN RESTRICTIONS ON THE TRANSFER OF SUCH SECURITIES, (II) CERTAIN RIGHTS OF FIRST OFFER AND CO-SALE RIGHTS APPLICABLE TO THIS SECURITY AND (III) CERTAIN OTHER MATTERS. A COPY OF SUCH INVESTORS’ RIGHTS AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY.  ANY TRANSFER OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE IN VIOLATION OF THE INVESTORS’ RIGHTS AGREEMENT IS NULL AND VOID.”
(C)	“THE COMPANY WILL FURNISH TO ANY SHAREHOLDER, WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT THE PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE, AND THERE IS ON FILE IN THE OFFICE OF THE SECRETARY OF STATE OF TEXAS, A FULL STATEMENT OF (I) THE DENIAL OF PREEMPTIVE RIGHTS SET FORTH IN THE AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS AMENDED, OF THE COMPANY AND (II) THE DESIGNATIONS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF EACH CLASS OF SHARES OF THE COMPANY OR ANY SERIES THEREOF TO THE EXTENT THEY HAVE BEEN FIXED AND DETERMINED AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO FIX AND DETERMINE THE DESIGNATIONS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF SUBSEQUENT SERIES.”

11

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

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

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

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

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

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

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

12

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

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

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

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

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

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

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

13

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

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

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

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

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

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

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

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

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

14

validly adopt the Statement of Designations.

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

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

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

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

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

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

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

15

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

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

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

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

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

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

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

16

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

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

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

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

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

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

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

[Signature Page Follows]

17

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

KINETIC CONCEPTS, INC.

By:

Name:

Title:

SIGNATURE PAGE TO SERIES A PREFERRED STOCK AGREEMENT

Accepted as of the date hereof

NON-SPONSOR INVESTORS:

GS CAPITAL PARTNERS 2000, L.P.
By: GS Advisors 2000, L.L.C., its general partner
By:
	Name:
	Title:
GS CAPITAL PARTNERS 2000 OFFSHORE, L.P.
By:  GS Advisors 2000, L.L.C., its general partner
By:
	Name:
	Title:
GS CAPITAL PARTNERS 2000 GmbH & CO. BETEILIGUNGS KG
By:  Goldman Sachs Management GP GmbH, its general partner
By:
	Name:
	Title:
GS CAPITAL PARTNERS 2000 EMPLOYEE FUND, L.P.
By:  GS Employee Funds 2000 GP, L.L.C., its general partner
By:
	Name:
	Title:
GOLDMAN SACHS DIRECT INVESTMENT FUND 2000, L.P.
By:  GS Employee Funds GP, L.L.C., its general partner
By:
	Name:
	Title:

SIGNATURE PAGE TO SERIES A PREFERRED STOCK AGREEMENT

DLJ MERCHANT BANKING PARTNERS III, L.P.
By:  DLJ Merchant Banking III, Inc., its Managing General Partner
		By:
		Name:
		Title:
DLJ MERCHANT BANKING III, INC., its Advisory General Partner on behalf of DLJ Offshore Partners III, C.V.
By:
Name:
Title:
DLJ MERCHANT BANKING III, INC. as Advisory General Partner on behalf of DLJ Offshore Partners III-1, C.V. and as attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate General Partner of DLJ Offshore Partners III-1, C.V.
By:
	Name:
	Title:
DLJ MERCHANT BANKING III, INC. as Advisory General Partner on behalf of DLJ Offshore Partners III-2, C.V. and as attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate General Partner of DLJ Offshore Partners III-2, C.V.
By:
	Name:
	Title:
DLJ MB PARTNERSIII GMBH & CO. KG
By:  DLJ Merchant Banking III, L.P., its Managing Limited Partner
	By:  DLJ Merchant Banking III, Inc., its General Partner
		By:
			Name:
			Title:

SIGNATURE PAGE TO SERIES A PREFERRED STOCK AGREEMENT

MILLENNIUM PARTNERS II, L.P.
By:	DLJ Merchant Banking III, Inc., its Managing General Partner
	By:
		Name:
		Title:
MBP III PLAN INVESTORS, L.P.
By:	DLJ LBO Plans Management Corporation II, its General Partner
	By:
		Name:
		Title:

SIGNATURE PAGE TO SERIES A PREFERRED STOCK AGREEMENT

SPONSOR INVESTORS:
	FREMONT PARTNERS III, L.P.
	By:	FP Advisors III, L.L.C.
	Its:	General Partner
		By:	Fremont Group, L.L.C.
		Its:	Managing Member
			By:	Fremont Investors, Inc.
			Its:	Manager
				By:
				Name:
				Title:
	FREMONT PARTNERS III SIDE-BY-SIDE, L.P.
	By:	Fremont Group, L.L.C.
	Its:	General Partner
		By:	Fremont Investors, Inc.
		Its:	Manager
			By:
				Name:
				Title:
	FREMONT ACQUISITION COMPANY II, L.L.C.
	By:  Fremont Partners, L.P.
	Its:  Member
		By:	FP Advisors, L.L.C.
		Its:	General Partner
		By:	Fremont Group, L.L.C.
		Its:	Manager
			By:  Fremont Investors, Inc.
			Its:  Manager
				By:
				Name:
				Title:

SIGNATURE PAGE TO SERIES A PREFERRED STOCK AGREEMENT

FREMONT ACQUISITION COMPANY IIA, L.L.C.
By:  FP Advisors, L.L.C.
Its:  Non-Member Manager
	By:  Fremont Group, L.L.C.
	Its:  Managing Member
		By:  Fremont Investors, Inc.
		Its:  Manager
			By:
			Name:
			Title:

SIGNATURE PAGE TO SERIES A PREFERRED STOCK AGREEMENT

BLUM STRATEGIC PARTNERS II, L.P.

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

Its: General Partner

By:

Name:

Title:

BLUM STRATEGIC PARTNERS II GmbH & Co. KG

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

Its: Managing Limited Partner

By:

Name:

Title:

STINSON CAPITAL PARTNERS II, L.P.

By: Blum Capital Partners, L.P.

Its: General Partner

By:

Name:

Title:

RCBA-KCI CAPITAL PARTNERS, L.P.

By: Blum Capital Partners, L.P.

Its: General Partner

By:

Name:

Title:

SIGNATURE PAGE TO SERIES A PREFERRED STOCK AGREEMENT

JAMES R. LEININGER, M.D.

SIGNATURE PAGE TO SERIES A PREFERRED STOCK AGREEMENT

DIRECTOR INVESTORS:
	JOHN P. BYRNES
	HARRY R. JACOBSON, M.D.
	DAVID J. SIMPSON
	C. THOMAS SMITH

SIGNATURE PAGE TO SERIES A PREFERRED STOCK AGREEMENT

SCHEDULE I

A.            NON-SPONSOR INVESTORS

Investor		Shares of Series A Preferred Stock to be Purchased	Additional Transaction Fees
GS Capital Partners 2000, L.P.		18,864	—
GS Capital Partners 2000 Offshore, L.P.		6,854	—
GS Capital Partners 2000 GmbH & Co. Beteiligungs KG		788	—
GS Capital Partners 2000 Employee Fund, L.P.		5,994	—
Goldman Sachs Direct Investment Fund 2000, L.P.		2,500	—
DLJ Merchant Banking Partners III, L.P.		29,311	—
DLJ Merchant Banking III, Inc., its Advisory General Partner on behalf of DLJ Offshore Partners III, C.V.		2,018	—
DLJ Merchant Banking III, Inc., as Advisory General Partner on behalf of DLJ Offshore Partners III-1, C.V. and as attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate General Partner of DLJ Offshore Partners III-1, C.V.		518	—
DLJ Merchant Banking III, Inc., as Advisory General Partner on behalf of DLJ Offshore Partners III-2, C.V. and as attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate General Partner of DLJ Offshore Partners III-2, C.V.		369	—
DLJ MB PartnersIII GmbH & Co. KG		245	—
Millennium Partners II, L.P.		99	—
MBP III Plan Investors, L.P.		4,440	—
	Total:	72,000	0

I-1

B.SPONSOR INVESTORS

Investor	Shares of Series A Preferred Stock to be Purchased	Additional Transaction Fees
Fremont Partners III, L.P.	47,824	—
Fremont Partners III Side-By-Side, L.P.	2,176	—
Fremont Acquisition Company II, L.L.C.	21,355	—
Fremont Acquisition Company IIA, L.L.C.	4,517	—
Blum Strategic Partners II, L.P.	2,273	—
Blum Strategic Partners II GmbH and Co. KG	47	—
Stinson Capital Partners II, L.P.	2,792	—
RCBA-KCI Capital Partners, L.P.	45,010	—
James R. Leininger, M.D.	64,006	1,280,120
Total:	190,000	$	1,280,120

C.DIRECTOR INVESTORS

Investor	Shares of Series A Preferred Stock to be Purchased	Additional Transaction Fees
John P. Byrnes	1,000	$	20,000
Harry R. Jacobson, M.D.	500	10,000
David J. Simpson	250	5,000
C. Thomas Smith	44	880
Total:	1,794	$	35,880

TOTAL: 263,794 $1,316,000

I-2

SCHEDULE II

Subsidiaries of the Company

Name	Jurisdiction of Organization
Medclaim, Inc.	North Carolina
KCI Holding Company, Inc.	Delaware
KCI Real Holdings, L.L.C.	Delaware
KCI Equi-Tron, Inc.	Ontario, Canada
KCI International, Inc.	Delaware
KCI Licensing, Inc.	Delaware
KCI Properties Limited	Texas
KCI Real Property Limited	Texas
Equi-Tron Mfg. Inc.	Ontario, Canada
KCI International Holding Company	Delaware
KCII Holdings L.L.C.	Delaware
KCI USA, Inc.	Delaware
KCI USA Real Holdings, L.L.C.	Delaware
KCI Medical Canada, Inc.	Canada
KCI Medical Australia PTY, Ltd.	Australia
KCI Medica Espana, S.A.	Spain
KCI Medical Puerto Rico, Inc.	Puerto Rico
European Medical Distributors C.V.	Netherlands
International Medical Distributors CV	Netherlands
KCI International, V.O.F.	Netherlands
KCI Europe Holding, B.V.	Netherlands
KCI United Kingdom Holdings Ltd.	United Kingdom
KCI (Bermuda) Holding, Ltd.	Bermuda
KCI Medical B.V.	Netherlands
KCI Medical AB	Sweden
KCI Medical Srl	Italy
KCI Austria GmbH	Austria
KCI Medical GmbH	Switzerland
Equipment Medical KCI SARL	France
KCI Medical ApS	Denmark
KCI Medical South Africa Pty Ltd.	South Africa
KCI Clinic AB	Sweden
KCI Clinic Spain SL	Spain
KCI Medical Holdings Gmbh	Germany
KCI Medical Limited	United Kingdom
KCI Ethos Medical Limited	Ireland
KCI Medical Belgium BVBA	Belgium
KCI Medizinprodukte Gmbh	Germany
KCI Therapie Gerate Gmbh	Germany
KCI Medical UK Ltd	United Kingdom
KCI Medical Products (UK) Ltd	United Kingdom
KCI Clinic Limited	Ireland
Alliance Investments Limited	Ireland
KCI Ethos Medical Products Limited	Ireland
Ethos Medical Research Limited	Ireland
Polymedics BVBA	Belgium

II-1

EXHIBIT A

STATEMENT OF DESIGNATIONS

EXHIBIT B

INVESTORS’ RIGHTS AGREEMENT

EXHIBIT C

OPINION OF COUNSEL FOR THE COMPANY

August     , 2003

[INVESTORS]

Ladies & Gentlemen:

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

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

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

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

C-1

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

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

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

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

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

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

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

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

C-2

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

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

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

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

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

Very truly yours,
COX & SMITH INCORPORATED
By:
	William J. McDonough, Jr.
	For the Firm

C-3

ANNEX A

KINETIC CONCEPTS, INC.	Address:	8023 Vantage Drive San Antonio, TX  78265-9608
	Telephone Number:	(210) 524-9000
	Fax Number:	(210) 255-6331
If to:
GS CAPITAL PARTNERS 2000, L.P.
GS CAPITAL PARTNERS 2000 OFFSHORE, L.P.
GS CAPITAL PARTNERS 2000 GmbH & CO. BETEILIGUNGS KG
GS CAPITAL PARTNERS 2000 EMPLOYEE FUND, L.P.
GOLDMAN SACHS DIRECT INVESTMENT FUND 2000, L.P.
Then to such party c/o:	Address:	Goldman, Sachs & Co. 85 Broad Street, 10th Floor New York, NY 10004
	Telephone Number:	(212) 902-1000
	Fax Number:	(212) 357-5505

A-1

If to:
DLJ MERCHANT BANKING PARTNERS III, L.P.
DLJ MERCHANT BANKING III, INC., its Advisory General Partner on behalf of DLJ Offshore Partners III, C.V.
DLJ MERCHANT BANKING III, INC. as Advisory General Partner on behalf of DLJ Offshore Partners III-1, C.V. and as attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate General Partner of DLJ Offshore Partners III-1, C.V.
DLJ MERCHANT BANKING III, INC. as Advisory General Partner on behalf of DLJ Offshore Partners III-2, C.V. and as attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate General Partner of DLJ Offshore Partners III-2, C.V.
DLJ MB PARTNERS III GMBH & CO. KG
MILLENNIUM PARTNERS II, L.P.
MBP III PLAN INVESTORS, L.P.
Then to such party c/o:	Address:	DLJ Merchant Banking Eleven Madison Avenue, 16th Floor New York, NY 10010 Attention:  Andrew Rush
	Telephone Number:	(212) 538-3149
	Fax Number:	(212) 538-0413

A-2

If to:
FREMONT PARTNERS III, L.P.
FREMONT PARTNERS III SIDE-BY-SIDE, L.P.
FREMONT ACQUISITION COMPANY II, L.L.C.
FREMONT ACQUISITION COMPANY, IIA, L.L.C.
Then to such party c/o:	Address:	Fremont Partners 199 Fremont Street, Suite 2300 San Francisco, CA 94105
	Telephone Number:	(415) 284-8100
	Fax Number:	(415) 284-8730
If to:
BLUM STRATEGIC PARTNERS II, L.P.
BLUM STRATEGIC PARTNERS II GmbH & Co. KG
STINSON CAPITAL PARTNERS II, L.P.
RCBA-KCI CAPITAL PARTNERS, L.P.
Then to such party c/o:	Address:	Blum Capital Partners 909 Montgomery Street, Suite 400 San Francisco, CA 94133
	Telephone Number:	(415) 434-1111
	Fax Number:	(415) 288-7293
JAMES R. LEININGER, M.D.	Address:	8023 Vantage Drive San Antonio, TX  78265-9608
	Telephone Number:	(210) 255-6493
	Fax Number:	(210) 255-6975

A-3

JOHN P. BYRNES	Address:	19387 US 19 North Clearwater, FL  33764
	Telephone Number:	(727) 530-7700 x 8226
	Fax Number:	(727) 532-4091
HARRY R. JACOBSON, M.D.	Address:	Vanderbilt University Medical Center D-3300 Medical Center North Nashville, TX  37232
	Telephone Number:	(615) 343-3485
	Fax Number:	(615) 343-7286
DAVID J. SIMPSON	Address:	2725 Fairfield Road Kalamazoo, MI  49002
	Telephone Number:	(269) 383-7324
	Fax Number:	(269) 383-7353
C. THOMAS SMITH	Address:	17703 Cedar Creek Canyon Dallas, TX  75252
	Telephone Number:	(972) 380-9120
	Fax Number:	(972) 735-0196

A-4

EX-10.6

Exhibit 10.6

KINETIC CONCEPTS, INC.

INVESTORS’ RIGHTS AGREEMENT

THIS INVESTORS’ RIGHTS AGREEMENT (this “Agreement”) is made as of the 11th day of August, 2003, by and among Kinetic Concepts, Inc., a Texas corporation (the “Company”), the investors listed on the signature pages hereto, each of which is herein referred to as an “Investor”, and Fremont Partners III, L.P., Fremont Partners III Side-By-Side, L.P., Fremont Acquisition Company II, L.L.C., Fremont Acquisition Company IIA, L.L,C., Blum Strategic Partners, II, L.P., Blum Strategic Partners II GmbH & Co. KG, Stinson Capital Partners II, L.P., RCBA-KCI Capital Partners, L.P. and James R. Leininger, M.D., each of which is referred to as a “Sponsor”.

RECITALS

WHEREAS, the Company and the Investors are parties to the Series A Preferred Stock Purchase Agreement, dated as of August 11, 2003, (the “Series A Agreement”);

WHEREAS, in order to induce the Company to enter into the Series A Agreement and to induce the Investors to invest funds in the Company pursuant to the Series A Agreement, each of the Sponsors, the Investors and the Company hereby agree that this Agreement shall govern the rights of the Investors to cause the Company to register shares of the Series A Preferred and Common Stock issuable upon conversion of the Series A Preferred and certain other matters as set forth herein;

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereby agree as follows:

1.Definitions.  For purposes of this Agreement:

(a)The term “1934 Act” means the Securities Exchange Act of 1934, as amended.

(b)The term “Act” means the Securities Act of 1933, as amended.

(c)The term “Affiliate” means, as applied to any specified Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person.  For purposes of the foregoing, “control,” when used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlled” and “controlling” shall have meaning correlative to the foregoing.  In the case of a Person who is an individual, the term “Affiliate” shall include, with respect to such specified Person, (i) in the case of an individual, members of such specified Person’s immediate family (as defined in Instruction 2 of Item 404(a) of Regulation S-K under the Act), (ii) in the case of an individual, trusts, the trustee or the beneficiaries of which are such specified Person or members of such Person’s immediate family

as determined in accordance with the foregoing clause (i) and (iii) in the case of a trust, any Person that is the trustee of a beneficiary of such trust.

(d)The term “As-Converted Basis” means with respect to any Person, the total number of shares of Common Stock that such Person holding shares of Series A Preferred would hold assuming conversion of all such Person’s shares of Series A Preferred into shares of Common Stock, at the then applicable conversion rate.

(e)The term “Board” means the Company’s board of directors.

(f)The term “Common Stock” means the Common Stock, par value $0.001 per share of the Company.

(g)The term “Credit Agreement” means the Credit Agreement, dated as of August 11, 2003, among the Company, the lenders party thereto in their capacities as lenders thereunder, Morgan Stanley Senior Funding Inc., as Administrative Agent, and Credit Suisse First Boston, acting through its Cayman Islands branch, as Syndication Agent, together with the documents related thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented, restated or otherwise modified from time to time.

(h)The term “Initial Offering” means the Company’s first firm commitment underwritten public offering of its Common Stock under the Act.

(i)The term “Issue Date” means the date that the first share of Series A Preferred is issued.

(j)The term “Person” means an individual, partnership, corporation, unincorporated organization, limited liability company, trust or joint venture, or a governmental agency or political subdivision thereof.

(k)The term “Principal Investor” means an Investor that holds at least 2.0% of the Common Stock on an As-Converted Basis.

(l)The term “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document.

(m)The term “Registrable Securities” means, as of the date of any registration, (i) shares of the Series A Preferred and any Common Stock issued or issuable upon conversion of the Series A Preferred, and (ii) any Common Stock issued as a dividend or other distribution with respect to, or in exchange for, or in replacement of, the shares referenced in (i) above, owned by any Investor that may not be sold without restriction under federal or state securities law; provided, however, that the term “Registrable Securities” shall exclude Series A Preferred and Common Stock issued or issuable upon conversion of the Series A Preferred sold by a Person in a transaction in which such Person’s rights under Section 2 are expressly not

2

assigned.  The number of shares of Registrable Securities outstanding shall be determined by the number of shares of Common Stock outstanding that are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities that are, Registrable Securities.

(n)The term “SEC” shall mean the Securities and Exchange Commission.

(o)The term “Series A Preferred” means all the Series A Convertible Participating Preferred Stock of the Company.

2.Registration Rights.  The Company covenants and agrees as follows:

2.1Piggy-Back Rights.

(a)If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Investors) the public offering of any of its capital stock under the Act (other than in connection with (i) the Initial Offering, (ii) a registration relating solely to the sale of securities to participants in a Company benefit plan, (iii) a registration relating to a corporate reorganization or other transaction under Rule 145 of the Act or (iv) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities), the Company shall, at such time, promptly give each Investor written notice of such proposed registration.  Upon receipt by the Company of the written request of any Investor given within twenty (20) days after mailing of such notice by the Company, the Company shall, subject to the provisions of Section 2.1(c), use its reasonable best efforts to cause to be registered under the Act all of the Registrable Securities that each such Investor has requested to be registered.

(b)Right to Terminate Registration.  The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.1 prior to the effectiveness of such registration whether or not any Investor has elected to include any of its Registrable Securities in such registration.  The expenses of such withdrawn registration shall be borne by the Company in accordance with Section 2.4 hereof.

(c)Underwriting Requirements.  In connection with any offering involving an underwriting of shares of the Company’s capital stock, the Company shall not be required under this Section 2.1 to include any of the Investors’ Registrable Securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters) and enter into an underwriting agreement in customary form with an underwriter or underwriters selected by the Company.  If the total amount of Registrable Securities requested by Investors to be included in such offering, together with the securities to be included in such offering by the Company or any other stockholder that is not an Investor (such stockholder, an “Other Stockholder”), exceeds the amount of securities that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such Registrable Securities and securities to be

3

included by Other Stockholders (“Other Securities”) that the underwriters determine in their sole discretion, together with the securities to be included in such offering by the Company, will not jeopardize the success of the offering.  If the number of securities to be included in such offering are reduced in accordance with the preceding sentence, the number of securities to be included in the offering will be apportioned pro rata among the selling Investors and Other Stockholders according to the total amount of Common Stock (on an As-Converted Basis) entitled to be included therein owned by each selling Investor or Other Stockholder pursuant to registration rights, unless otherwise mutually agreed to by such selling Investors and Other Stockholder; provided that no such limitation shall be imposed unless a comparable limitation is also being imposed on Other Stockholders and any reduction of the number of securities to be included in the offering by the selling Investors and Other Stockholders is to be apportioned pro rata among all such parties.  For purposes of the preceding sentence concerning apportionment, for any selling Investor or selling stockholder that is (a) a partnership or corporation, all Registrable Securities or other securities entitled to be included in the offering pursuant to registration rights held by the partners, retired partners and stockholders of such Investor, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be Registrable Securities or other securities of such selling Investor or selling stock holder and any pro rata reduction with respect to such “selling Investor” or “selling stockholder” shall be based upon the aggregate amount of such Registrable Securities or other securities owned by all such related entities and individuals, or (b) that is an individual, the estates and family members of such individual and any trusts for the benefit of the foregoing persons shall be deemed to be Registrable Securities or other securities of such selling Investor or selling stock holder and any pro rata reduction with respect to such “selling Investor” or “selling stockholder” shall be based upon the aggregate amount of such Registrable Securities or other securities owned by all such related entities and individuals.

2.2Obligations of the Company.  In connection with a registration of any Registrable Securities under Section 2.1 that is not terminated in accordance with Section 2.1(b), the Company shall, as expeditiously as reasonably possible:

(a)prepare and file with the SEC a registration statement with respect to the offering of such Registrable Securities and use its reasonable efforts to cause such registration statement to become effective, and, upon the request of the Investors of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the Registration Statement has been completed;

(b)prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement;

(c)furnish to the Investors such numbers of copies of a prospectus, including a preliminary prospectus, if any, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them;

4

(d)use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Investors, provided that the Company shall not be required in connection therewith or as a condition thereto to bear undue expense or qualify to do business or, unless the Company is already subject to service in such jurisdiction, to file a general consent to service of process in any such states or jurisdictions;

(e)in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering; provided that each Investor participating in such underwriting shall also enter into and perform its obligations under such an agreement;

(f)notify each Investor holding Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act or the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;

(g)cause all such Registrable Securities covered by such registration statement to be listed on each securities exchange on which similar securities issued by the Company are then listed;

(h)provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date, as declared by the SEC, of such registration;

(i)furnish, at the request of any Investor requesting registration of Registrable Securities, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, or , if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to Investors holding a majority of the Registrable Securities requesting registration, addressed to the underwriters and to the Investors requesting registration of Registrable Securities and (ii) a “comfort” letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Registrable Securities held by the  Investors requesting registration, addressed to the underwriters and to the Investors requesting registration of Registrable Securities; and

(j)advise each Investor holding Registrable Securities covered by such registration, promptly after the Company shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for such purpose and promptly use its

5

reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued.

2.3Information from Investor.  It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Investor that such Investor shall, within ten (10) days of the request of each Investor that such Investor’s Registrable Securities to be included in a registration, furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such Regsitrable Securities as shall be required to effect the registration of such Investor’s Registrable Securities.

2.4Expenses of Registration.  All expenses (other than underwriting discounts and commissions (excluding the Company’s pro rata share to the extent that it is also selling securities), which shall be borne by the selling Investor) incurred in connection with registrations, filings or qualifications pursuant to Section 2.1, including (without limitation) all registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel and one local counsel for the selling Investors, shall be borne by the Company.

2.5[Intentionally Omitted]

2.6Indemnification.  In the event any Registrable Securities are included in a registration statement under this Section 2:

(a)To the extent permitted by law, the Company will indemnify and hold harmless each Investor, the partners or officers, directors, stockholders, members, managers, employees, subsidiaries and other affiliates of each Investor, any underwriter (as defined in the Act) for such Investor and each person, if any, who controls such Investor or underwriter within the meaning of the Act or the 1934 Act (each an “Investor Indemnified Party”), against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act or any state securities laws or otherwise, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations:  (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities laws or any rule or regulation promulgated under the Act, the 1934 Act or any state securities laws or otherwise; and the Company will reimburse each such Investor Indemnified Party for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 2.6(a) shall not apply to amounts paid in settlement of any such loss,

6

claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld or delayed), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus or final prospectus or any amendments or supplements thereto in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Investor Indemnified Party; further provided, however, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Investor Indemnified Party, or underwriter, or any person controlling such Investor Indemnified Party, from whom the person asserting any such losses, claims, damages or liabilities purchased shares in the offering, if a copy of the prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Investor Indemnified Party to such person, if required by law so to have been delivered by or on the behalf of such Investor Indemnified Party, at or prior to the written confirmation of the sale of the shares to such Person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability.

(b)To the extent permitted by law, each selling Investor will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, any underwriter, any other Investor selling securities in such registration statement and any controlling person of any such underwriter or other Investor (each a “Company Indemnified Party”), against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act or any state securities laws, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus or final prospectus or any amendments or supplements thereto, in each case to the extent (and only to the extent) that such statement or omission was made in reliance upon and in conformity with written information furnished by such Investor expressly for use in connection with such registration; and each such Investor will reimburse any Company Indemnified Parties for any legal or other expenses reasonably incurred by such person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 2.6(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Investor (which consent shall not be unreasonably withheld or delayed), provided that in no event shall any Investor’s cumulative aggregate liability out of which such violation arises under this subsection 2.6(b)and section 2.6(d) exceed the net proceeds from the offering out of which such violation arises that are received by such Investor.

(c)Promptly after receipt by an indemnified party under this Section 2.6 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.6, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to

7

assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel and one local counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, only if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any indemnification obligation to the indemnified party under this Section 2.6, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.6.

(d)If the indemnification provided for in this Section 2.6 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault and benefit of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations.  The relative fault and benefit of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission, provided, however that (A) in no event shall any Investor’s cumulative, aggregate liability under this subsection 2.6(d), or under subsection 2.6(b) hereof, or under such subsections together, exceed the net proceeds from the offering received by such Investor; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. Notwithstanding anything to the contrary herein, no party shall be liable for contribution under this subsection 2.6(d), except to the extent and under the circumstances as such party would have been liable to indemnify under subsection 2.6(a) or subsection 2.6(b) hereof, as the case may be, if such indemnification were enforceable under applicable law.

(e)The obligations of the Company and Investors under this Section 2.6 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 2, and otherwise.

2.7“Market Stand-Off” Agreement.  Each Investor hereby agrees that, if the Company files a registration statement under the Act to register its Common Stock, or any of the Company’s securities convertible into Common Stock, such Investor (A) shall not (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Registrable Securities then owned by such Investor (other than those

8

included in the registration), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Registrable Securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, for a period equal to (x) 180 days after the consummation of the Initial Offering, (y) 90 days after the effective date of any registration with respect to any offering subsequent to the Initial Offering or, (z) in each case, such longer period of time as may be reasonably requested or shorter period as may reasonably be deemed appropriate by the managing underwriter in connection with such Initial Offering or subsequent offering, provided, however, that (1) if any such offering (including the Initial Offering) is made in connection with the merger, consolidation or sale of the Company, such longer period of time as may be set forth in any lock-up or market stand-off agreement executed by the Sponsors, and (2) none of the restrictions set forth in this Section 2.7 shall apply to the Investors unless concurrently comparable restrictions are imposed on the Sponsors; and (B) shall enter into such agreements as requested by the underwriters in connection with the offering that is the subject of such registration, providing for similar restrictions to those described in clause (A).  Each Investor hereby authorizes and directs, and shall cause its Permitted Transferees to authorize and direct, the Company not to authorize any transfer of any Registrable Securities that does not comply with this Section 2.7.  An Investor’s obligations under this Section 2.7 shall expire on the earlier of (1) two years after the Initial Offering, or (2) such time after at which the Registrable Securities held by such Investor and its Affiliates do not exceed more than 1.0% of the Common Stock outstanding, provided, that at such time, (1) such Investor and its Affiliates do not hold any shares of Series A Preferred, and (2) shall not be on or prior to 180 days following the Initial Offering.

In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period.

2.8Termination of Registration Rights.  An Investor’s registration rights, pursuant to this Section 2 shall expire at such time after the Initial Offering in which all Registrable Securities held by such Investor (and any Affiliate of the Investor with whom such Investor must aggregate its sales under Rule 144) can be sold in any 90 day period without registration in compliance with Rule 144.

3.Transfers of Shares

3.1Restrictions on Transfer.

(a)Prior to the consummation of the Initial Offering, no Investor shall, directly or indirectly, transfer or otherwise dispose of any shares of Series A Preferred or shares of Common Stock issuable on conversion thereof owned by such Investor, or any interest therein, except pursuant to a Permitted Transfer described in Section 3.2, unless such transfer or disposition is made in accordance with the applicable provisions of Sections 3.3, 3.4, and 3.5 of this Agreement.  Any attempt by an Investor to effect a transfer or disposition in violation of this Agreement shall be void and ineffective for all purposes. The words “transfer” and “dispose” mean the making of any sale, exchange, assignment, gift, security interest, pledge or other encumbrance, or any contract therefor, any voting trust or other agreement or arrangement with

9

respect to the transfer or voting rights or any other beneficial interests, the creation of any other claim thereto or any other transfer or disposition whatsoever, whether voluntary or involuntary, affecting the right, title, interest or possession in or to any equity securities of the Company.

(b)Prior to the consummation of the Initial Offering, no Investor may transfer any shares of Series A Preferred or shares of Common Stock issuable upon conversion thereof to a direct or indirect competitor of the Company or to any Person with a material interest in, or a material degree of control over a competitor of the Company without the prior written consent of the Board.  The determination of whether a transfer violates this Section 3.1(b) shall be made by the Board in its reasonable discretion.

(c)No Investor may transfer any shares of Series A Preferred or shares of Common Stock issuable upon conversion thereof unless such transfer is (i) made pursuant to an effective registration statement under the Securities Act, or (ii) is exempt from registration under the Securities Act and exempt from qualification under any applicable state and foreign securities laws.  Should an Investor propose to transfer any such shares pursuant to clause (ii), such Investor shall deliver to the Company an opinion of counsel reasonably satisfactory to the Company stating that such transfer is exempt from registration under the Securities Act and exempt from qualification under applicable state and federal securities laws.

3.2Permitted Transfers.

(a)Affiliates.  An Investor may transfer any shares of Series A Preferred or shares of Common Stock issued or issuable upon conversion thereof to an Affiliate of such Investor (a “Permitted Transferee”), provided, that the Permitted Transferee shall (i) be subject to and acknowledge the rights of the Company, the Sponsors and the Investors set forth herein, and (ii) agree in writing to be bound by this Agreement to the same extent as the transferring Investor.  In the event of any transfer to a Permitted Transferee, such Permitted Transferee shall thereafter be deemed an “Investor” under this Agreement and shall have the rights and obligations of an Investor hereunder.

(b)Sale Subject to Right of First Offer.  in addition to the rights set forth in Section 3.2(a), beginning on the seventh anniversary of the Issue Date an Investor may transfer any shares of Series A Preferred or shares of Common Stock issued or issuable on conversion thereof to any person that is reasonably acceptable to the Company and does not compete with the Company so long as such Investor complies with the provisions of Section 3.3 in connection with such transfer.

(c)Termination of Restrictions.  The restrictions on transfer imposed by this Section 3.2 and the Investors’ obligations hereunder shall expire upon the consummation of the Initial Offering

3.3Right of First Offer:

(a)Offer Notice. Beginning on the seventh anniversary of the Issue Date, if any Investor (the “Selling Investor”) desires to transfer any Series A Preferred or shares of Common Stock issued or issuable on conversion thereof other than (i) to a Permitted Transferee or (ii) as a Tag-Along Investor or Bring-Along Investor, such Selling Investor shall,

10

prior to soliciting a bona fide written offer from an independent third-party (the “Third-Party Offer”), deliver to each of the Company and the Company for further delivery to the Sponsors a written notice (the “Offer Notice”) offering to sell such shares of the Series A Preferred proposed to be sold (the “Offered Shares”) first to the Company, and secondly, under the circumstances set forth herein, to the Sponsors. The Offer Notice shall state (i) that the Investor desires to sell the Offered Shares, (ii) the purchase price per share and (iii) the material terms and conditions subject to which the Offered Shares are offered.

(b)Exercise of Right of First Offer.

(i)Upon receipt of the Offer Notice, the Company shall have the option (the “Company Right of First Offer”), which shall be exercisable by written notice (the “Company Notice of Election”) delivered to the Selling Investor within 30 days after the date the Offer Notice is delivered to the Company (the “Company First Offer Option Period”), to purchase from the Investor, at the price and upon the terms specified in the Offer Notice, all, but not less than all, of the Offered Shares.

(ii)If the Company does not exercise the Company Right of First Offer within the Company First Offer Option Period, the Sponsors shall have the option (the “Sponsor Right of First Offer”), which shall be exercisable by written notice (the “Sponsor Notice of Election”) delivered to the Selling Investor within 10 days after the expiration of the Company First Offer Option Period (the “Sponsor First Offer Option Period”), to purchase from the Investor, at the price and upon the terms specified in the Offer Notice, all, but not less than all, of the Offered Shares.  The Sponsors shall have the right to purchase such Offered Shares pro rata, based on the total amount of Common Stock such Sponsor holds on an As-Converted Basis.  In the event that one or more of the Sponsors does not desire to purchase the Offered Shares pursuant to the Sponsor Right of First Offer, the remaining Sponsor(s) shall be entitled to purchase all, but not less than all, of the Offered Shares.

(iii)Each Company Notice of Election and Sponsor Notice of Election shall recite that such Company Notice of Election or Sponsor Notice of Election, as the case may be, constitutes a binding obligation of the Company or the Sponsors, as the case may be, committing the same to purchase, upon the same terms and subject to the conditions set forth in the Offer Notice.

(iv)The closing of the purchase of the Offered Shares subscribed to by the Company or the Sponsors pursuant to this Section 3.3 shall be held at the principal office of the Company at 10:00 a.m., local time on the date contemplated in the Offer Notice, which date will not be earlier than the earlier to occur of (x) the thirtieth (30th) day after the later to expire of the Company First Offer Option Period or, if applicable, the Sponsor First Offer Option Period, and (y) the date that the waiting period under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended, shall have expired or been terminated, if applicable to the Sponsors’ purchase of the Offered Shares.

11

(c)Sale to Third-Party Purchaser.

(i)If the Offer Notice shall have been duly delivered, and the Company or the Sponsors shall not have exercised the Company Right of First Offer or the Sponsor Right of First Offer to purchase all of the Offered Shares, the Selling Investor may solicit Third-Party Offers to purchase all (but not less than all) of the Offered Shares and, so long as any sale of the Offered Shares made pursuant to a Third-Party Offer is (A) upon such terms, including price, and subject to such conditions, as are not materially less favorable to the Selling Investor, taken as a whole, than those set forth in the Offer Notice, (B) consummated within one hundred (100) days from the date the Offer Notice is first delivered to the Company, and (C) in accordance with clause (ii) below, such transfer may be consummated without further restriction under this Section 3 and shall be a Permitted Transfer under this Agreement.  If the Selling Investor shall not have completed the sale of all (but not less than all) of the Offered Shares in accordance with the foregoing, the Selling Investor shall not subsequently transfer the Offered Shares except in accordance with the requirements of this Section 3.3.

(ii)All Offered Shares transferred by the Selling Investor in accordance with clause (i) above shall remain, and the third-party purchaser shall agree and be permitted to take and hold such Offered Shares, subject to all of the obligations and restrictions imposed upon, and rights granted to, the Selling Investor by this Agreement. No transfer of Offered Shares to which the preceding sentence applies shall be effective unless and until the third-party purchaser shall have executed and delivered to the Company  appropriate instruments or other supporting documents to the foregoing effect.

(d)Termination of Right of First Offer.  Each of the Company Right of First Offer and the Sponsor Right of First Offer shall expire upon the consummation of the Initial Offering.

3.4Tag-Along Rights.

(a)The Right.  If any Sponsor or any of its Affiliates proposes to enter into any agreement to sell shares of Series A Preferred or Common Stock to any person (other than transfers among each Sponsor and its Affiliates) (a “Prospective Purchaser”) that, when taken together with all other sales of Series A Preferred or Common Stock by such Sponsor and its Affiliates (other than transfers among such Sponsor and its Affiliates) from and after the Issue Date, would exceed 50% of the aggregate number of shares of Common Stock (on an As-Converted Basis) owned by such Sponsor and its Affiliates on the date hereof, (a “Tag-Along Sale”), then each of the Investors shall have the right, but not the obligation, to participate in any such sale or transfer of such shares of Series A Preferred or Common Stock by such Sponsor and its Affiliates in accordance with the procedures set forth below and on the same terms and subject to the same conditions as those on which such Sponsor and its Affiliates propose to transfer their shares.  Prior to any proposed Tag-Along Sale, the Sponsor shall deliver, and/or where applicable shall cause its Affiliates to deliver, to each Investor, a written notice (the “Tag-Along Notice”) stating the number of shares of Series A Preferred and/or Common Stock that the Sponsor and/or its s Affiliates desire to sell and providing copies of any documents setting forth the terms and conditions to which such sale is subject.  The Tag-Along Notice shall set forth the percentage of shares of Series A Preferred and/or Common Stock held by each Investor that such Investor can include in such Tag-Along Sale (the “Tag-Along Percentage”), which  percentage will equal the quotient of (i) the difference of (x) the total number of shares of Common Stock

12

(on an As-Converted Basis) that are proposed to be sold in the Tag-Along Sale, minus (y) the total number of shares of Common Stock (on an As-Converted Basis) that any other Persons with similar “tag-along” or “co-sale” rights have the right to sell in connection with such transaction (assuming that all such persons exercise all such rights to the fullest extent), divided by (ii) the total number of shares of Common Stock (on an As-Converted Basis), owned in the aggregate by the Investors and the Sponsor and/or its Affiliates on the date of such Tag-Along Notice.

(b)Election to Participate.  Each Investor shall have the right (the “Tag-Along Right”) for ten (10) days from receipt of the Tag-Along Notice described in Section 3.4(a) (the “Tag-Along Option Period”) to elect to participate in the Tag-Along Sale.  Any Investor electing to participate in the Tag-Along Sale (a “Tag-Along Investor”) shall give all other Investors, the Company and the Sponsor who delivered such Tag-Along Notice written notice thereof (the “Election Notice”) within the Tag-Along Option Period.  The Election Notice shall specify the number of shares of Common Stock and/or Series A Preferred that such Tag-Along Investor desires to sell to the Prospective Purchaser, which amount shall not exceed the product of (i) the Tag-Along Percentage set forth in the Tag-Along Notice, multiplied by (ii) the total number of shares of Common Stock (on an As-Converted Basis) that such Investor owns as of the date of the Election Notice.  The failure of any Investor to submit an Election Notice within the Tag-Along Option Period shall constitute an election by such remaining Investor not to participate in such Tag-Along Sale.  By delivering an Election Notice to such Sponsors within the Tag-Along Option Period, a Tag-Along Investor shall have the right to sell to the Prospective Purchaser that number of Common Stock or Series A Preferred specified in the Election Notice; provided, however, that, to the extent the Prospective Purchaser is unwilling or unable to purchase all of the shares proposed to be sold by such Sponsors and the Tag-Along Investors, the number of shares to be sold by each of the Sponsors and each of the Tag-Along Investors shall be ratably reduced so that the number of shares to be sold by such Sponsors and each of the Tag-Along Investors equals the number of shares that the Prospective Purchaser is willing or able to purchase.

(c)Actions of Affiliates. Each Sponsor shall use its reasonable best efforts to cause its Affiliates to comply with the provisions of this Section 3.4.

(d)Termination of Tag-Along Rights.  Each Investor’s Tag-Along Right shall expire upon the consummation of the Initial Offering.

3.5Bring-Along Rights.

(a)The Right.  If one or more of the Sponsors and/or any of their Affiliates (the “Sponsor Parties”) propose to enter into any agreement to sell or otherwise dispose of any Common Stock or Series A Preferred that would constitute 50% or more of the Common Stock (on an As-Converted Basis) held by the Sponsors and their Affiliates on the Issue Date to a Prospective Purchaser (a “Bring-Along Sale”), then such Sponsor Parties shall have the right (the “Bring-Along Right”) to compel each of the Investors and any Permitted Transferees of the Investors (the “Bring-Along Parties”) to sell, free and clear of any liens or encumbrances, (1) if the Sponsor Parties are selling Series A Preferred in connection with such Bring-Along Sale, a number of shares of Series A Preferred equal to the product obtained by

13

multiplying (i) the total number of shares of Series A Preferred, owned by such Investor as of the date of the Bring-Along Notice, with (ii) a fraction, the numerator of which shall be the total number of shares of Series A Preferred that the Sponsor Parties propose to sell and the denominator of which shall equal the total number of shares of Series A Preferred owned by such Sponsor Parties s as of the date of the Bring-Along Notice, for such consideration per share of Series A Preferred as the Sponsor Parties would receive for shares of Series A Preferred in such Bring-Along Sale and on the same terms and subject to the same conditions as the Sponsor Parties are able to obtain, and (2) if the Sponsor Parties are selling shares of Common Stock and/or shares of Series A Preferred in connection with such Bring-Along Sale, the number of shares of Common Stock equal to the product obtained by multiplying (i) the total number of shares of Common Stock (on an As-Converted Basis (but without counting for such purposes shares of Series A Preferred required to be sold under (1) above)), owned by such Investor as of the date of the Bring-Along Notice, with (ii) a fraction, the numerator of which shall be the total number of shares of Common Stock (on an As-Converted Basis (but without counting for such purposes shares of Series A Preferred that such Sponsor Parties are selling, if the Investor is required to sell shares of Series A Preferred under (1) above)) that the Sponsor Parties propose to sell and the denominator of which shall equal the total number of shares of Common Stock (on an As-Converted Basis (but without counting for such purposes shares of Series A Preferred that such Sponsor Parties are selling, if the Investor is required to sell shares of Series A Preferred under (1) above)), owned by the Sponsor Parties as of the date of the Bring-Along Notice, for such consideration per share of Common Stock as the Sponsor Parties would receive for shares of Common Stock and on the same terms and subject to the same conditions as the Sponsors are able to obtain; provided, however, that the Bring-Along Parties shall be required to give only representations and warranties substantially comparable to the representations and warranties of such Sponsor Sparties, which representations and warranties will be limited to representations and warranties as to their title to the shares being sold by them, to their existence, power and authorization to execute any sale documents, that such sale shall not contravene such Bring-Along Parties’ organizational documents, if any, or any law or regulation applicable to such Bring-Along Party, that such sale shall not breach or cause a default under any material agreement to which such Bring-Along Party is party, and to the enforceability of such documents, and shall not be obligated to accept an overall limit on their liability in excess of the net proceeds received by them in any such sale.  The Sponsors shall exercise the Bring-Along Right by giving written notice (the “Bring-Along Notice”) to the Company and the Bring-Along Parties stating (i) that they propose to effect such transaction, (ii) the name and address of the Prospective Purchaser, (iii) the proposed purchase price per share and other terms and conditions of the proposed sale and (iv) that all the Bring-Along Parties shall be obligated to sell their Common Stock or Series A Preferred, as applicable, upon the same terms and subject to the same conditions (subject to applicable law).

(b)Procedure.  Not later than ten (10) days following the date of receipt of the Bring-Along Notice, each of the other Investors shall deliver to the Sponsors certificates representing all Common Stock or Series A Preferred, as applicable, held by a Bring-Along Investor, accompanied by duly executed stock powers.  If any Bring-Along Investor fails to deliver such certificates to the Sponsors, the Company shall cause the books and records of the Company to show that the shares represented by such certificates of such Bring-Along Investor are bound by the provisions of this Section 3.5 and are transferable only to the Prospective Purchaser or an Affiliate of such Prospective Purchaser upon surrender for transfer by the holder

14

thereof.  Upon the consummation of the sale of the Common Stock or Series A Preferred of the Sponsors and the Common Stock or Series A Preferred of the Bring-Along Investors pursuant to this Section 3.5, the Sponsors shall give notice thereof to the Bring-Along Investors and shall remit to each of the Bring-Along Investors the total sales price received for the Common Stock or Series A Preferred of such Bring-Along Investor sold pursuant hereto.

(c)Termination of Bring-Along Rights.  The Sponsor Parties’ Bring-Along Rights and the Investors’ obligations under this Section 3.5 shall expire upon the consummation of the Initial Offering.

3.6Registration of Transfer by the Company.  No transfer of any equity security of the Company by any Investor shall be effective (and the Company shall not transfer on its books any such shares) unless (i) the certificates representing such equity securities of the Company issued to the Permitted Transferee shall bear any legends required by Section 3.7 and (ii) the Permitted Transferee (if not already a party hereto) shall have executed and delivered to the Company, as a condition precedent to such transfer, an instrument or instruments in form and substance reasonably satisfactory to the Company confirming that the Permitted Transferee agrees to be bound by the terms of this Agreement to the same extent as its transferor.

3.7Legend.

(a)Each certificate representing Registrable Securities shall (unless otherwise permitted by the provisions of this Agreement) be stamped or otherwise imprinted with a legend substantially similar to the following (it being understood and agreed that such legend shall be removed by the Company at the request of an Investor following the consummation of an Initial Offering and the expiration of the restrictions contained in Section 2.7 hereof):

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

(b)Except as provided in this 3.7(b), each certificate representing Registrable Securities shall be stamped or otherwise imprinted with a legend substantially similar to the following (in addition to any legend required under applicable state securities laws):

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED, ASSIGNED, PLEDGED OR

15

HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

Notwithstanding the foregoing, the Company shall be obligated to reissue promptly certificates without the legend set forth in this Section 3.7(b) at the request of any holder thereof if the holder shall have obtained an opinion of counsel at such Investor’s expense (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification or legend.

(c)Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal.

4.Covenants of the Company.

4.1Delivery of Financial Statements.  The Company shall deliver to each Principal Investor copies of any financial statements delivered to its lenders under its Credit Agreement, but not compliance certificates; provided, however, that the Company shall not be required to deliver to the Principal Investors any projections delivered to the Company’s senior lenders under its Credit Agreement until after the first anniversary of the Issue Date; provided, further, that the Company shall not be required to deliver to the Principal Investors any projections delivered to the Company’s lenders under its Credit Agreement at any time if the Company in good faith is contemplating an Initial Offering at such time or determines in good faith that delivery of such projections could have an adverse effect on the Company.

4.2Senior Management.  The Company shall make members of its senior management available to the Principal Investors, as a group, twice per calendar year, to discuss the operations of the Company, at times and locations reasonably determined by the Company after consultation with the Principal Investors.

4.3Termination of Information and Inspection Covenants.  The covenants set forth in Sections 4.1 and 4.2 shall terminate as to a Principal Investor and be of no further force or effect upon the earlier of (i) the Initial Offering, (ii) the merger, consolidation or sale of the Company or (iii) such time as such Investor ceases to be a Principal Investor.

5.Miscellaneous.

5.1Successors and Assigns.  Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties (including transferees of any shares of Registrable Securities). Excepts as otherwise expressly provided herein, (i) the Investors and the Company shall not be able to assign their rights under this Agreement to any Person, and (ii) a Sponsor shall be able to assign its rights and obligations under this Agreement to any Affiliate or any

16

other Person in connection with a sale of any shares of Series A Preferred or shares of Common Stock issuable on conversion thereof that is subject to the tag-along rights contained in Section 3.4, provided that such Affiliate or such other Person assumes all obligations of such Sponsor under this Agreement.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

5.2Governing Law.  This Agreement shall be governed by and construed under the laws of the State of New York, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of New York.

5.3Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

5.4Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

5.5Notices.  Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given, mailed, received or delivered, as applicable: (i) upon personal delivery to the party to be notified, (ii) one business day after being sent by confirmed telex or facsimile with confirmation or receipt, (iii) three (3) business days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt, if addressed to the party to be notified at the address indicated for such party on the signature pages hereof or on Annex A, or at such other address as such party may designate by ten (10) days’ advance written notice to the other parties.

5.6Expenses.  If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

5.7Entire Agreement; Amendments and Waivers.  This Agreement  constitutes the full and entire understanding and agreement among the parties with regard to the subject matter hereof. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the parties hereto; provided, however, that notwithstanding any provision to the contrary herein, no amendment to this Agreement may be made without the written consent of any party affected thereby if such amendment would impose any new obligations on such party or diminish any right of such party hereunder without similarly diminishing the right of all similarly situated parties. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each

17

holder of any Registrable Securities, each future holder of all such Registrable Securities, and the Company.

5.8Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision was so excluded and shall be enforceable in accordance with its terms.

5.9Information Confidential.  Each Investor acknowledges that the information received by them pursuant hereto may be confidential and for its use only, and it will not use such confidential information except in connection with its investment in shares of Series A Preferred or shares of Common Stock issued or issuable on conversion thereof or reproduce, disclose or disseminate such information to any other person (other than its employees or agents having a need to know the contents of such information, and its attorneys), except in connection with the exercise of rights under this Agreement, unless the Company has made such information available to the public generally or such Holder is required to disclose such information by a governmental body or under or pursuant to applicable law.  Notwithstanding the foregoing, the parties (and each employee, representative, or other agent of the parties) may disclose to any and all persons, without limitation of any kind, the tax treatment and any facts that may be relevant to the tax structure of the transaction, provided, however, that no party (and no employee, representative, or other agent thereof) shall disclose any other information that is not relevant to understanding the tax treatment and tax structure of the transaction (including the identity of any party and any information that could lead another to determine the identity of any party), or any other information to the extent that such disclosure would result in a violation of any federal or state securities law.

5.10Aggregation of Stock.  All shares of Registrable Securities held or acquired by affiliated entities or persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

(Remainder of this page intentionally left blank)

18

IN WITNESS WHEREOF, the parties hereto have executed this Investors’ Rights Agreement as of the day and year first above written.

COMPANY:

KINETIC CONCEPTS, INC.

By:
	Name:
	Title:
Address:
Telephone Number:
Fax Number:

[Signature Page to Investors' Rights Agreement]

GS CAPITAL PARTNERS 2000, L.P.

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

By:

Name:

Title:

GS CAPITAL PARTNERS 2000 OFFSHORE, L.P.

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

By:

Name:

Title:

GS CAPITAL PARTNERS 2000 GmbH & CO. BETEILIGUNGS KG

By:  Goldman Sachs Management GP GmbH, its general partner

By:

Name:

Title:

GS CAPITAL PARTNERS 2000 EMPLOYEE FUND, L.P.

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

By:

Name:

Title:

GOLDMAN SACHS DIRECT INVESTMENT FUND 2000, L.P.

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

By:

Name:

Title:

[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]

INVESTORS:

DLJ Merchant Banking Partners III, L.P.

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

By:

Name:

Title:

Address:

Telephone Number:

Fax Number:

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

By:

Name:

Title:

Address:

Telephone Number:

Fax Number:

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

By:

Name:

Title:

Address:

Telephone Number:

Fax Number:

[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]

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

By:
	Name:
	Title:

Address:

Telephone Number:

Fax Number:

DLJ MB PartnersIII Gmbh & Co. KG

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

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

Address:

Telephone Number:

Fax Number:

[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]

Millennium Partners II, L.P.

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

By:
	Name:
	Title:

Address:

Telephone Number:

Fax Number:

MBP III Plan Investors, L.P.

By:  DLJ LBO Plans Management Corporation II, its General Partner

By:
	Name:
	Title:

Address:

Telephone Number:

Fax Number:

[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]

JOHN P. BYRNES

HARRY R. JACOBSON, M.D.

DAVID J. SIMPSON

C. THOMAS SMITH

[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]

SPONSORS:

FREMONT PARTNERS III, L.P.

By:  FP Advisors III, L.L.C.
Its:  General Partner
	By:  Fremont Group, L.L.C.
	Its:  Managing Member
		By:  Fremont Investors, Inc.
		Its:  Manager
			By:
			Name:
			Title:
			Address:
			Telephone Number:
			Fax Number:

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

By:  Fremont Group, L.L.C.
Its:  General Partner
	By:  Fremont Investors, Inc.
	Its:  Manager
		By:
		Name:
		Title:
		Address:
		Telephone Number:
		Fax Number:

[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]

FREMONT ACQUISITION COMPANY II, L.L.C.

By:  Fremont Partners, L.P.
Its:  Member
	By:  FP Advisors, L.L.C.
	Its:  General Partner
		By:  Fremont Group, L.L.C.
		Its:  Managing Member
			By:  Fremont Investors, Inc.
			Its:  Manager
				By:
				Name:
				Title:
				Address:
				Telephone Number:
				Fax Number:

FREMONT ACQUISITION COMPANY IIA, L.L.C.

By:  FP Advisors, L.L.C.
Its:  Non-Member Manager
	By:  Fremont Group, L.L.C.
	Its:  Managing Member
		By:  Fremont Investors, Inc.
		Its:  Manager
			By:
			Name:
			Title:
				Address:
				Telephone Number:
				Fax Number:

[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]

BLUM STRATEGIC PARTNERS II, L.P.

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

Its: General Partner

By:

Name:

Title:

Address:

Telephone Number:

Fax Number:

BLUM STRATEGIC PARTNERS II GmbH & Co. KG

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

Its: Managing Limited Partner

By:

Name:

Title:

Address:

Telephone Number:

Fax Number:

STINSON CAPITAL PARTNERS II, L.P.

By: Blum Capital Partners, L.P.

Its: General Partner

By:

Name:

Title:

Address:

Telephone Number:

Fax Number:

[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]

RCBA-KCI CAPITAL PARTNERS, L.P.

By: Blum Capital Partners, L.P.

Its: General Partner

By:

Name:

Title:

Address:

Telephone Number:

Fax Number:

[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]

JAMES R. LEININGER, M.D.

Address:

Telephone Number:

Fax Number:

[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]

Annex A

Investor	Information
JOHN P. BYRNES	Address:	19387 US 19 North Clearwater, FL  33764
	Telephone Number:	(727) 530-7700 x 8226
	Fax Number:	(727) 532-4091
HARRY R. JACOBSON, M.D.	Address:	Vanderbilt University Medical Center D-3300 Medical Center North Nashville, TX  37232
	Telephone Number:	(615) 343-3485
	Fax Number:	(615) 343-7286
DAVID J. SIMPSON	Address:	2725 Fairfield Road Kalamazoo, MI  49002
	Telephone Number:	(269) 383-7324
	Fax Number:	(269) 383-7353
C. THOMAS SMITH	Address:	17703 Cedar Creek Canyon Dallas, TX  75252
	Telephone Number:	(972) 380-9120
	Fax Number:	(972) 735-0196

A-1

EX-10.7

Exhibit 10.7

STATEMENT OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF THE
SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK
OF
KINETIC CONCEPTS, INC.

(Pursuant to Article 2.13 of the Texas Business Corporation Act)

Kinetic Concepts, Inc. (the “Corporation”), a corporation organized and existing under the laws of the State of Texas, does hereby certify that, pursuant to authority conferred upon the Board of Directors of the Corporation by its Articles of Incorporation, as amended, (hereinafter referred to as the “Articles of Incorporation”) and pursuant to the provisions of Article 2.13 of the Texas Business Corporation Act, said Board of Directors, duly approved and adopted the following resolution (the “Resolution”) on August 9, 2003:

RESOLVED, that pursuant to the authority vested in the Board of Directors by the Articles of Incorporation, the Board of Directors hereby creates, authorizes and provides for the issuance of a series of Preferred Stock of the Corporation, designated as Series A Convertible Participating Preferred Stock of the Corporation, par value $0.001 per share, having the designations, preferences, relative, participating, optional and other special rights, and the qualifications, limitations and restrictions thereof that are set forth in this Resolution, as follows:

SECTION 1.  Designation and Amount. The designation for the series of Preferred Stock authorized by this Resolution shall be the Series A Convertible Participating Preferred Stock, par value $0.001 per share (the “Series A Preferred”). The initial liquidation preference of the Series A Preferred is $1,000.00 per share (the “Initial Liquidation Preference”) and the original issue price for each such share is $1,000.00. The Initial Liquidation Preference or the issue price per share of the Series A Preferred Stock shall not for any purpose be considered to be a determination by the Board of Directors with respect to the capital and surplus of the Corporation.  The number of shares constituting such Series A Preferred Stock shall be 264,000 shares.

SECTION 2.  Rank.  The Series A Preferred shall, with respect to the right to receive dividends and distributions of assets and rights upon the Corporation’s liquidation, dissolution or winding up, rank (x) senior to the Common Stock and each other class or series of preferred stock of the Corporation hereafter created which does not expressly rank senior to or pari passu with the Series A Preferred Stock with respect to the right to receive dividends and distributions and rights upon the Corporation’s liquidation, dissolution or winding up (together with the Common Stock, the “Junior Capital Stock”), (y) pari passu with all other series of Preferred Stock of the Corporation, created after the date hereof, which expressly ranks on a parity with the Series A Preferred Stock with respect to the right to receive dividends and distributions and rights upon the Corporation’s liquidation, dissolution or winding up (the “Parity Capital Stock”), and (y) junior to all other series of Preferred Stock of the Corporation, created after the date hereof, which expressly ranks senior to the Series A Preferred Stock with respect to the right to receive dividends and distributions and rights upon the Corporation’s liquidation, dissolution or winding up (the “Senior Capital Stock”).

SECTION 3.  Stated Value/Liquidation, Dissolution or Winding Up

(a)       For the purposes hereof, the “Stated Value” per share of Series A Preferred as of any date, shall mean the Initial Liquidation Preference, together with accrued Dividends through such date that have been added to the Stated Value through accretion as provided in Section 4(a)

below; provided, that, upon any conversion of shares of Series A Preferred in accordance with Section 7 hereof or a Sale of the Corporation on or prior to December 31, 2005, the Stated Value shall mean the Initial Liquidation Preference, together with (i) accrued Dividends through the date of such conversion or sale and (ii) the Minimum Dividends that such shares of Series A Preferred would have been entitled to on each Quarterly Dividend Payment Date had they not become subject to conversion or sale and remained outstanding through December 31, 2005.

(b)       In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series A Preferred then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made to the holders of any shares of any Junior Capital Stock by reason of their ownership thereof, an amount in cash equal to the greater of (i) the amount the holders of Series A Preferred would have received had they converted their shares of Series A Preferred into Common Stock, in accordance with the provisions of Section 7 hereof, immediately prior to such liquidation, dissolution or winding up or (ii) the Stated Value then in effect plus (A) if such liquidation, dissolution or winding up occurs prior to the Final Quarterly Dividend Payment Date, the increase in the Stated Value which would have occurred on the Quarterly Dividend Payment Date next following such liquidation, dissolution or winding up or (B) if such liquidation, dissolution or winding up occurs after the Final Quarterly Dividend Payment Date, the amount of any accumulated but unpaid Participating Dividends as of the date of such event, pro rata to the date of such dissolution, liquidation, or winding up.  If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred the full amount to which they shall be entitled pursuant to this Section 3(b), the holders of shares of Series A Preferred, and any other shares of Parity Capital Stock, shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares of Series A Preferred held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.  For the purposes of this Section 3(b) and 3(c), a Sale of the Corporation (as defined below) shall not be considered a voluntary or involuntary liquidation, dissolution or winding up of the Corporation.

(c)       After the payment of all amounts required to be paid pursuant to Section 3(b) to the holders of shares of Series A Preferred, and any other shares of Parity Capital Stock, upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of any capital stock of the Corporation other than the Series A Preferred and Parity Capital Stock then outstanding shall share in any distribution of the remaining assets and funds of the Corporation in the manner provided by law, in the Articles of Incorporation of the Corporation, as amended, or as provided in any pertinent Statement of Designations of the Corporation, as the case may be.

(d)       Upon the occurrence of, (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation or, after a Holding Company Merger, Parent to any Person (other than the Corporation or any Subsidiary of the Corporation) or group of related Persons (other than the Corporation and its Subsidiaries) for purposes of Section 13(d) of the Exchange Act (a “Group”), together with any Affiliates thereof (whether or not otherwise in compliance of the terms of this Resolution), (ii) any Person or Group (other than any of the Permitted Holder(s) or any underwriters in connection with an offering of Common Stock registered under the Securities Act) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Corporation or, after a Holding Company Merger, Parent, or (iii) the first day on which a majority of the members of the Board of Directors of the Corporation or, after a Holding Company Merger, Parent are not Continuing Directors (each a “Sale of the Corporation”), the Series A Preferred will be entitled to receive the greater of (x) the Stated Value of the Series A Preferred at such time, plus (A) if such Sale of the Corporation occurs prior to the Final Quarterly Dividend Payment Date,

2

the increase in the Stated Value that would have occurred on the Quarterly Dividend Payment Date next following such Sale of the Corporation, pro rated to the date of such Sale of the Corporation, or (B) if such Sale of the Corporation occurs after the Final Quarterly Dividend Payment Date, the amount of any accumulated but unpaid Participating Dividends as of the date of such event, in cash or other securities received in the transaction, which value, if the securities received in the transaction are not then publicly traded, will be based on the advice of a non-affiliated investment banking firm selected by the Corporation that is reasonably acceptable to the holders of two-thirds of the shares of outstanding Series A Preferred or (y) the cash or consideration that would have been received in such transaction by the holder of shares of Common Stock equal to the number of shares of Common Stock the Series A Preferred would have been convertible into at such time; provided, however, that prior to the Corporation’s repurchase or redemption of any of the shares of Series A Preferred pursuant to this Section 3(d), the Corporation shall have repurchased any High Yield Notes as are required to be repurchased by the terms of the High Yield Indenture.

SECTION 4.  Dividends

(a)       The holders of shares of Series A Preferred shall be entitled to receive, whether or not declared by the Board of Directors, cumulative quarterly dividends (the “Dividends”) equal to the greater of:  (i) 9.00% per annum of the Stated Value of the Series A Preferred, calculated at each Quarterly Dividend Payment Date from the later of the date that the first share of Series A Preferred is issued (the “Issue Date”) or the most recent Quarterly Dividend Payment Date, compounded quarterly (the “Minimum Dividends”), or (ii) the dividends which would have been payable to such holders of shares of Series A Preferred in such quarter had such holders converted such shares of Series A Preferred into Common Stock immediately prior to the record date of any dividend declared on the Common Stock in such quarter (the “Participating Dividends”); provided, however, that to the extent that any Dividends are not paid in cash, an amount equal to the fair market value of such Dividends shall be added to the Stated Value.  Dividends payable in respect of outstanding shares of Series A Preferred shall begin to accrue and compound quarterly on the last day of each of March, June, September and December in each year (each such date being a “Quarterly Dividend Payment Date”) commencing in respect of each outstanding share of Series A Preferred on the first Quarterly Dividend Payment Date occurring on or after the Issue Date; provided, however, that to the extent that any Dividends are not paid in cash, an amount equal to the fair market value of such Dividends shall be added to the Stated Value.

(b)       Holders of the Series A Preferred shall be entitled to receive either the Minimum Dividends or the Participating Dividends in accordance with Section 4(a), up to and including the last Quarterly Dividend Payment Date occurring on or prior to the sixth anniversary of the Issue Date (the “Final Quarterly Dividend Payment Date”).  After the Final Quarterly Dividend Payment Date, holders of the Series A Preferred shall only be entitled to receive Participating Dividends; provided, that, during any period after the Initial Mandatory Redemption Date during which the Corporation has delayed the mandatory redemption of the Series A Preferred pursuant to Section 6(a) below, the Series A Preferred shall be entitled to the greater of (i) the Minimum Dividends and (ii) Participating Dividends for such periods.

(c)       The Dividends set forth in Section 4(a) hereof for the twelve Quarterly Dividend Payment Dates immediately after the Issue Date shall not be payable in cash, but shall be added to the Stated Value on the relevant Dividend Payment Date in accordance with Section 4(a) hereof.

(d)       The Board of Directors of the Corporation may fix a record date for the determination of holders of Series A Preferred entitled to receive payment of Dividends pursuant to Section 4(a) hereof, which record date shall be no more than sixty (60) days prior to the date fixed for the payment thereof.  All cash payments shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

3

SECTION 5.  Protective Provisions

Prior to a Qualified IPO (as defined below) or a Sale of the Corporation:

(a)  Limitation on Incurrence of Indebtedness.  Without the approval of the holders of two-thirds of the outstanding shares of Series A Preferred Stock, the Corporation shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, “incur”) any Indebtedness; provided, however, the Corporation and its Subsidiaries may incur Indebtedness (including, without limitation, Acquired Indebtedness) if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Corporation’s Leverage Ratio is no more than 5.5 to 1.  Notwithstanding the foregoing, the Corporation and any of its Subsidiaries may incur: (i) Indebtedness permitted to be incurred under the terms of the High Yield Indenture or any Refinancings thereof, (ii) Indebtedness permitted to be incurred under the terms of the Credit Agreement or any Refinancings thereof, and (iii) Indebtedness arising from loans or advances from any Subsidiary of the Corporation to the Corporation or any other Subsidiary of the Corporation.

(b)  Limitation on Restricted Payments.  The Corporation shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly,

(1)declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of the Corporation or warrants, options or other rights to acquire Qualified Capital Stock (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, Qualified Capital Stock)) on or in respect of shares of the Corporation’ s Junior Capital Stock to holders of such Junior Capital Stock, or

(2)purchase, redeem or otherwise acquire or retire for value any Junior Capital Stock of the Corporation or any warrants, rights or options to purchase or acquire shares of any class of such Junior Capital Stock, (each of the foregoing actions set forth in clauses (1) and (2) being referred to as a “Restricted Payment”),

if at the time of such Restricted Payment or immediately after giving effect thereto:

(A)the Corporation’s Consolidated Fixed Charge Coverage Ratio, after giving effect to such Restricted Payment, is greater than 2.0 to 1.0; or

(B)the aggregate amount of Restricted Payments (including such proposed Restricted Payment but excluding the Distribution) made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the fair market value of such property as determined in good faith by the Board of Directors of the Corporation, whose determination shall be conclusive) shall exceed the sum, without duplication, of:

(1)50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Corporation earned during the period beginning on the first day of the fiscal quarter which includes the Issue Date and ending on the last day of the last fiscal quarter that precedes the date the Restricted Payment occurs (the “Reference Date”) for which a financial statement relating to such fiscal quarter has been filed or furnished in a report with the SEC (treating such period as a single accounting period); plus

4

(2)100% of the aggregate net cash proceeds received by the Corporation from any Person (other than a Subsidiary of the Corporation ) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of the Corporation (other than the Series A Preferred to the extent that the net cash proceeds therefrom are or are expected to be used to fund the Distribution and other than proceeds of Qualified Capital Stock to the extent that they are used pursuant to clause (14) of Permitted Investments); plus

(3)100% of the aggregate net cash proceeds received after the Issue Date by the Corporation from the issuance or sale (other than to a Subsidiary of the Corporation ) of debt securities or Disqualified Capital Stock that have been converted into or exchanged for Qualified Capital Stock of the Corporation, together with (without duplication) any net cash proceeds received by the Corporation at the time of such conversion or exchange; plus

(4)to the extent not otherwise included in the Consolidated Net Income of the Corporation, an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) in Unrestricted Subsidiaries resulting from the payments in cash of interest on Indebtedness, dividends, repayments of loans or advances or other transfers of assets, in each case to the Corporation or a Restricted Subsidiary or from the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary; plus

(5)to the extent not otherwise included in Consolidated Net Income, net cash proceeds from sale of Investments which were treated as Restricted Payments, but not to exceed the amounts so treated; plus

(6)without duplication of any amounts included in clauses (B)(2) and (B)(3) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Corporation from a holder of the Corporation’ s Capital Stock other than proceeds of a Capital Contribution to the extent that they are used pursuant to clause (14) of Permitted Investments.

Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit:

(1)the payment of any dividend or redemption payment within 60 days after the date of declaration of such dividend or redemption payment if the dividend or redemption payment would have been permitted on the date of declaration;

(2)the acquisition of any shares of Capital Stock of the Corporation, either:

(A)solely in exchange for shares of Qualified Capital Stock of the Corporation (or warrants, options or other rights to acquire Qualified Capital Stock of the Corporation (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, Qualified Capital Stock)), or

(B)through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Corporation) of shares of Qualified Capital Stock of the Corporation (or warrants, options or other rights to acquire Qualified Capital Stock of the

5

Corporation (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, Qualified Capital Stock));

(3)repurchases by the Corporation of Equity Interests of the Corporation from employees, consultants or directors of the Corporation or any of its Subsidiaries or their authorized representatives upon or within 270 days after the death, disability or termination of employment, consultancy, or directorships of such employees, consultants or directors, in an amount not to exceed the difference of (A) a cumulative amount equal to $10.0 million per fiscal year (or partial fiscal year) beginning with the fiscal year that included the Issue Date, minus (B) the aggregate amount of Restricted Payments made pursuant to this clause (3); provided, however, that the aggregate amount of Restricted Payments made pursuant to this clause (3) shall not exceed $30.0 million in the aggregate from and after the Issue Date;

(4)the repurchase of Equity Interests deemed to occur upon the exercise of stock options if such Equity Interests represent a portion of the exercise price of such stock options;

(5)for the avoidance of doubt only, payments pursuant to the Management Agreement;

(6)other Restricted Payments pursuant to this clause (6) not to exceed $80.0 million in the aggregate from and after the Issue Date;

(7)the acquisition of, or declaration or payment of dividends on, Equity Interests of the Corporation in connection with the consummation of the Distribution;

(8)after the Holding Company Merger, payments to the Parent pursuant to this clause (8), (i) to enable the Parent to pay the Federal, state, local, or foreign tax liabilities of itself, and of the Corporation and its Subsidiaries for which it is liable; such payment shall be determined assuming that the Parent, the Corporation, and the Subsidiaries file a consolidated Federal (and where actually filed, consolidated, combined, unitary or similar returns for state, local or foreign purposes) tax return with the Parent as the Parent and the Corporation and the Subsidiaries as members and that the Parent has no substantial assets other than the stock of the Corporation and any tax payments shall either be used by the Parent to pay such tax liabilities within 90 days of the Parent’s receipt of such payment or refunded to the payee, and (ii) in an aggregate amount not to exceed $10 million per year in order to pay legal and accounting expenses, payroll and other compensation expenses in the ordinary course of business, and other corporate overhead expenses in the ordinary course of business; and

(9)for the avoidance of doubt, the distribution of any Equity Interests of any Subsidiary of the Corporation for the purpose of establishing a holding company structure.

In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (B) of the immediately preceding paragraph, amounts expended pursuant to clauses (2)(A), (4), (5), (7), (8) and (9) shall be excluded in such calculation and amounts expended pursuant to clauses (1), (2)(B), (3) and (6) shall be included in such calculation; or

(c)  amend, alter, repeal or waive any provision of the Corporation’s Articles of Incorporation, as it may be amended from time to time, or the Corporation’s By-Laws, as they may be amended from time to time, to alter or change the powers, designations, preferences, rights and qualifications, limitations or restrictions of Series A Preferred.

6

SECTION 6.  Redemption

(a)       Except as set forth in this Section 6(a), the Series A Preferred shall be mandatorily redeemed by the Corporation on the twelfth anniversary of the Issue Date (the “Initial Mandatory Redemption Date”).  On the Initial Mandatory Redemption Date, the Corporation shall have the option to delay the mandatory redemption of the Series A Preferred until the fifteenth anniversary of the Issue Date (the “Extended Mandatory Redemption Date”).  On the Extended Mandatory Redemption Date, the Corporation shall have the option to delay the mandatory redemption of the Series A Preferred until the seventeenth anniversary of the Issue Date (the “Final Mandatory Redemption Date”).

(b)       At the Initial Mandatory Redemption Date, each share of Series A Preferred shall be redeemed, at the option of the Corporation, for an amount of cash, Common Stock or a combination of cash and Common Stock, the fair market value of which, when combined with any cash paid in connection with such redemption, shall be equal to the greater of (i) the Stated Value or (ii) the average Closing Sale Price of the Common Stock into which such Series A Preferred is then convertible for the 20 consecutive trading days immediately preceding the Initial Mandatory Redemption Date; provided, that, if the redemption price is based on the Stated Value and the Corporation chooses to redeem the Series A Preferred for Common Stock or for a combination of cash and Common Stock, (x) such Common Stock must be listed on a United States national securities exchange or quoted on the Nasdaq Stock Market, and (y) such Common Stock to be issued in redemption of the Series A Preferred shall not represent more than 35% of the fully diluted common equity of the Corporation.

(c)       If the Corporation delays the mandatory redemption of the Series A Preferred in accordance with Section 6(a) above, the Corporation shall have the option at any time after the Initial Mandatory Redemption Date or Extended Mandatory Redemption Date, as applicable, to redeem each share of Series A Preferred for an amount of cash, Common Stock or a combination of cash and Common Stock, at the option of the Corporation, the fair market value of which, when combined with any cash paid in connection with such redemption, shall be equal to the greater of (i) the Stated Value or (ii) the average Closing Sale Price of the Common Stock into which such Series A Preferred is then convertible for the 20 consecutive trading days immediately preceding such redemption; provided, that, if the redemption price is based on the Stated Value and the Corporation chooses to redeem the Series A Preferred for Common Stock or for a combination of cash and Common Stock, such Common Stock must be listed on a United States national securities exchange or quoted on The Nasdaq Stock Market and such Common Stock to be issued in redemption of the Series A Preferred shall not represent more than 35% of the fully diluted common equity of the Corporation.

(d)       At the Final Mandatory Redemption Date, the Corporation shall redeem each share of Series A Preferred for cash in an amount equal to the greater of (1) the Stated Value or (2) the Closing Sale Price of the Common Stock into which the Series A Preferred is then convertible (which Closing Sale Price shall be equal to the average Closing Price for the 20 consecutive trading days immediately preceding the Final Mandatory Redemption Date, if the Common Stock is then traded on a U.S. securities exchange or, is reported by the National Association of Securities Dealers Automated Quotation system or, by the National Quotation Bureau Incorporated).

(e)       Notice of any redemption of shares of Series A Preferred pursuant to this Section 6 (the “Redemption Notice”) shall be mailed not less than 30 days and not more than 90 days prior to the date fixed for redemption to each holder of shares of Series A Preferred to be redeemed, at such holder’s address as it appears on the transfer books of the Corporation, notifying each such holder of the redemption to be effected and specifying the redemption date (the “Redemption Date”), redemption price (the “Redemption Price”), whether the Redemption Price will be payable in cash, Common Stock, or a combination of cash and Common Stock, the place at which payment may be obtained and requesting each such holder to surrender to the Corporation, in the manner and at the place designated, such holder’s certificate or certificates representing the shares of Series A Preferred to be redeemed.  On or after the Redemption Date, each holder of Series A Preferred who has not previously elected to convert its shares of

7

Series A Preferred into Common Stock pursuant to Section 7 hereof shall surrender to the Corporation the certificate or certificates representing such shares, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be cancelled.  In order to facilitate the redemption of shares of Series A Preferred, the Board may fix a record date for the determination of the holders of shares of Series A Preferred to be redeemed, not more than 60 days or less than 10 days prior to the date fixed for such redemption.

(f)        From and after any Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of shares of Series A Preferred shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever.

(g)       On or prior to any Redemption Date, the Corporation shall deposit the aggregate Redemption Price of all shares of Series A Preferred with a bank or trust corporation having aggregate capital and surplus in excess of $100,000,000 as a trust fund for the benefit of the respective holders of the shares of Series A Preferred not yet redeemed, with irrevocable instructions and authority to the bank or trust corporation to pay the Redemption Price for such shares to their respective holders on or after the Redemption Date upon receipt of notification from the Corporation that such holder has surrendered his share certificate to the Corporation pursuant to section 3(e) above.  As of the Redemption Date, the deposit shall constitute full payment of the Redemption Price for the shares of Series A Preferred Stock to their holders, and from and after the Redemption Date the shares so called for redemption shall be redeemed and deemed to be no longer outstanding, and the holders thereof shall cease to be stockholders with respect to such shares and shall have no rights with respect thereto except the right to receive from the bank or trust corporation payment of the Redemption Price of the shares, without interest, upon surrender of certificates therefor.  Such instructions shall also provide that any moneys deposited by the Corporation pursuant to this Section 6(g) for the redemption of shares thereafter converted into shares of the Corporation’s Common Stock pursuant to Section 7 hereof prior to the Redemption Date shall be returned to the Corporation forthwith upon such conversion.  The balance of any moneys deposited by the Corporation pursuant to this Section 6(g) remaining unclaimed at the expiration of one (1) year following the Redemption Date shall thereafter be returned to the Corporation upon its request expressed in a resolution of the Board of Directors of the Corporation.

SECTION 7.  Conversion

(a)       Subject to the terms and conditions of this Section 7, the holder of any share or shares of Series A Preferred shall have the right, at his, her or its option at any time, to convert any such shares of Series A Preferred into such number of fully paid and nonassessable whole shares of Common Stock (the “Conversion Rate”) as is obtained by dividing (i) the Stated Value per share then in effect plus (A) if such conversion occurs prior to the Final Quarterly Dividend Payment Date, the increase in the Stated Value which would have occurred on the Quarterly Dividend Payment Date next following such conversion, pro rated to the date of such conversion,  (B) if such conversion occurs after the Final Quarterly Dividend Payment Date, the amount of any accumulated but unpaid Participating Dividends as of the date of such conversion, or (C) if such conversion occurs during any period after the Initial Mandatory Redemption date during which the Corporation has delayed the mandatory redemption of the Series A Preferred pursuant to Section 6(a) above, the increase in the Stated Value as a result of any Dividends that the shares of the Series A Preferred are entitled to pursuant to Section 4(b), pro rated to the date of such conversion by (ii) the conversion price of $17.00 per share, or, if there has been an adjustment of the conversion price, by the conversion price as last adjusted and in effect at the date any share or shares of Series A Preferred are surrendered for conversion (such price, or such price as last adjusted, being referred to herein as the “Conversion Price”).  Such right of conversion shall be exercised by the holder thereof by giving written notice to the Corporation that the holder elects to convert a stated number of shares of Series

8

A Preferred into Common Stock and by surrender of a certificate or certificates for the shares so to be converted to the Corporation at its principal office (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the holder or holders of the Series A Preferred) at any time during its usual business hours on the date set forth in such notice, together with a statement of the name or names (with address), subject to compliance with applicable laws to the extent such designation shall involve a transfer, in which the certificate or certificates for shares of Common Stock shall be issued.

(b)(i)            Immediately upon the completion of a sale of the Corporation’s Common Stock in a firm commitment, underwritten public offering registered under the Securities Act of 1933, as amended (the “Securities Act”), other than a registration relating solely to a transaction under Rule 145 under the Securities Act (or any successor rule thereto) or to an employee benefit plan of the Corporation (a “Qualified IPO”), at a price offered to the public of $22.00 per share or greater, as adjusted in the same manner as the Conversion Price for any transaction that has resulted in an adjustment to the Conversion Price, the Series A Preferred shall be automatically converted into Common Stock at the Conversion Rate.

(ii)           In the event that the Corporation completes a Qualified IPO at a price offered to the public of less than $22.00 per share, as adjusted in the same manner as the Conversion Price for any transaction that has resulted in an adjustment to the Conversion Price, the Corporation shall have the option to cause each share of the Series A Preferred to be mandatorily converted at a conversion rate equal to the product of (x) the Conversion Rate, multiplied by (y) the quotient of (a) $22.00, as adjusted in the same manner as the Conversion Price for any transaction that has resulted in an adjustment to the Conversion Price, divided by (b) the price per common share offered to the public in such Qualified IPO; provided, that, if the Corporation does not exercise its option to cause the Series A Preferred to be mandatorily converted pursuant to this Section 7(b)(ii), each share of Series A Preferred shall automatically convert into Common Stock at the Conversion Rate on the first day that the average of the Closing Sales Prices per share of Common Stock exceeds $23.50, as adjusted in the same manner as the Conversion Price for any transaction that has resulted in an adjustment to the Conversion Price, for 20 consecutive trading days; provided, further, that if the Series A Preferred is not converted at the option of the Corporation pursuant to this Section 7(b)(ii), the Corporation shall have the option to cause each share of the Series A Preferred to be mandatorily converted at any time at a conversion rate equal to the product of (x) the Conversion Rate, multiplied by (y) the quotient of  (a) $23.50, as adjusted in the same manner as the Conversion Price for any transaction that has resulted in an adjustment to the Conversion Price, divided by (b) the average of the Closing Sales Prices for the 20 consecutive trading days immediately preceding the date the notice of such conversion is mailed to the holders of the Series A Preferred.

(iii)          Upon any conversion of Series A Preferred in accordance with Section 7(b)(ii), the Corporation shall mail written notice thereof to the address of such holder as shown on the books of the Corporation, which notice shall state the applicable Conversion Rate and setting forth in reasonable detail the method of calculation of the Conversion Rate.  Promptly after surrender of the certificate or certificates for the share or shares of the Series A Preferred that are the subject of the conversion notice, the Corporation shall issue and deliver, or cause to be issued and delivered, to the holder, registered in such name or names as such holder may direct, subject to compliance with applicable laws to the extent such designation shall involve a transfer, a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such share or shares of Series A Preferred.

(c)Promptly after the receipt by the Corporation of the written notice referred to in Section 7(a) above and surrender of the certificate or certificates for the share or shares of the Series A Preferred to be converted, the Corporation shall issue and deliver, or cause to be issued and

9

delivered, to the holder, registered in such name or names as such holder may direct, subject to compliance with applicable laws to the extent such designation shall involve a transfer, a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such share or shares of Series A Preferred.  To the extent permitted by law, such conversion shall be deemed to have been effected and the Conversion Price shall be determined as of the close of business on the date on which such written notice shall have been received by the Corporation and the certificate or certificates for such share or shares shall have been surrendered as aforesaid, and at such time the rights of the holder of such shares or shares of Series A Preferred shall cease, and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby.

(d)(i)                No fractional shares shall be issued upon conversion of the Series A Preferred into Common Stock and the number of shares of Common Stock to be issued shall be rounded down to the nearest whole share.  If any fractional interest in a share of Common Stock would, except for the provisions of this Section 7(d), be deliverable upon any such conversion, the Corporation, in lieu of delivering the fractional share thereof, shall pay to the holder surrendering the Series A Preferred for conversion an amount in cash equal to the current value of such fractional interest based upon the Closing Sale Price of the Common Stock on the trading day prior to the date of the notice of conversion.

(ii)               In case the number of shares of Series A Preferred represented by the certificate or certificates surrendered pursuant to Section 7(a) exceeds the number of shares converted, the Corporation shall, upon such conversion, execute and deliver to the holder thereof, at the expense of the Corporation, a new certificate or certificates for the number of shares of Series A Preferred represented by the certificate or certificates surrendered which are not to be converted.

(e)In the event that the Corporation shall declare or pay, without consideration, any dividend or other distribution on the then outstanding shares of Common Stock payable in Common Stock or in any right to acquire Common Stock for no consideration, or shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by stock split, reclassification or otherwise than by payment of a dividend in Common Stock or in any right to acquire Common Stock), or in the event that the then outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, then the applicable Conversion Price for the Series A Preferred in effect immediately prior to such event shall, concurrently with the effectiveness of such event, be proportionately decreased or increased, as appropriate.  In the event that the Corporation shall declare or pay, without consideration, any dividend on the then outstanding shares of Common Stock payable in any right to acquire Common Stock for no consideration, then the Corporation shall be deemed to have made a dividend payable in Common Stock in an amount of shares equal to the maximum number of shares issuable upon exercise of such rights to acquire Common Stock.

(f)In the event that the Corporation shall declare or pay, without consideration, any dividend or other distribution on the then outstanding shares of Common Stock payable in securities of the Corporation other than Common Stock or in any right to acquire securities of the Corporation other than Common Stock for no consideration and other than as otherwise adjusted in this Section 7, then in each such event provision shall be made so that the holders of the Series A Preferred shall be entitled to receive a proportionate share of any such dividend or distribution as though they were the holders of the number of shares of Common Stock of the corporation into which their shares of Series A Preferred are convertible as of the record date fixed for the determination of the holders of Common Stock of the corporation entitled to receive such dividend or other distribution.

10

(g)If the Common Stock issuable upon conversion of the Series A Preferred shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for in Section 7(e) above or a merger or other reorganization referred to in Section 3(d) above), the Conversion Price then in effect shall, concurrently with the effectiveness of such reorganization or reclassification, be proportionately adjusted so that the Series A Preferred shall be convertible into, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive, a number of shares of such other class or classes of stock equivalent to the number of shares of Common Stock that would have been subject to receipt by the holders upon conversion of the Series A Preferred immediately before that change.  In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 7 with respect to the rights of the holders of Series A Preferred after the capital reorganization, reclassification or other action to the end that the provisions of this Section 7 (including adjustment of the Conversion Price then in effect and the number of shares issuable upon conversion of the Series A Preferred) shall be applicable after such action and be as nearly equivalent as possible.

(h)       Upon any adjustment of the Conversion Price, then and in each such case the Corporation shall give written notice thereof, by first class mail, postage prepaid, addressed to each holder of shares of Series A Preferred at the address of such holder as shown on the books of the Corporation (or its transfer agent, if any), which notice shall state the Conversion Price resulting from such adjustment, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.

(i)          In case at any time:

(i)    the Corporation shall declare any dividend upon its Common Stock payable in cash or stock or make any other distribution to the holders of its Common Stock;

(ii)   the Corporation shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights;

(iii)  there shall be any reorganization, recapitalization or reclassification of the capital stock of the Corporation (a “Reorganization”) or the Corporation shall enter into an agreement with respect to any transaction described in Section 3(d) hereof (a “Change of Control Transaction”); or

(iv)  there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Corporation;

then, in any one or more of said cases, the Corporation shall give, by first class mail, postage prepaid, addressed to each holder of any shares of Series A Preferred at the address of such holder as shown on the books of the Corporation (or its transfer agent, if any), (A) at least 10 days’ prior written notice of the date on which the books of the Corporation (or its transfer agent) shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such Reorganization or Change of Control Transaction, and (B) in the case of any such Reorganization or Change of Control Transaction, at least 10 days’ prior written notice of the date when the same shall take place.  Such notice in accordance with the foregoing clause (A) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (B) shall also specify the date on

11

which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such Reorganization or Change of Control Transaction, as the case may be.

(j)        The Corporation will at all times reserve and keep available out of its authorized but unissued Common Stock, solely for the purpose of issuance upon the conversion of the Series A Preferred as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding shares of Series A Preferred.  All shares of Common Stock which shall be so issued shall be duly and validly issued and fully paid and nonassessable and free from all taxes, liens and charges arising out of or by reason of the issue thereof, and, without limiting the generality of the foregoing, the Corporation covenants that it will from time to time take all such action as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the effective Conversion Price.  The Corporation will take all such action within its control as may be necessary on its part to assure that all such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirements of any national securities exchange upon which the Common Stock of the Corporation may be listed.

(k)       Shares of Series A Preferred that are converted into shares of Common Stock as provided herein shall not be reissued.

(l)        The issuance of certificates for shares of Common Stock upon conversion of the Series A Preferred shall be made without charge to the holders thereof for any issuance tax in respect thereof, provided that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of Series A Preferred which is being converted.

(m)      The Corporation will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 7 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series A Preferred against impairment.

SECTION 8.  Voting Except as otherwise required by law or as expressly set forth herein, the holders of the Series A Preferred shall vote together with the holders of Common Stock on all matters to be voted on by the shareholders of the Corporation, and each holder of Series A Preferred shall be entitled to one vote for each whole share of Common Stock that would be issuable to such holder upon the conversion of all the shares of Series A Preferred held by such holder on the record date for the determination of stockholders entitled to vote; provided, however, that, no holder of the Series A Preferred will be entitled to vote as a result of increases in the Stated Value of the Series A Preferred after the Issue Date until any applicable waiting period under the Hart Scott Rodino Anitrust Improvements Act of 1976, as amended, shall have expired or been terminated to the extent that such waiting period would be triggered by such holder’s acquisition of shares of Series A Preferred or as a result of increases in the Stated Value thereof after the Issue Date.  In the event any matter requires a separate vote of the holders of the Series A Preferred as a class as a matter of law or as expressly set forth herein, the approval of two-thirds of the shares of the Series A Preferred voting in connection with such matter shall be necessary to approve such matter.

SECTION 9.  Restriction of Participation in Reorganization Each holder of shares of Series A Preferred, by its acceptance thereof, shall be deemed to have agreed that it shall not participate in the Reorganization Transactions with respect to the shares of the Series A Preferred.  As used herein, “Reorganization Transactions” shall mean one or more dividends on, or repurchases or redemptions of,

12

equity interests of the Corporation (including the cash settlement of employee stock options or other employee incentive plans) prior to March 31, 2004 in an aggregate amount not to exceed $300.0 million plus (1) net cash proceeds from the sale of shares of the Series A Preferred, (2) the net cash proceeds (on an after tax basis) received from the installment payment due in January 2004 in connection with the antitrust litigation settlement with Hillenbrand Industries, Inc., which amount shall not exceed $47.0 million, (3) the estimated tax benefit to the Corporation from the recapitalization, including the exercise or repurchase of stock options in connection therewith, which amount shall not exceed $40.0 million and (4) the cash proceeds received, if any, from the exercise of stock options repurchased in connection with the recapitalization.

SECTION 10.  Definitions

“Acquired Indebtedness” means Indebtedness of a Person or any of its Subsidiaries (1) existing at the time such Person becomes a Restricted Subsidiary of the Corporation or at the time it merges or consolidates with the Corporation or any of its Restricted Subsidiaries or (2) which becomes Indebtedness of the Corporation or a Restricted Subsidiary in connection with the acquisition of assets from such Person, and in each case not incurred by such Person or its Subsidiary in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Corporation or such acquisition, merger or consolidation.

“Affiliate” means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person.  The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and terms “controlling” and “controlled” have meanings correlative of the foregoing.

“Asset Acquisition” means (1) an Investment by the Corporation or any Restricted Subsidiary of the Corporation in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Corporation or any Restricted Subsidiary of the Corporation, or shall be merged with or into the Corporation or any Restricted Subsidiary of the Corporation, or (2) the acquisition by the Corporation or any Restricted Subsidiary of the Corporation of the assets of any Person (other than a Restricted Subsidiary of the Corporation) which constitute all or substantially all of the assets of such Person or comprises any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business.

“Asset Sale” means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by the Corporation or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Corporation or a Restricted Subsidiary of the Corporation of:

(1)any Capital Stock of any Restricted Subsidiary of the Corporation; or

(2)any other property or assets of the Corporation or any Restricted Subsidiary of the Corporation other than in the ordinary course of business; provided, however, that Asset Sales shall not include:

(a)   a transaction or series of related transactions for which the Corporation or its Restricted Subsidiaries receive aggregate consideration of less than $5.0 million,

13

(b)   the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Corporation as permitted under the “Merger, Consolidation and Sale of Assets” covenant of the High Yield Indenture or any such disposition that constitutes a “Change of Control” under the High Yield Indenture,

(c)   sales of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of “Qualified Securitization Transaction” to a Securitization Entity for the fair market value thereof, including cash in an amount at least equal to 75% of the fair market value thereof,

(d)   transfers of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of “Qualified Securitization Transaction” (or a fractional undivided interest therein) by a Securitization Entity in a Qualified Securitization Transaction,

(e)   Investments and Restricted Payments that are not prohibited by the High Yield Indenture, or

(f)    the distribution of any Equity Interests of any Subsidiary of the Corporation for the purpose of establishing a holding company structure in compliance with the “Merger, Consolidation and Sale of Assets” covenant of the High Yield Indenture.

“Board of Directors” means, as to any Person, the board of directors of such Person.

“Capital Contribution” means any contribution to the equity of the Corporation from a direct or indirect parent of the Corporation for which no consideration is given.

“Capital Stock” means (1) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person and (2) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person, as adjusted in the same manner as the Conversion Price for any transaction that has resulted in an adjustment to the Conversion Price

“Capitalized Lease Obligation” means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP.

“Closing Sale Price” on any date shall mean the closing per share sale price (or if no closing sale price is reported, the average of the average bid and the average ask prices) for the Common Stock as reported in composite transactions for the principal U.S. securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a U.S. national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation system or by the National Quotation Bureau Incorporated.  In the absence of such a quotation, “Closing Sale Price” shall be determined in good faith by the Board of Directors of the Corporation, based on the advice of a non-affiliated investment banking firm selected by the Corporation reasonably acceptable to the holders of two-thirds of the outstanding shares of Series A Preferred.

“Common Stock” of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common stock,

14

whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock.

“Consolidated EBITDA” means, with respect to any Person, for any period, the sum (without duplication) of

(1)Consolidated Net Income, and

(2)to the extent Consolidated Net Income has been reduced thereby,

(A)all income taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary, unusual or nonrecurring gains or losses or taxes attributable to sales or dispositions outside the ordinary course of business) and any payments to the Parent pursuant to clause (8) of the last paragraph of Section 5(b) above,

(B)Consolidated Interest Expense,

(C)the aggregate charges for depreciation, amortization and impairment of goodwill or other intangible assets of such Person and its Restricted Subsidiaries for such period,

(D)the unrealized foreign currency losses of such Person and its Restricted Subsidiaries for such period,

(E)other non-cash charges of such Person and its Restricted Subsidiaries for such period, less (i) any non-cash charges increasing Consolidated Net Income during such period and (ii) the amount of all cash payments made by such Person or any of its Restricted Subsidiaries during such period, to the extent such payments relate to non-cash charges that were added back in determining Consolidated EBITDA for such period or any prior period,

(F)for purposes of determining the Consolidated Fixed Charge Coverage Ratio or the Leverage Ratio (and the components thereof) for any Four Quarter Period that includes the Issue Date, the Transaction Expenses,

(G)management fees paid pursuant to the Management Agreement paid within the twelve month period immediately prior to the Issue Date; provided that no further management fee payments are made after August 31, 2003, or required to be made, thereunder,

(H)cash expenses for stock option and stock repurchase for the twelve month period immediately prior to the Issue Date and cash expenses related thereto incurred on or after the Issue Date, and

(I)research and development expense write-offs during the twelve month period immediately prior to the Issue Date,

in each case as determined on a consolidated basis for such Person and its Restricted Subsidiaries in accordance with GAAP.

“Consolidated Fixed Charge Coverage Ratio” means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the “Four Quarter Period”)

15

ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the “Transaction Date”) to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, “Consolidated EBITDA” and “Consolidated Fixed Charges” shall be calculated after giving effect on a pro forma basis for the period of such calculation to:

(1)the incurrence or repayment of any Indebtedness of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period and

(2)any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (provided that such Consolidated EBITDA shall be included only to the extent includable pursuant to the definition of “Consolidated Net Income”) attributable to the assets which are the subject of the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period.

If such Person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating “Consolidated Fixed Charges” for purposes of determining the denominator (but not the numerator) of this “Consolidated Fixed Charge Coverage Ratio,”

(1)interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date;

(2)if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four Quarter Period; and

(3)notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements.

“Consolidated Fixed Charges” means, with respect to any Person for any period, the sum, without duplication, of (1) Consolidated Interest Expense, plus (2) the product of (A) the amount of all dividend payments on any series of Preferred Stock of such Person (other than (x) dividends paid in Qualified Capital Stock and (y) dividends on the Series A Preferred, the net proceeds of which will be used for the

16

Distribution, to the extent that they are paid in kind or accrete) paid, accrued or scheduled to be paid or accrued during such period times (B) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal.

“Consolidated Indebtedness” means on any date, with respect to the Corporation and its Restricted Subsidiaries on a Consolidated basis, all Indebtedness of the Corporation and its Restricted Subsidiaries which by its terms or by the terms of any instrument or agreement relating thereto matures more than one year after the date of incurrence thereof, and any such Indebtedness maturing within one year from the date of incurrence which is directly or indirectly renewable or extendible at the option of such Person to a date more than one year from such date of incurrence (including an option of such Person under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from such date of incurrence) and all Guarantee Obligations of the Corporation and its Restricted Subsidiaries on such date in respect of any such Indebtedness of Persons other than the Corporation and its Restricted Subsidiaries.

“Consolidated Interest Expense” means, with respect to any Person for any period, the sum of, without duplication:

(1)the aggregate of the interest expense of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including without limitation,

(A)any amortization of debt discount,

(B)the net costs under Interest Swap Obligations,

(C)all capitalized interest, and

(D)the interest portion of any deferred payment obligation, but excluding amortization or write-off of deferred financing costs;

but, in all cases, excluding dividends on the Series A Preferred, the net proceeds of which will be used for the Distribution, to the extent that they are paid in kind or accrete, except to the extent that they constitute Disqualified Capital Stock; and

(2)the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP.

“Consolidated Net Income” means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP minus, after the Holding Company Merger, any payments to the Parent pursuant to clause (8) of the last paragraph of Section 5(b) above; provided that there shall be excluded therefrom:

(1)after-tax gains from asset sales or abandonments or reserves relating thereto,

(2)after-tax items classified as extraordinary or nonrecurring gains,

(3)the net income (but not loss) of any Restricted Subsidiary of the referent Person to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is restricted by a contract, operation of law or otherwise,

17

(4)the net income of any Person in which the referent Person has an interest, other than a Restricted Subsidiary of the referent Person, except to the extent of cash dividends or distributions paid to the referent Person or to a Restricted Subsidiary of the referent Person by such Person,

(5)any restoration to income of any contingency reserve in accordance with GAAP, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following the Issue Date,

(6)income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued),

(7)in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person’s assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets,

(8)after-tax gains from the installment payment due in January 2004 in connection with the anti-trust litigation settlement with Hillenbrand Industries, Inc., and

(9)tax benefits from the exercise of employee stock options to the extent proceeds from such exercise are used to fund the Distribution.

“Continuing Directors” means, as of the date of determination, any member of the Board of Directors of the Corporation, or, after a Holding Company Merger, Parent who (1) was a member of the Board of Directors of the Corporation on the Issue Date or (2) was nominated for election or elected to the Board of Directors of the Corporation or, after a Holding Company Merger, Parent, with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election.

“Credit Agreement” means the Credit Agreement to be dated on or about the Issue Date, among the Corporation, the lenders party thereto in their capacities as lenders thereunder, Morgan Stanley Senior Funding Inc., as Administrative Agent, and Credit Suisse First Boston, acting through its Cayman Islands Branch, as Syndication Agent, together with the documents related thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented, replaced, restated or otherwise modified from time to time, including any agreement and related documents (including, without limitation, any loan agreement, note, note purchase agreement and indenture) extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder (provided that such increase in borrowings is permitted by Section 5(a) above) or adding Restricted Subsidiaries of the Corporation as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement and related documents or any successor or replacement agreement and related documents and whether by the same or any other agent, lender, group of lenders or otherwise and whether through any credit facilities or other borrowing or lending arrangements, including through issuing senior or subordinated notes.

“Currency Agreement” means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Corporation or any Restricted Subsidiary of the Corporation against fluctuations in currency values.

“Disqualified Capital Stock” means that portion of any Capital Stock (other than shares of the Series A Preferred)  which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a

18

sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof on or prior to the Final Mandatory Redemption Date; provided that any Capital Stock that would not constitute Disqualified Capital Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an “asset sale” or “change of control” occurring prior to the Final Mandatory Redemption Date shall not constitute Disqualified Capital Stock if the “asset sale” or “change of control” provisions applicable to such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Corporation’ s repurchase of the Series A Preferred.

“Distribution” means one or more dividends on, or repurchases or redemptions of, Equity Interests (including the cash settlement of employee stock options or other employee incentive plans) prior to March 31, 2004 in an aggregate amount not to exceed $300 million plus (1) net cash proceeds from the sale of Preferred Stock completed prior to March 31, 2004, (2) the net cash proceeds (on an after tax basis) received from the installment payment due in January 2004 in connection with the antitrust litigation settlement with Hillenbrand Industries, Inc., which amount shall not exceed $47 million, (3) the tax benefit to the Corporation from the recapitalization, including the exercise or repurchase of stock options in connection therewith, which amount shall not exceed $40 million and (4) the cash proceeds received from the exercise of stock options repurchased in connection with the recapitalization.

“Equity Interests” of a Person means Capital Stock or partnership, participation or membership interests of such Person and all warrants, options or other rights to acquire Capital Stock or partnership, participation or membership interests of such Person (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock or partnership, participation or membership interests of such Person).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Existing Notes” means the Corporation’ s existing 9 5/8% Senior Subordinated Notes due 2007, Series A and the 9 5/8% Senior Subordinated Notes due 2007, Series B and the related guarantees.

“Fremont” means Fremont Partners, L.P. and its affiliates.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect on the Issue Date.

“Guarantee Obligation”: as to any Person (the “guaranteeing person”), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of

19

instruments for deposit or collection in the ordinary course of business.  The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (x) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (y) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing person in good faith.

“High Yield Notes” means the Corporation’s 7 3/8% Senior Subordinated Notes due 2013, issued pursuant to an indenture (the “High Yield Indenture”) dated August 11, 2003.

“Holding Company Merger” means a merger of the Corporation and one of its Subsidiaries for the purposes of establishing a holding company structure.

“Indebtedness” means with respect to any Person, without duplication,

(1)all Obligations of such Person for borrowed money,

(2)all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments,

(3)all Capitalized Lease Obligations of such Person,

(4)all Obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not overdue by 90 days or more or are being contested in good faith by appropriate proceedings),

(5)all Obligations for the reimbursement of any obligor on any letter of credit, banker’ s acceptance or similar credit transaction,

(6)guarantees and other contingent obligations in respect of Indebtedness of other Persons of the type referred to in clauses (1) through (5) above and clause (8) below,

(7)all Obligations of any other Person of the type referred to in clauses (1) through (6) which are secured by any Lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the Obligation so secured,

(8)all Obligations under Currency Agreements and Interest Swap Obligations of such Person, and

(9)all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. For purposes hereof, the “maximum fixed repurchase price” of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the High Yield Indenture, and if such price is based upon, or measured by, the fair market value of such

20

Disqualified Capital Stock, such fair market value shall be determined in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock.

For purposes hereof, the amount of any Indebtedness referred to in clause (8) of the preceding paragraph shall be the net amounts (including by offset of amounts payable thereunder), including any net termination payments, required to be paid to a counterparty rather than any notional amount with regard to which payments may be calculated.

“Interest Swap Obligations” means the obligations of any Person pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements.

“Investment” means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person. “Investment” shall exclude extensions of trade credit by the Corporation and its Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Corporation or such Restricted Subsidiary, as the case may be.

“Leverage Ratio” means at any time, the ratio of (a) Consolidated Indebtedness at such time to (b) Consolidated EBITDA for the most recent period of four consecutive fiscal quarters.

“Lien” means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest).

“Management Agreement” means the management agreement among the Corporation, Fremont and RCBA, in effect on the Issue Date.

“Obligations” means all obligations for principal, premium, interest, penalties, fees, commissions, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Parent” means, after the Holding Company Merger, any Person that, directly or indirectly, holds all or substantially all of the Qualified Capital Stock of the Corporation.

“Permitted Holders” means RCBA, Fremont, James R. Leininger, M.D., and his Affiliates and, after the Holding Company Merger, any Parent.

“Permitted Investments” means:

(1)Investments by the Corporation or any Restricted Subsidiary of the Corporation in any Person that is or will become immediately after such Investment a Restricted Subsidiary of the Corporation or that will merge or consolidate into the Corporation or a Restricted Subsidiary of the Corporation;

(2)Investments in the Corporation by any Restricted Subsidiary of the Corporation; provided that any Indebtedness evidencing such Investment is unsecured and subordinated, pursuant to a written

21

agreement, to the Corporation’ s obligations under the High Yield Notes and the High Yield Indenture;

(3)Investments in cash and cash equivalents;

(4)loans and advances to employees and officers of the Corporation and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of $10.0 million at any one time outstanding pursuant to this clause (4);

(5)Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Corporation’ s or its Restricted Subsidiaries’ businesses and otherwise in compliance with the High Yield Indenture;

(6)Investments in Unrestricted Subsidiaries not to exceed $10.0 million at any one time outstanding pursuant to this clause (6);

(7)Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers;

(8)Investments made by the Corporation or its Restricted Subsidiaries as a result of consideration received in connection with an asset sale;

(9)Investments existing on the date of the High Yield Indenture;

(10)accounts receivable, advances, loans, guarantees or extensions of credit created or acquired in the ordinary course of business, consistent with past or industry practice;

(11)any Investment by the Corporation or a Wholly Owned Restricted Subsidiary of the Corporation in a Securitization Entity or any Investment by a Securitization Entity in any other Person in connection with a Qualified Securitization Transaction; provided that any Investment in a Securitization Entity is in the form of a purchase money note or an equity interest;

(12)Investments committed to by the Corporation or its Restricted Subsidiaries on the Issue Date not to exceed $1.5 million in the aggregate pursuant to this clause (12);

(13)Investments in Strategic Joint Ventures not to exceed $20.0 million outstanding at any one time pursuant to this clause (13); and

(14)any Investment in any Person solely in exchange for Qualified Capital Stock or, after the Holding Company Merger, Capital Stock of the Parent, or from a Capital Contribution or the net cash proceeds of any substantially concurrent sale of the Corporation’ s Qualified Capital Stock.

“Person” means an individual, partnership, corporation, unincorporated organization, limited liability company, trust or joint venture, or a governmental agency or political subdivision thereof.

“Preferred Stock” of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation.

“Qualified Capital Stock” means any Capital Stock that is not Disqualified Capital Stock.

22

“Qualified Securitization Transaction” means any transaction or series of transactions that may be entered into by the Corporation or any of its Subsidiaries pursuant to which the Corporation or any of its Subsidiaries may sell, convey or otherwise transfer to (1) a Securitization Entity (in the case of a transfer by the Corporation or any of its Subsidiaries) and (2) any other Person (in the case of a transfer by a Securitization Entity), or may grant a security interest in, any accounts receivable or equipment (whether now existing or arising or acquired in the future) of the Corporation or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable and equipment, all contracts and contract rights and all guarantees or other obligations in respect of such accounts receivable and equipment, proceeds of such accounts receivable and equipment and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable and equipment.

“RCBA” means Blum Capital Partners, L.P. and its Affiliates.

“Refinance” means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. “Refinanced” and “Refinancing” shall have correlative meanings.

“Restricted Subsidiary” of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Securitization Entity” means a Wholly Owned Restricted Subsidiary of the Corporation (or another Person in which the Corporation or any Subsidiary of the Corporation makes an Investment and to which the Corporation or any Subsidiary of the Corporation transfers accounts receivable or equipment and related assets) which engages in no activities other than in connection with the financing of accounts receivable or equipment and which is designated by the Board of Directors of the Corporation as a Securitization Entity

(1)no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which

(A)is guaranteed by the Corporation or any Subsidiary of the Corporation (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings),

(B)is recourse to or obligates the Corporation or any Subsidiary of the Corporation in any way other than pursuant to Standard Securitization Undertakings or

(C)subjects any property or asset of the Corporation or any Subsidiary of the Corporation, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings,

(2)with which neither the Corporation nor any Subsidiary of the Corporation has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Corporation or such Subsidiary than those that might be obtained at the time from Persons that are

23

not Affiliates of the Corporation, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity, and

(3)to which neither the Corporation nor any Subsidiary of the Corporation has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results.

“Standard Securitization Undertakings” means representations, warranties, covenants and indemnities entered into by the Corporation or any Subsidiary of the Corporation which are reasonably customary in an accounts receivable or equipment securitization transaction.

“Strategic Joint Venture” means a corporation, partnership or other entity engaged in a business which is related to that of the Corporation or any of its Restricted Subsidiaries or which provides services, products or intellectual property to the Corporation or any of its Restricted Subsidiaries or uses the products, services or intellectual property of the Corporation or any of its Restricted Subsidiaries.

“Subsidiary,” with respect to any Person, means (1) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person or (2) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person.

“Transaction Expenses” means the expenses relating to the offering of the High Yield Notes, execution and initial borrowings under the Credit Agreement, the redemption of the Existing Notes, the sale of the Preferred Stock the net proceeds of which are used in connection with the Distribution, the Distribution and the interest expense on the Existing Notes after the Issue Date.

“Unrestricted Subsidiary” of any Person means:

(1)any Subsidiary of such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below and

(2)any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Corporation or any Restricted Subsidiary of the Corporation that is not a Subsidiary of the Subsidiary to be so designated; provided that each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Corporation or any of its Restricted Subsidiaries (other than the assets of such Restricted Subsidiary to be designated an Unrestricted Subsidiary and its Subsidiaries).

The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if immediately after giving effect to such designation, the Corporation’s Leverage Ratio is no more than 5.5 to 1, unless such designated Subsidiary shall, at the time of designation, have no Indebtedness outstanding other than Indebtedness that can be incurred pursuant to Section 5(a) above.

24

Notwithstanding the foregoing, to the extent Federal Express Trust No. 1991-B and Federal Express Trust No. 1991-A are Subsidiaries of the Corporation, each such entity will be an Unrestricted Subsidiary of the Corporation unless and until the Board of Directors of the Corporation designates it to be a Restricted Subsidiary in accordance with the foregoing provisions.

“Wholly Owned Restricted Subsidiary” of any Person means any Restricted Subsidiary of such Person of which all the outstanding voting securities (other than, in the case of a foreign Restricted Subsidiary, directors’ qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Restricted Subsidiary of such Person.

[Signature Page Follows]

25

IN WITNESS WHEREOF, the Corporation has caused the Statement of Designation to be duly executed in its corporate name on this      day of August, 2003.

Kinetic Concepts, Inc.
By:
Name:	Dennert O. Ware
Title:	President and Chief Executive Officer
By:
Name:	Dennis E. Noll
Title:	Senior Vice-President, General Counsel and Secretary

This instrument was acknowledged before me on                               by Dennert O. Ware, President and Chief Executive Officer and, Dennis E. Noll, as Secretary of Kinetic Concepts, Inc.

Notary Public

(Seal, if any)

[Signature Page to Statement of Designations]

EX-10.10

Exhibit 10.10

WAIVER AND CONSENT

THIS WAIVER AND CONSENT (this “Waiver and Consent”), dated December        , 2002 but effective for all purposes as of September 27, 2002, is executed by KINETIC CONCEPTS, INC., a Texas corporation (the “Company”), JAMES R. LEININGER (“Pledgor”), each of the SHAREHOLDERS of the Company under that certain Agreement Among Shareholders (the “Shareholders’ Agreement”), dated November 5, 1997, by and among the Company and the Shareholders of the Company named therein (such shareholders, other than Pledgor, referred to herein as the “Shareholders”), JPMORGAN CHASE BANK, a New York banking corporation (“Chase”), in its capacity as administrative agent for the Lenders (as defined herein) (in such capacity, together with its successors in such capacity, “Administrative Agent”), and Chase and BANK ONE, NA, in their capacity as lenders (together with their respective successors and assigns, individually a “Lender” and collectively the “Lenders”) and as issuing lenders.  (Capitalized terms not defined herein shall have the same meanings set forth in the Shareholders’ Agreement).

RECITALS

WHEREAS, Pledgor is a party to that certain Amended and Restated Credit Agreement (the “Credit Agreement”), dated as of September 27, 2002, among Pledgor, Administrative Agent and the Lenders; and

WHEREAS, the Lenders have agreed to make certain extensions of credit to Pledgor and certain affiliates of Pledgor pursuant to the terms of the Credit Agreement, conditioned on the indebtedness and obligations of Pledgor and such affiliates under the Credit Agreement and the other loan documents (as defined in the Credit Agreement) (such indebtedness and obligations as referenced and defined in the Credit Agreement being also referred to herein as the “Obligations”) being secured by, among other collateral, such of Pledgor’s shares as constitute 19.947% of the outstanding Common Stock of the Company (the “Shares”), pursuant to that certain Security and Pledge Agreement (the “Security and Pledge Agreement”) to be entered into by and between Pledgor, and Administrative Agent, for the benefit of Lenders; and

WHEREAS, the agreements of the Lenders under the Credit Agreement are further conditioned on the execution and delivery of this Consent and Waiver by the Company and the Shareholders evidencing certain agreements of the Company and the Shareholders with respect to the rights of the Administrative Agent and the Lenders under the Security and Pledge Agreement; and

WHEREAS, the Company and the Shareholders have agreed to enter into this Consent and Waiver conditioned upon the agreements of the Administrative Agent and the Lenders set forth herein.

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

1.  Waiver and Consent.

(a)Notwithstanding the provisions of Section 2.01 and Section 2.02 of the Shareholders’ Agreement, each of the Company and the Shareholders hereby consent (i) to the pledge of the Shares by Pledgor to Administrative Agent for the benefit of the Lenders under the Security and Pledge Agreement and, subject to the provisions set forth herein, any exercise of the rights or remedies with respect to a disposition of the Shares pursuant to the Security and Pledge Agreement, and (ii) subject to the provisions set forth herein, to any subsequent Transfer by Administrative Agent or any Holder (as defined herein) to any Person who agrees to be bound by the Shareholders’ Agreement;

(b)Should the Administrative Agent elect to accept in full or partial satisfaction of any indebtedness secured under the Security and Pledge Agreement any or all of the Shares pursuant to Section 9.620 of the Texas Business and Commerce Code, in connection with the exercise of its rights and remedies under the Security and Pledge Agreement, each of the Company and the Shareholders hereby consent to such acceptance by the Administrative Agent and, except as otherwise expressly set forth herein, waive any rights to a proposal under Section 9.621 of the Texas Business and Commerce Code; and

(c)Subject to the provisions set forth herein, each of the Company and the Shareholders hereby waive any and all rights provided under Section 2.03 of the Shareholders’ Agreement, including but not limited to all tag-along and Participation Offer rights, in connection with the Pledge, resulting from any Foreclosure Disposition (as hereinafter defined), and, in the event that the Administrative Agent on behalf of the Lenders, or any of the Lenders individually, or any of their respective affiliates acquires the Shares pursuant to a Foreclosure Disposition, any subsequent Transfer by the Administrative Agent or such Lender or affiliate made to any Person, provided however, in the case of any such subsequent transfer by the Administrative Agent, any Lender or any such affiliate, such rights are waived only to the extent of those Shares are transferred for consideration equal to or less than $50,000,000, in the aggregate.  Pledgor, the Shareholders and the Company agree that the Participation Offer rights shall be suspended in connection with any sale, transfer or conveyance made by each of the Shareholders, but only to the extent that the aggregate consideration for the shares transferred by any such Shareholder are equal to or less than $50,000,000.  Upon the later of (i) the termination of the Security and Pledge Agreement or (ii) a subsequent Transfer of the Shares by Administrative Agent or any Holder to any Person in connection with a disposition of the Shares, all of the rights, duties and obligations of the Pledgor, the Shareholders and any transferee who agrees to be bound by the Shareholders’ Agreement with respect to the Participation Offer rights under Section 2.03 shall be fully reinstated.

2.  Notice of Default.  Pledgor covenants and agrees to promptly deliver to the Shareholders and the Company upon receipt thereof, and in any event within three (3) business days of the receipt thereof, any Default Notice (as such term is defined in the Security and Pledge Agreement) under the Security and Pledge Agreement and any subsequent communication, written or oral, regarding such default and any proposed sale or transfer of the Shares, including without limitation, a Foreclosure Disposition.

3.  Notice of Foreclosure Disposition; Public Sale.  In the event that the Lenders elect to direct the Administrative Agent to conduct a sale of any of the Shares, or any portion thereof, in

connection with the exercise any of its remedies under the Security and Pledge Agreement (a “Foreclosure Disposition”), then, in the case of a Foreclosure Disposition which is to be a public sale:

(a)Each of the Company and the Shareholders shall receive written notice from the Administrative Agent of the time and place of such Foreclosure Disposition and the Note Purchase Price as of such date not less than ten (10) business days prior to the date of such Foreclosure Disposition, such notice to be given in accordance with the provisions of Section 15 hereof (the “Foreclosure Sale Notice”), and such Foreclosure Disposition shall not occur prior to the expiration of the Pre-Foreclosure Option Period (as defined in Section 4 below).  If the Company and/or any of the Shareholders agree to purchase any or all of the Shares in the Foreclosure Disposition, then the closing of such purchases shall take place on the forty-fifth (45^th) day of such agreement, unless the Administrative Agent and all such purchasers agree to a different closing date.

(b)The Foreclosure Disposition shall be conditioned upon the right of the Company and the Shareholders to approve the public sale purchaser within a period of ten (10) business days following the date of their receipt of Foreclosure Notice (as hereinafter defined), and shall not be deemed to be consummated until the obtainment (or deemed obtainment) of the approvals contemplated by Section 3(c) below; provided, however, that in the event that the Administrative Agent on behalf of the Lenders that are Lenders as of the date hereof, or any assignee which is a nationally or state chartered bank, federal savings bank, quasi-governmental lending agency or similar banking or lending institution, or any of such Lenders individually, or any of their respective affiliates shall be the public sale purchaser at a Foreclosure Disposition, then such sale shall be deemed approved by the Company and the Shareholders and no further approval as provided in this Section 3 shall be required.

(c)The Administrative Agent shall deliver to the Company and each of the Shareholders written notice of the occurrence of such conditional Foreclosure Disposition and the name of the public sale purchaser (the “Foreclosure Notice”).  Within ten (10) business days following receipt of the Foreclosure Notice, the Company and each of the Shareholders shall deliver to the Administrative Agent, in writing, either (i) its approval of the public sale purchaser as set forth in the Foreclosure Notice, or (ii) its election to purchase the Obligations from the Lenders pursuant to the provisions of Section 6 below.  The failure of the Company or any of the Shareholders to deliver its written approval of the public sale purchaser or election to purchase the Obligations prior to the expiration of such ten (10) business day period shall be deemed to constitute the approval of the public sale purchaser as set forth in the Foreclosure Notice and, unless one of the Company or any of the Shareholders shall deny its approval of the public sale purchaser, the Administrative Agent shall have the right to consummate the Foreclosure Disposition, provided that as a condition precedent to such transfer, such public sale purchaser becomes a party to and agrees to be bound by all terms and conditions of the Shareholders’ Agreement.

4.  Pre-Foreclosure Purchase Option.  Prior to any Foreclosure Disposition, the Administrative Agent and each of the Lenders agrees that the Company and the Shareholders shall have the exclusive option to purchase (i) the Obligations (the “Pre-Foreclosure Note Option”) at the price and upon the terms and conditions set forth in Section 6 hereof or (ii) the Shares (the “Pre-Foreclosure Purchase Option”) at price (the “Pre-Foreclosure Purchase Price”) equal to the

Appraised Value (as defined in the Security and Pledge Agreement) of such Shares (the “Pre-Foreclosure Shares”).

(a)To exercise the Pre-Foreclosure Note Option or Pre-Foreclosure Purchase Option, the Company and/or Shareholders (a “Pre-Foreclosure Exercising Party”) shall deliver to the Administrative Agent written notice (the “Pre-Foreclosure Purchase Notice”) of its intention to exercise the Pre-Foreclosure Note Option or Pre-Foreclosure Purchase Option not later than ten (10) business days following the delivery of the Foreclosure Sale Notice (the “Pre-Foreclosure Purchase Option Exercise Period”).

(b)If the Company and/or Shareholders do not exercise the Pre-Foreclosure Note Option, but the Company and/or any of the Shareholders have elected to exercise the Pre-Foreclosure Purchase Option prior to the expiration of the Pre-Foreclosure Note Option Exercise Period, then the closing of the Pre-Foreclosure Purchase Option shall occur on or before the forty-fifth (45th) day after the Pre-Foreclosure Purchase Notice is delivered.  To the extent that more than one of the Company and/or the Shareholders desire to exercise such option to acquire the Pre-Foreclosure Shares, then such option shall be an option exercisable first by the Company and then to the extent not fully exercised by the Company, jointly by the Shareholders with respect to the remaining Pre-Foreclosure Shares to the extent of their respective pro rata interests (as defined below); provided, however, in no event shall the option to acquire the Pre-Foreclosure Shares be exercisable with respect to less than the number of Shares that have an aggregate Pre-Foreclosure Purchase Price equal to the Note Purchase Price or, if the Pre-Foreclosure Purchase Price for all of the Pre-Foreclosure Shares is less than or equal to the Note Purchase Price, all of the Pre-Foreclosure Shares.  For purposes of this Section 4(b), the term “pro rata interest” shall mean the ratio of the number of shares of Common Stock held by a Pre-Foreclosure Exercising Party (other than the Company) to the number of shares of Common Stock held by all Pre-Foreclosure Exercising Parties (other than the Company).  At such closing, the Administrative Agent shall deliver any and all certificates, instruments and/or other documents representing the Pre-Foreclosure Shares, free and clear of the security interests of the Lenders, in the form reasonably requested by the Pre-Foreclosure Exercising Party, but without recourse or warranty, express or implied, and the Pre-Foreclosure Exercising Party shall deliver a bank or certified check (or wire transfer) to the Administrative Agent, in an amount equal to the Pre-Foreclosure Purchase Price.

(c)Pledgor acknowledges and agrees that a transfer of the Pre-Foreclosure Shares pursuant this Section 4 shall constitute a commercially reasonable sale under the applicable provisions of the Uniform Commercial Code as in effect in the State of Texas (the “UCC”) and a proper disposition of the collateral pursuant to the security interest granted to the Administrative Agent for the benefit of the Lenders under the Security and Pledge Agreement, and Pledgor shall have no right to contest the amount of the consideration or credit given with respect to the Lender Acquired Shares in accordance with this Section 4.

(d)Notwithstanding anything in this Section 4 or otherwise in this Waiver and Consent to the contrary, nothing herein shall preclude the Administrative Agent and/or the Lenders, or any of them, from taking steps permitted by applicable laws preliminary to the conduct of a public or private sale or other disposition in accordance with the rights and remedies of the Lenders under the Security and Pledge Agreement and/or the UCC or otherwise under the Loan Documents.

5.  Private Sale Offers and Rights of First Refusal.  If the Company and/or Shareholders do not exercise the Pre-Foreclosure Note Option or Pre-Foreclosure Purchase Option prior to the expiration of the Pre-Foreclosure Purchase Option Exercise Period, then, in the event of a proposed Foreclosure Disposition which is to be a private sale pursuant to an offer for the purchase and sale of the Shares, or any portion thereof, which the Lenders desire to accept (a “Proposed Private Sale Offer”), then the Administrative Agent shall deliver to the Company and the Shareholders written notice of the Proposed Private Sale Offer in accordance with the provisions of Section 5(a) below (the “Private Sale Notice”), and the Company and the Shareholders shall have the right to purchase the Shares which are the subject of the Proposed Private Sale Offer (the “Private Sale Offered Shares”) on the same terms and conditions as the Proposed Private Sale Offer in accordance with and subject to the provisions of Section 5(b) below.

(a)The Administrative Agent shall deliver to the Company and to each of the Shareholders a Private Sale Notice prior to its acceptance of any Proposed Private Sale Offer, in the manner and at the addresses set forth in Section 15 hereof.  The Private Sale Notice shall disclose the terms of the Proposed Private Sale Offer, including the number of Private Sale Offered Shares, the aggregate purchase price for the Private Sale Offered Shares, the name of the proposed transferee, the method of payment, the closing date of such proposed transfer, and all other material terms and conditions of the Proposed Private Sale Offer and the Note Purchase Price as of such date.

(b)On receipt of the Private Sale Notice, the Company and each of the Shareholders (and their respective nominees) shall have the right and option to acquire the Private Sale Offered Shares, on the same terms and conditions as set forth in the Proposed Private Sale Offer, except that (i) the closing date shall be the date which is forty-five (45) days following the expiration of the Private Sale Offer Notice Period (as defined below), (ii) if the Proposed Private Sale Offer specifies consideration other than cash, the consideration shall be the cash equivalent of the consideration specified in the Proposed Private Sale Offer, and (iii) to the extent that more than one of the Company and/or the Shareholders desire to exercise such option to acquire the Private Sale Offered Shares, then such option shall be an option exercisable first by the Company and then to the extent not fully exercised by the Company, jointly by the Shareholders with respect to the remaining Private Sale Offered Shares to the extent of their respective pro rata interests (as defined below); provided, however, in no event shall the option to acquire the Private Sale Offered Shares be exercisable with respect to less than the entirety of the Private Sale Offered Shares.  If either the Company and/or any Shareholder elects to exercise its option to acquire the Private Sale Offered Shares (a “Private Sale Exercising Party”), such Private Sale Exercising Party shall give notice to the Administrative Agent within ten (10) business days of its receipt of such Private Sale Offer Notice (the “Private Sale Offer Notice Period”).  For purposes of this Waiver and Consent, the term “pro rata interest” shall mean the ratio of the number of shares of Common Stock held by a Private Sale Exercising Party (other than the Company) to the number of shares of Common Stock held by all Private Sale Exercising Parties (other than the Company).  For purposes of this Section 5.5(b), the term “cash equivalent” shall mean (i) the value ascribed to the consideration by mutual agreement of the Administrative Agent and the Private Sale Exercising Parties within five (5) business days of the expiration of the Private Sale Offer Notice Period or (ii) if no such agreement is reached within five (5) business days of the expiration of the Private Sale Offer Notice Period, the value ascribed to such consideration by a nationally-recognized investment bank or appraisal firm engaged by the tenth (10^th) business day after the expiration of the Private Sale Offer Notice Period by the Private Sale Exercising Parties and reasonably acceptable to the Administrative Agent (the

fees and expenses of which shall be borne by Pledgor), which firm shall use a valuation methodology supplied by the Private Sale Exercising Parties and reasonably acceptable to the Administrative Agent, and which firm shall be directed to provide its valuation within thirty (30) days of its engagement.

(c)At the closing of any sale of the Private Sale Offered Shares to a Private Sale Exercising Party pursuant to the provisions of this Section 5, the Administrative Agent shall deliver any and all certificates, instruments and/or other documents representing the Private Sale Offered Shares, free and clear of the security interests of the Lenders, in the form reasonably requested by the Private Sale Exercising Party but without recourse or warranty, express or implied, and the Private Sale Exercising Party shall deliver a bank or certified check (or wire transfer) to the Administrative Agent in an amount equal to the aggregate purchase price set forth in the Proposed Private Sale Offer.

(d)If none of the Company and any of the Shareholders elects to exercise the option to acquire the Private Sale Offered Shares pursuant to this Section 5, then, prior to the expiration of the Private Sale Offer Notice Period, each of the Company and each Shareholder shall deliver to the Administrative Agent, in writing, either (i) its consent to the Transfer pursuant to the Proposed Private Sale Offer, or (ii) its election to purchase the Obligations from the Lenders pursuant to the provisions of Section 6 below.  The failure of the Company or any Shareholder to deliver its written consent or election to purchase the Obligations prior to the expiration of the Private Sale Offer Notice Period shall be deemed to constitute the consent of such party to the Transfer of the Private Sale Offered Shares pursuant to the terms of the Proposed Private Sale Offer, and, if (x) there shall be no Private Sale Exercising Party pursuant to the provisions of this Section 5 (or if any such Private Sale Exercising Party shall fail to consummate the acquisition of the Private Sale Offered Shares as set forth herein) and (y) and neither the Company nor any of the Shareholders elects to purchase the Obligations from the Lenders pursuant to the provisions of Section 6 below, then the Administrative Agent shall have the right to transfer the Private Sale Offered Shares to the proposed transferee on the same terms and conditions set forth in the Private Sale Offer Notice, provided that as a condition precedent to such transfer, such proposed transferee becomes a party to and agrees to be bound by all terms and conditions of the Shareholders’ Agreement and such condition shall not be waived or modified.

(e)Notwithstanding anything in this Section 5 or otherwise in this Waiver and Consent to the contrary, nothing herein shall preclude the Administrative Agent and/or the Lenders, or any of them, from taking steps permitted by applicable laws preliminary to the conduct of a private sale or other disposition in accordance with the rights and remedies of the Lenders under the Security and Pledge Agreement and/or the UCC or otherwise under the Loan Documents.

(f)Pledgor acknowledges and agrees that a transfer of the Shares pursuant this Section 5 shall constitute a commercially reasonable sale under the UCC and a proper disposition of the collateral pursuant to the security interest granted to the Administrative Agent for the benefit of the Lenders under the Security and Pledge Agreement, and Pledgor shall have no right to contest the amount of the consideration or credit given with respect to the Lender Acquired Shares in accordance with this Section 5.

6.  Note Purchase Obligation.  If any of the Company or the Shareholders elect to purchase the Obligations from the Lenders (whether one or more, the “Note Purchasing Party”), (a) pursuant to Section 4(a) or (b) in lieu of (i) granting its approval or deemed approval of public sale purchaser disclosed in a Foreclosure Notice, (ii) granting its consent or deemed consent to a Transfer pursuant to a Proposed Private Sale Offer, or (iii) becoming a Private Sale Exercising Party pursuant to the provisions of Section 5 above, as applicable, Lenders agree to sell and transfer to the Note Purchasing Party, and the Note Purchasing Party agrees to purchase and assume the Leininger Term Notes, Designated Affiliate Term Notes and L/C Obligations (as each is defined in the Credit Agreement) (the Leininger Term Notes, Designated Affiliate Term Notes and L/C Obligations are collectively, the “Term Notes”), including all of the rights, interests and obligations of the Lenders under those of the Loan Documents (as such term is defined under the Credit Agreement) more particularly described on Annex B attached hereto (the “Assigned Loan Documents”), for a purchase price equal to the amount then due under the Term Notes (the “Note Purchase Price”), including all accrued but unpaid interest, and all reasonable out-of-pocket fees and expenses incurred by the Lenders in connection with the enforcement of the Loan Documents as set forth in the Foreclosure Sale Notice or Private Sale Notice, as applicable.

(a)The sale and assignment of the Assigned Loan Documents to the Shareholders shall occur on or before forty-five (45) days after the expiration of the Pre-Foreclosure Purchase Option Exercise Period or Private Sale Offer Notice Period, as applicable.  To the extent that more than one of the Company and/or the Shareholders elect to acquire the Assigned Loan Documents in accordance with Section 6(a), then such option shall be an option exercisable first by the Company and then to the extent not fully exercised by the Company, shall be exercised jointly by the remaining Note Purchasing Parties to the extent of their respective pro rata interests (as defined below) unless otherwise agreed to by the Note Purchasing Parties; provided, however, in no event shall the option to acquire the Term Notes be exercisable with respect to less than the entirety of the Term Notes.  For purposes of this Section 6(b), the term “pro rata interest” shall mean the ratio of the number of shares of Common Stock held by a Note Purchasing Party (other than the Company) to the number of shares of Common Stock held by all Note Purchasing Parties (other than the Company).  At such closing, the Administrative Agent and the Lenders shall deliver an instrument of assignment which is reasonably acceptable to the Lenders and the Note Purchasing Party (subject to the provisions of Section 6(b) below), endorse the Term Notes to the Note Purchasing Party (or its designee), without recourse or warranty (subject to the provisions of Section 6(b) below), and deliver to the Note Purchasing Party the originals of the Term Notes and the other Assigned Loan Documents, the certificates evidencing the Shares, the stock powers held by the Administrative Agent with respect thereto, and such other instruments of conveyance or assignment as shall be reasonably necessary to transfer to the Note Purchasing Party the Obligations and the rights and interests of the Lenders under the Assigned Loan Documents free and clear of liens and encumbrances (subject to the provisions of Section 6(b) below), and the Shareholders shall deliver a bank or certified check (or wire transfer) to the Administrative Agent, in an amount equal to the Note Purchase Price, together with such other acknowledgements of receipt and assumption of the obligations of the Administrative Agents and the Lenders under the Assigned Loan Documents, including but not limited to the obligations to fund the outstanding Letters of Credit (as defined in the Credit Agreement), if any, up to the face amount of such L/C Obligations set forth on Annex B, subject to the terms and conditions thereof.

(b)Lenders’ assignment of the Term Notes and the other Assigned Loan Documents will be without recourse, warranty or representation, express or implied, except that each of the Lenders will represent and warrant to the Note Purchasing Party (i) the amount of the unpaid principal balance and accrued interest due and owing in respect of the Term Notes as of the date of the assignment, (ii) the amounts to be funded under any of the outstanding Letters of Credit, and (iii) that such Lender has not sold, assigned or pledged its interest in the Loan Documents in whole or in part to any person or entity that is not a party to such assignment.

(c)The Company and the Shareholders acknowledge and agree that, upon the conveyance to the Note Purchasing Party of the Assigned Loan Documents, the maturity date of the Term Notes shall be automatically be reinstated and extended to the date which is one (1) year from the date of the conveyance of the Assigned Loan Documents.  Pledgor acknowledges and agrees that, upon the conveyance to the Note Purchasing Party of the Assigned Loan Documents, the Obligations shall continued to be secured by all of the collateral (or any portion thereof, at the option of the Note Purchasing Party) securing the Obligations under the Loan Documents enforceable as of the date of the Foreclosure Notice.  The Note Purchasing Party agrees to act reasonably and to cooperate with the Lenders in consummating the sale and assignment of the Lenders’ interest in the Term Notes.

(d)The Administrative Agent and the Lenders agree that the Obligations under the Loan Documents shall not be increased without the consent of the Company and the Shareholders which shall not be unreasonably withheld.

(e)The rights granted to the Company and the Shareholders under this Section 6 shall not require any notice to or consent of any of the Company or the Shareholders with respect to any of the Loan Documents or the exercise of any of the rights or remedies of the Lenders thereunder except as specifically set forth in this Agreement with respect to the exercise of the remedies of the Lenders under the Security and Pledge Agreement (in the event of the election of the Lenders to exercise such rights and remedies), it being understood and agreed by the Company and the Shareholders that the Loan Documents, and any and all of the terms or provisions thereof, may be exercised, waived, modified, amended, supplemented, released, renewed or extended by the Lenders in the sole and absolute discretion.

7.  Company and Shareholder Purchase Option.

(a)If the Company and/or the Shareholders do not exercise the Pre-Foreclosure Note Option or Pre-Foreclosure Purchase Option prior to the expiration of the Pre-Foreclosure Purchase Option Exercise Period, then, if the Administrative Agent on behalf of the Lenders, or any of the Lenders individually, or any of their respective affiliates (such acquiror referred to herein as the “Holder”), shall acquire all or any portion of the Shares in connection with the exercise of the rights and remedies of the Lenders under the Security and Pledge Agreement, whether pursuant to a Foreclosure Disposition or otherwise (the “Lender Acquired Shares”), the Administrative Agent shall give written notice thereof promptly following such acquisition of the Shares, and each of the Lenders that the Company and Shareholders shall have the exclusive option to purchase all of the Lender Acquired Shares (the “Purchase Option”), exercisable during the period set forth in Section 7(b), at a purchase price equal to the amount of the consideration paid or credit given with respect to the Lender Acquired Shares plus two percent (2%) of such amount (the “Exercise Price”).  Each of

the Administrative Agent and the Lenders agrees to cause any affiliate thereof who becomes a Holder to acknowledge that its acquisition of the Shares is subject to the provisions of this Waiver and Consent.

(b)To exercise the Pre-Foreclosure Purchase Option, the Company and/or Shareholders (a “Purchase Option Exercising Party”) shall deliver to the Holder of the Lender Acquired Shares written notice (the “Purchase Option Notice”) of its intention to exercise the Purchase Option not later than ten (10) business days following the delivery of the notice specified in Section 7(a) (the “Purchase Option Exercise Period”), and the closing of the Purchase Option shall occur on or before the forty-fifth (45th) day after the Purchase Option Notice is delivered.  To the extent that more than one of the Company and/or the Shareholders desire to exercise such option to acquire the Lender Acquired Shares, then such option shall be an option exercisable first by the Company and then to the extent not fully exercised by the Company, jointly by the Shareholders with respect to the remaining Lender Acquired Shares to the extent of their respective pro rata interests (as defined below); provided, however, in no event shall the option to acquire the Lender Acquired Shares be exercisable with respect to less than the entirety of the Lender Acquired Shares.  For purposes of this Section 7(b), the term “pro rata interest” shall mean the ratio of the number of shares of Common Stock held by a Purchase Option Exercising Party (other than the Company) to the number of shares of Common Stock held by all Purchase Option Exercising Parties (other than the Company).  At such closing, the Holder of the Lender Acquired Shares shall deliver any and all certificates, instruments and/or other documents representing the Lender Acquired Shares free and clear of the security interests of the Lenders, in a form reasonably requested by the Purchase Option Exercising Party, but without recourse or warranty, express or implied, and the Purchase Option Exercising Party shall deliver a bank or certified check (or wire transfer) to the Holder of the Lender Acquired Shares, in an amount equal to the Exercise Price for the Lender Acquired Shares.

(c)Pledgor acknowledges and agrees that it shall have no right to contest the validity or propriety of any transfer of the Shares which may be made by the Holder pursuant to this Section 7, or the amount of the consideration or credit given with respect to the Lender Acquired Shares.

(d)At the expiration of the Purchase Option Exercise Period, the Purchase Option and all rights and obligations associated therewith and described herein shall automatically and with no further action expire and terminate.

(e)Notwithstanding anything in this Section 7 or otherwise in this Waiver and Consent to the contrary, nothing herein shall preclude the Administrative Agent and/or the Lenders, or any of them, from marketing the Lender Acquired Shares, in compliance with applicable laws, at any time to any third party.

8.  Proposed Purchase Offers and Rights of First Refusal.  If all or any portion of the Shares shall be acquired by a Holder in connection with the exercise of the rights and remedies of the Lenders under the Security and Pledge Agreement, whether pursuant to a Foreclosure Disposition or otherwise, and neither the Company nor any Shareholder does not exercise the Purchase Option prior to the expiration of the Purchase Option Exercise Period, then, if the Holder of the Shares obtains an offer for the sale and purchase of the Shares which the Holder desires to accept from any third party pursuant to a bona fide offer or private placement (a “Proposed

Purchase Offer”), the Administrative Agent shall deliver to the Company and the Shareholders written notice of the Proposed Purchase Offer in accordance with the provisions of Section 8(a) below (the “Offer Notice”) and the Company and the Shareholders shall have the right to purchase the Lender Acquired Shares which are the subject of the Proposed Purchase Offer (the “Offered Shares”) on the same terms and conditions as the Proposed Purchase Offer in accordance with and subject to the provisions of Section 8(b) below.

(a)The Holder shall deliver to the Company and to each of the Shareholders prior to its acceptance of any Proposed Purchase Offer, in the manner and at the addresses set forth in Section 15 hereof, the Offer Notice.  The Offer Notice shall disclose the terms of the Proposed Purchase Offer, including the number of Offered Shares, the aggregate purchase price for the Offered Shares, the name of the proposed transferee, the method of payment, the closing date of such proposed transfer, and all other material terms and conditions of the Proposed Purchase Offer.

(b)On receipt of the Offer Notice, the Company and each of the Shareholders shall have the right and option to acquire the Offered Shares, on the same terms and conditions as set forth in the Offer Notice, except that (i) the closing date shall be the date which is forty-five (45) days following the expiration of the Right of First Refusal Notice Period (as defined below), (ii) if the Proposed Purchase Offer specifies consideration other than cash, the consideration shall be the cash equivalent of the consideration specified in the Proposed Purchase Offer, and (iii) to the extent that more than one of the Company and/or the Shareholders desire to exercise such option to acquire the Offered Shares, then such option shall be an option exercisable first by the Company and then to the extent not fully exercisable by the Company, jointly by the Shareholders with respect to the remaining Offered Shares to the extent of their respective pro rata interests; provided, however, in no event shall the option to acquire the Offered Shares be exercisable with respect to less than the entirety of the Offered Shares.  If either the Company and/or any Shareholder elects to exercise its option to acquire the Offered Shares pursuant to this Section 8 (an “Exercising Party”), such Exercising Party shall give notice to the Holder of the Lender Acquired Shares within ten (10) business days of its receipt of such Offer Notice (the “Right of First Refusal Notice Period”).  For purposes of this Section 8.5(b), the term “cash equivalent” shall mean (i) the value ascribed to the consideration by mutual agreement of the Administrative Agent and the Exercising Parties within five (5) business days of the expiration of the Right of First Refusal Notice Period or (ii) if no such agreement is reached within five (5) business days of the expiration of the Right of First Refusal Notice Period, the value ascribed to such consideration by a nationally-recognized investment bank or appraisal firm engaged by the tenth (10^th) business day after the expiration of the Right of First Refusal Notice Period by the Exercising Parties and reasonably acceptable to the Administrative Agent (the fees and expenses of which shall be borne by Pledgor), which firm shall use a valuation methodology supplied by the Exercising Parties and reasonably acceptable to the Administrative Agent, and which firm shall be directed to provide its valuation within thirty (30) days of its engagement.

(c)If any of the Company or any of the Shareholders do not elect to exercise its option to acquire the Offered Shares pursuant to this Section 8 (a “Non-Exercising Party”), then, prior to the expiration of the Right of First Refusal Notice Period, such Non-Exercising Party shall deliver to the Administrative Agent, in writing, its consent or denial of consent to the acceptance by the Holder of the Proposed Purchase Offer and a Transfer pursuant to the Proposed Purchase Offer (conditioned upon the failure of any of the Company or any Shareholder to become an Exercising

Party pursuant to the provisions of this Section 8), which consent shall not be unreasonably withheld.  The failure of a Non-Exercising Party to deliver its written consent or denial of consent prior to the expiration of the Right of First Refusal Notice Period shall be deemed to constitute the consent of such Non-Exercising Party to the Transfer of the Offered Shares pursuant to the terms of the Offer Notice.  Notwithstanding the giving of any consent to the acceptance and Transfer, it shall be provided that as a condition precedent to such Transfer that such proposed transferee becomes a party to and agrees to be bound by all terms and conditions of the Shareholders’ Agreement and such condition shall not be waived or modified.

(d)At the closing of any sale of the Offered Shares to an Exercising Party pursuant to the provisions of this Section 8, the Holder of the Offered Shares shall deliver any and all certificates, instruments and/or other documents representing the Offered Shares free and clear of the security interest of the Lenders and in a form reasonably requested by the Company and/or Shareholders acquiring the Offered Shares, but without recourse or warranty, express or implied, and the Company and/or Shareholders shall deliver a bank or certified check (or wire transfer) to the Holder of the Offered Shares in an amount equal to the aggregate purchase price set forth in the Offer Notice.

9.  Right of Inspection and Audit.  The Company hereby covenants and agrees to permit the Administrative Agent or any of its agents or representatives, including but not limited to any accountants, investment bankers, attorneys and other financial, business or legal consultants, to visit and inspect the financial records and statements, inventory or properties of the Company, to discuss the affairs, finances, and accounts of the Company and to otherwise assist Administrative Agent in conducting an appraisal of the Shares and a valuation of the equity of the Company, during normal business hours, at any reasonable time and from time to time (“Appraisal and Marketing Investigations”).  It shall be a condition to the Company’s obligation to provide any information that the Administrative Agent and any other party or entity receiving such information shall enter into a confidentiality agreement in the form of Annex A hereto.  Such inspection right shall commence upon receipt of a bona fide Default Notice under Section 2 and continue during any Event of Default (as defined in the Security and Pledge Agreement) and shall terminate upon the earliest to occur of (i) consummation of an initial public offering of the Company’s equity securities, (ii) acceptance of any or all of the Shares by the Administrative Agent in full or partial satisfaction of any indebtedness secured under the Security and Pledge Agreement, (iii) consummation of a Foreclosure Disposition, and (iv) consummation of a private placement or other disposition of any or all of the Shares.  The Administrative Agent agrees that the scope of the Appraisal and Marketing Investigations shall be limited to only that information deemed by the Company to be reasonably necessary to appraise the Shares and value the equity of the Company.  The Administrative Agent agrees that any such information received from the Company shall be kept confidential and shall not be disclosed to any other party or entity, except for the Lenders, affiliated entities of the Administrative Agent and/or the Lenders deemed reasonably acceptable by the Company, and their respective agents, representatives and successors.  The Administrative Agent shall use the same degree of care as the Administrative Agent takes to preserve and safeguard its own proprietary information.  Any costs, fees and expenses incurred by the Administrative Agent and/or or the Lenders in connection with any inspection or Appraisal and Marketing Investigations shall be the sole obligation of Pledgor.

10.  Other Shareholder Rights Agreements.

(a)Upon acceptance by the Administrative Agent, for the benefit of the Lenders, of any or all of the Shares in full or partial satisfaction of the Obligations, or upon a Transfer of the Shares by the Administrative Agent to any Person in connection with Administrative Agent’s exercise of any of the rights or remedies under the Security and Pledge Agreement or otherwise, the Administrative Agent, any other Holder or any other such transferee shall agree in writing to become a party to the Shareholders’ Agreement and to be bound by all of its terms and provisions; provided, however, neither the Administrative Agent, any other Holder nor any other transferee of the Shares shall be entitled to the rights, duties, and obligations set forth in Section 3 or Section 4 of the Shareholders’ Agreement with respect to any acquired Shares (other than the obligation to vote their shares in accordance with Section 3.01 for directors of the Company which votes shall not be made cumulatively).

(b)Notwithstanding a Transfer of the Shares to the Administrative Agent, the Lenders or any other third party, Pledgor shall continue to be bound to all of the terms and conditions of the Shareholders’ Agreement; provided, however, the rights set forth in Section 3.01, Section 4 and Section 5.01 of the Shareholders’ Agreement shall automatically terminate solely with respect to Pledgor or any transferee of Pledgor or any subsequent transferee in the event that Pledgor shall hold title to less than fifty percent (50%) of the shares of Common Stock of the Company held as of November 5, 1997.

(c)Except to the extent set forth herein, the Shareholders’ Agreement shall remain in full force and effect and the Shares shall at all times remain subject to all of terms and provisions of the Shareholders’ Agreement.

11.  Release of Shares upon Exercise of Drag-Along Rights.  In the event of a Required Sale, the Seller shall deliver a copy of any Required Sale Notice to the Administrative Agent.  From and after receipt of such Required Sale Notice and for so long as the Shares shall remain subject to the Security Agreement and Pledge, the Administrative Agent and the Lenders shall cooperate in good faith with the Seller in connection with consummating the Required Sale (including, without limitation, releasing the Shares to be sold from the Security and Pledge Agreement and the Credit Agreement upon the payment to it of the consideration payable to Pledgor incident to the consummation of the Required Sale to the extent of, in the case of cash consideration, the amount of the Obligations, the giving of consents and the voting of any Common Stock held by the Administrative Agent to approve such Required Sale).  On the Required Sale Date, the Administrative Agent shall deliver, free and clear of the security interests of the Lenders, a certificate or certificates and/or other instrument or instruments for all Shares, duly endorsed and in proper form for transfer, to the Third Party in the manner and at the address indicated in the Required Sale Notice but conditioned upon the delivery to the Administrative Agent of the consideration payable to Pledgor incident to the consummation of the Required Sale to the extent of, in the case of cash consideration, the amount of the Obligations.

12.  No Termination or Amendment of Shareholders’ Agreement.  The Company, Pledgor and each of the Shareholders hereby covenant and agree not to vote in favor of, or cause, the termination of the Shareholders’ Agreement, or vote in favor of, or cause, any modification, extension, renewal, amendment, replacement or alteration of any of the terms of the Shareholders’

Agreement without the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld.

13.  Pledgor Covenant.  Pledgor covenants and agrees that upon any sale or transfer of the Shares by the Administrative Agent or any Holder to the Company or any Shareholders in accordance with this Agreement, Pledgor shall deliver to such purchaser at closing a certificate signed by the Pledgor attesting that good title is being passed to the Shares free and clear of all encumbrances.  Notwithstanding the foregoing, the delivery of such certificate shall not be a condition precedent to consummating any such transaction

14.  Restrictive Legend.  Pledgor acknowledges and agrees that each certificate representing the Shares shall bear a legend as follows until the later of (i) the termination of the Security and Pledge Agreement or (ii) a subsequent Transfer of the Shares by Administrative Agent or any Holder to any Person in connection with a disposition of the Shares:

“THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A WAIVER AND CONSENT, DATED DECEMBER      , 2002 BUT EFFECTIVE FOR ALL PURPOSES AS OF SEPTEMBER 27, 2002, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY, AND SAID SHARES MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN STRICT ACCORDANCE WITH THE TERMS OF THAT AGREEMENT.  A COPY OF SAID AGREEMENT WILL BE FURNISHED WITHOUT CHARGE TO THE SHAREHOLDER UPON RECEIPT BY THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE OF A WRITTEN REQUEST FROM THE HOLDER REQUESTING SUCH A COPY.”

15.  Notices.  All notices given with respect to this Waiver and Consent shall be in writing and shall be deemed to have been properly given or served for all purposes (i) if sent by a nationally recognized overnight carrier for next business day delivery, on the first business day following deposit of such notice with such carrier unless such carrier confirms such notice was not delivered, then on the day such carrier actually delivers such notice, or (ii) if personally delivered, on the actual date of delivery, or (iii) if sent by certified U.S. Mail, return receipt requested postage prepaid, on the fifth business day following the date of mailing, or (iv) if sent by facsimile, then on the actual date of delivery (as evidenced by a facsimile confirmation) provided that a copy of the facsimile and confirmation is also sent by regular U.S. Mail, addressed as follows:

If to Pledgor:	8122 Datapoint Drive, Suite 1000
	San Antonio, Texas  78229
	Facsimile:  (210) 614-5841
	Attention:  Thomas W. Lyles, Jr., President

If to Administrative Agent:	JPMorgan Chase Bank
	1020 N.E. Loop 410
	San Antonio, Texas  78265-7531
	Facsimile:  (210) 829-6126
	Attention:  David P. McGee, President
with copy to:	Jackson Walker L.L.P.
	112 E. Pecan Street, Suite 2100
	San Antonio, Texas  78205
	Facsimile: (210) 978-7790
	Attention:  Eileen E. Sommer, Esq.
If to the Company:	Kinetic Concepts, Inc.
	8023 Vantage
	San Antonio, Texas  78203
	Facsimile:	(210) 255-6993
	Attention:	Dennis Noll, Vice President
		General Counsel
If to the Shareholders:	Richard C. Blum & Associates, L.P.
	909 Montgomery Street, Suite 400
	San Francisco, CA  94133
	Facsimile:	(415) 434-3130
	Attention:	Murray Indick, Esq.
		Partner and General Counsel
and	Fremont Partners, L.P.
	199 Fremont Street, Suite 2300
	San Francisco, CA  94105
	Facsimile:  (415) 284-8191
	Attention:  Kevin Baker, Esq.
with copy to:	Skadden, Arps, Slate, Meagler & Flom LLP
	525 University Avenue, Suite 1100
	Palo Alto, CA  94403
	Facsimile: (650) 470-4570
	Attention:  Kenton J. King, Esq.
and	Richard Welch
	8122 Datapoint Drive, Suite 1000
	San Antonio, Texas  78229
	Facsimile:  (210) 614-5841
	Attention:  Thomas W. Lyles, Jr., Esq.

and	Robert Welch
	8122 Datapoint Drive, Suite 1000
	San Antonio, Texas  78229
	Facsimile:  (210) 614-5841
	Attention:  Thomas W. Lyles, Jr., Esq.

16.  Further Assurances.  Each party hereto agrees to perform any further acts and to execute and deliver any further documents which may be reasonably necessary to carry out the provisions of this Waiver and Consent.

17.  Subsequently Acquired Shares.  For purposes of this Consent and Waiver, the term “Shares” shall not include any Common Stock of the Company acquired prior to the Effective Date hereof or acquired by the Administrative Agent or any of the Lenders, in each case, that do not constitute the Shares described in the Security and Pledge Agreement.

18.  Titles and Captions.  All section titles or captions in this Waiver and Consent are for convenience only, shall not be deemed part of this Waiver and Consent and in no way define, limit, extend or describe the scope or intent of any provisions hereof.

19.  Assignment.  This Waiver and Consent shall be binding upon and inure to the benefit of the successors and assigns of the respective parties.  Neither this Waiver and Consent nor any right, duty or obligation created hereby or in any shall be assignable by any party hereto other than a Lender or a Holder.

20.  Choice of Law.  This Waiver and Consent shall be construed, interpreted and governed in accordance with the laws of the State of Texas applicable to agreements fully executed, delivered and performed there.

21.  Construction.  This Waiver and Consent shall be interpreted and construed in accordance with its fair meaning and not for or against any party to this Waiver and Consent.

22.  Severability.  In the event that any of the provisions, or portions thereof, of this Waiver and Consent are held to be unenforceable or invalid by any court of competent jurisdiction, the validity and enforceability of the remaining provisions, or portions thereof, shall not be affected thereby.

23.  Amendment.  No amendment or modification of this Waiver and Consent shall in any event be effective against any party hereto unless the same shall be agreed or consented to in writing by such party.

24.  Counterparts.  This Waiver and Consent may be executed in multiple counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument and facsimile signatures shall be given the same effect as original signatures.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the parties hereto have each executed the Waiver and Consent to be effective as of the date first above written.

COMPANY:
KINETIC CONCEPTS, INC.
By:
	Name:
	Title:
JAMES R. LEININGER:
James R. Leininger, M.D.
SHAREHOLDERS:
FREMONT PARTNERS, L.P.
By:	FP Advisors, L.L.C.
Its:	General Partner
	By:	Fremont Group, L.L.C.
	Its:	Managing Member
		By:
			Name:
			Title:
		By:	Fremont Investors, Inc.
		Its:	Managers
			By:
				Name:
				Title:

RICHARD C. BLUM & ASSOCIATES, L.P.
By:	Richard C. Blum & Associates, Inc.
Its:	General Partner
	By:
		Name:
		Title:
THE COMMON FUND FOR NON-PROFIT ORGANIZATIONS
By:	Richard C. Blum & Associates, L.P.
Its:	Attorney-In-Fact
	By:
		Name:
		Title:
STINSON CAPITAL PARTNERS II, L.P.
	By		Richard C. Blum & Associates, L.P.
	Its:		General Partner
			By:
					Name:
					Title:
RCBA-KCI CAPITAL PARTNERS, L.P.
	By	Richard C. Blum & Associates, L.P.
	Its:	General Partner
		By:
				Name:
				Title:

17

FREMONT PARTNERS SIDE-BY-SIDE, L.P.
By:		Fremont Group, L.L.C.
Its:		General Partner
		By:		Fremont Investors, Inc.
		Its:		Manager
				By:
					Name:
					Title:
FREMONT-KCI INVESTMENT COMPANY, L.L.C.
By:		FP Advisors, L.L.C.
Its:		Member-Manager
		By:	Fremont Group, L.L.C.
		Its:	Managing Member
			By:		Fremont Investors, Inc.
			Its:		Managers
					By:
					Name:
					Title:
FREMONT PURCHASER II, INC.
By:
	Name:
	Title:

	FREMONT ACQUISITION COMPANY II, L.L.C.
	By:		Fremont Partners, L.P.
	Its:		Member
			By:			FP Advisors, L.L.C.
			Its:			General Partner
					By:			Fremont Group, L.L.C.
					Its:			Managing Member
								By:		Fremont Investors, Inc.
								Its:		Manager
										By:
											Name:
											Title:
	FREMONT ACQUISITION COMPANY IIA, L.L.C.
By:			FP Advisors, L.L.C.
Its:			Non-Member Manager
		By:		Fremont Group, L.L.C.
		Its:		Managing Member
				By:			Fremont Investors, Inc.
				Its:			Manager
							By:
									Name:
									Title:

		FREMONT OFFSHORE PARTNERS, L.P.
		By:	FP Advisors, L.L.C.
		Its:	General Partner
			By:	Fremont Group, L.L.C.
			Its:	Managing Member
				By:	Fremont Investors, Inc.
				Its:	Manager
					By:
						Name:
						Title:
		RICHARD WELCH
		Richard Welch
		ROBERT WELCH
		Robert Welch
AGREED AND ACCEPTED:
ADMINISTRATIVE AGENT:
JPMORGAN CHASE BANK,
a New York banking corporation
By:
	David P. McGee
	President

LENDERS:
JPMORGAN CHASE BANK,
a New York banking corporation
By:
	David P. McGee
	President
BANK ONE, NA
By:
Name:
Title:

ANNEX A

FORM OF CONFIDENTIALITY AGREEMENT

ANNEX B

LOAN DOCUMENTS

1.Credit Agreement.

2.Term Note dated September 27, 2002, in the original principal amount of $16,608,175, executed by Pledgor and payable to the order of Chase.

3.Term Note dated September 27, 2002, in the original principal amount of 11,641,825, executed by Pledgor and payable to the order of Bank One.

4.Continuing and Unlimited Guaranty, dated effective as of September 27, 2002, executed by Pledgor in favor of the Administrative Agent for the benefit of the Lenders with respect to Guaranteed Extensions of Credit issued for the account of The Core Group, Inc.

5.Continuing and Unlimited Guaranty, dated effective as of September 27, 2002, executed by Pledgor in favor of the Administrative Agent for the benefit of the Lenders with respect to Guaranteed Extensions of Credit issued for the account of LynMed Capital, Inc.

6.Continuing and Unlimited Guaranty, dated effective as of September 27, 2002, executed by Pledgor in favor of the Administrative Agent for the benefit of the Lenders with respect to Existing Letters of Credit issued for the account of the Designated Affiliate Borrowers named therein.

7.Security and Pledge Agreement, dated effective as of September 27, 2002 executed by Pledgor in favor of the Administrative Agent for the benefit of the Lenders.

8.Covenant Ranch Cash Collateral Agreement, dated effective as of September 27, 2002, executed by Leininger in favor of the Administrative Agent for the benefit of the Lenders.

9.Renewal and Extension Deed of Trust, Absolute Assignment of Rents, Security Agreement and Financing Statement, dated effective as of September 27, 2002, executed by Leininger to David L. Mendez, Trustee, covering certain tracts of land in Kendall County and Gillespie County, Texas.

10.Deed of Trust, Absolute Assignment of Rents, Security Agreement and Financing Statement, dated effective as of September 27, 2002, executed by Leininger to David L. Mendez, Trustee, covering certain tracts of land in Comal County, Texas.

11.Deed of Trust, Absolute Assignment of Rents, Security Agreement and Financing Statement, dated effective as of September 27, 2002, executed by Leininger and his wife, Cecilia Leininger, to David L. Mendez, Trustee, covering certain tracts of land in Comal County, Texas.

12.Deed of Trust, Absolute Assignment of Rents, Security Agreement and Financing Statement, dated effective as of September 27, 2002, executed by Willow Springs, Ltd. to David L. Mendez, Trustee, covering certain tracts of land in Bandera County, Texas.

13.Deed of Trust, Absolute Assignment of Rents, Security Agreement and Financing Statement, dated effective as of September 27, 2002, executed by Covenant Ranch I, L.C. to David L. Mendez, Trustee, covering certain tracts of land in Webb County, Texas.

14.Term Note dated September 27, 2002, in the original principal amount of $4,703,200, executed by The Core Group, Inc. and payable to the order of Chase.

15.Term Note dated September 27, 2002, in the original principal amount of $3,296,800, executed by The Core Group, Inc. and payable to the order of Bank One.

16.Term Note dated September 27, 2002, in the original principal amount of $2,939,500, executed by LynMed Capital, Inc. and payable to the order of Chase.

17.Term Note dated September 27, 2002, in the original principal amount of $2,060,500, executed by LynMed Capital, Inc. and payable to the order of Bank One.

18.Letter of Credit Application dated December 20, 2001, executed by American Gem Seafoods, Inc., MCMI Food Company and Harry Lees in favor of Chase, as Issuing Lender, with respect to Letter of Credit No. D-220597, in the face amount of $4,000,000, issued to RLI Insurance Company for the account of American Gem Seafoods, Inc., MCMI Food Company and Harry Lees.

19.Letter of Credit Application, executed by MCMI Food Company in favor of Chase, as Issuing Lender, with respect to Letter of Credit No. D-211160, in the face amount of $150,000, issued to Zurich American Insurance Company for the account of MCMI Food Company.

20.Letter of Credit Application dated August 6, 1999, executed by ATX Technologies, Inc.  in favor of Chase, as Issuing Lender, with respect to Letter of Credit No. D-291414, in the face amount of $3,000,000, issued to Freeport #2, L.P. for the account of ATX Technologies, Inc.

21.Letter of Credit Application dated April 5, 2000, executed by Covenant Classic Schools, LLC in favor of Chase, as Issuer, with respect to Letter of Credit No. D-299684, in the face amount of $117,242, issued to Del Norte Center Limited Partnership for the account of Covenant Classic Schools, LLC.

22.Letter of Credit Application dated August, 2001, executed by James R. Leininger in favor of Bank One, as Issuing Lender, with respect to Letter of Credit No. STR18411, in the face amount of $575,000, issued to General Electric Capital Corporation for the account of James R. Leininger.

EX-10.11

Exhibit 10.11

AMENDMENT AND WAIVER

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

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

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

WHEREAS, the Company expects to:  (1) issue an aggregate of $205.0 million principal amount of 7 3/8% senior subordinated notes due 2013 (the “New Notes”), (2) enter into a new senior credit facility, consisting of a $480.0 million term loan facility and a $100.0 million revolving credit facility (the “New Senior Credit Facility”), (3) redeem all of its currently outstanding senior subordinated notes due 2007 on or shortly after the date of issuance of the New Notes for a purchase price of 104.813% of their principal amount plus accrued and unpaid interest to the date of redemption (the “Redemption”), (4) offer up to $270.0 million of convertible preferred stock (the “Preferred Stock”), subject to the rights, preferences, privileges and terms that the Company’s Board of Directors or any committee thereof shall determine, (5) use approximately $590 million to offer to repurchase some of the Company’s outstanding shares of common stock and vested stock options (the “Initial Share Repurchase”), which may take place in one or more tranches between the date of issuance of the New Notes and March 31, 2004, and (6) repurchase additional shares and vested stock options with the net proceeds from (a) an antitrust settlement with Hillenbrand Industries, Inc., on an after-tax basis, that it expects to receive in January 2004, (b) the cash tax benefit to the Company from the Recapitalization in an amount not to exceed $40 million and (c) the exercise of employee stock options (collectively, the “Recapitalization”).

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

1.Amendment

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

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

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

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

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

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

2

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

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

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

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

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

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

3

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

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

2.Waiver and Consent

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

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

3.Recapitalization

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

4.General

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

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

4

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

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

[Signature Pages to Follow]

5

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

FREMONT PARTNERS, L.P.
By:	FP Advisors, L.L.C.
Its:	General Partner
	By:	Fremont Group, L.L.C.
	Its:	Managing Member
		By:	Fremont Investors, Inc.
		Its:	Manager
			By:
				Name:
				Title:

BLUM CAPITAL PARTNERS, L.P.
By:		Richard C. Blum & Associates, Inc.
Its:		General Partner
	By:
			Name:
			Title:
James R. Leininger, M.D.
KINETIC CONCEPTS, INC.
By:
	Name:
	Title:

[SIGNATURE PAGE TO AMENDMENT AND WAIVER]

BLUM STRATEGIC PARTNERS II, L.P.
By:	Blum Strategic GP II, L.L.C.
Its:	General Partner
	By:
		Name:
		Title:

BLUM STRATEGIC PARTNERS II GmbH & Co. KG
By:	Blum Strategic GP II, L.L.C.
Its:	Managing Limited Partner
	By:
		Name:
		Title:

STINSON CAPITAL PARTNERS II, L.P.
By:	Blum Capital Partners, L.P.
Its:	General Partner
	By:
		Name:
		Title:

RCBA-KCI CAPITAL PARTNERS, L.P.
By:	Blum Capital Partners, L.P.
Its:	General Partner
	By:
		Name:
		Title:

[SIGNATURE PAGE TO AMENDMENT AND WAIVER]

FREMONT PARTNERS SIDE-BY-SIDE, L.P.
By:	Fremont Group, L.L.C.
Its:	General Partner
	By:	Fremont Investors, Inc.
	Its:	Manager
		By:
			Name:
			Title:

FREMONT-KCI CO-INVESTMENT COMPANY, L.L.C.
By:	FP Advisors, L.L.C.
Its:	Member-Manager
	By:	Fremont Group, L.L.C.
	Its:	Managing Member
		By:	Fremont Investors, Inc.
		Its:	Manager
			By:
				Name:
				Title:

[SIGNATURE PAGE TO AMENDMENT AND WAIVER]

FREMONT ACQUISITION COMPANY II, L.L.C.
By:	Fremont Partners, L.P.
Its:	Member
	By:	FP Advisors, L.L.C.
	Its:	General Partner
		By:	Fremont Group, L.L.C.
		Its:	Managing Member
			By:	Fremont Investors, Inc.
			Its:	Manager
				By:
					Name:
					Title:

FREMONT ACQUISITION COMPANY IIA, L.L.C.
By:	FP Advisors, L.L.C.
Its:	Non-Member Manager
	By:	Fremont Group, L.L.C.
	Its:	Managing Member
		By:	Fremont Investors, Inc.
		Its:	Manager
			By:
				Name:
				Title:

[SIGNATURE PAGE TO AMENDMENT AND WAIVER]

FREMONT OFFSHORE PARTNERS, L.P.
By:	FP Advisors, L.L.C.
Its:	General Partner
	By:	Fremont Group, L.L.C.
	Its:	Managing Member
		By:	Fremont Investors, Inc.
		Its:	Manager
			By:
				Name:
				Title:

FREMONT PARTNERS III, L.P.
By:	FP Advisors III, L.L.C.
Its:	General Partner
	By:	Fremont Group, L.L.C.
	Its:	Managing Member
		By:	Fremont Investors, Inc.
		Its:	Manager
			By:
				Name:
				Title:

FREMONT-KCI CO-INVESTMENT COMPANY II, L.L.C.
	By:	FP Advisors, L.L.C.
	Its:	Member-Manager
		By:	Fremont Group, L.L.C.
		Its:	Managing Member
			By:	Fremont Investors, Inc.
			Its:	Manager
				By:
					Name:
					Title:

[SIGNATURE PAGE TO AMENDMENT AND WAIVER]

FREMONT PARTNERS III SIDE-BY-SIDE, L.P.
By:	Fremont Group, L.L.C.
Its:	General Partner
	By:	Fremont Investors, Inc.
	Its:	Manager
		By:
			Name:
			Title:

[SIGNATURE PAGE TO AMENDMENT AND WAIVER]

JPMORGAN CHASE BANK,

a New York banking corporation

By:

Name:

Title:

[SIGNATURE PAGE TO AMENDMENT AND WAIVER]

EXHIBIT A

Schedule 1.05

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

FP Advisors, L.L.C.

Fremont Group, L.L.C.

Fremont Investors, Inc.

Sequoia Ventures Inc.

Fremont Partners, L.L.C.

Fremont Acquisition Company II, L.L.C.

Fremont Acquisition Company IIA, L.L.C.

Fremont Offshore Partners, L.P.

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

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

Fremont Purchaser II, Inc.

Fremont-KCI Co-Investment Company II, LLC

FP Advisors III, LLC

Fremont Partners III, LLC

Fremont Partners III, L.P.

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

EXHIBIT B

Schedule 1.06

Members of the Fremont/KCI Group:

Fremont Acquisition Company II, L.L.C.

Fremont Acquisition Company IIA, L.L.C.

Fremont Offshore Partners, L.P.

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

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

Fremont Purchaser II, Inc.

Fremont Partners, L.P.

Fremont Partners III, L.P.

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

Fremont-KCI Co-Investment Company II, LLC

EX-10.27

Exhibit 10.27

STANDARD OFFICE BUILDING

LEASE AGREEMENT

STATE  OF	TEXAS	o
		o
COUNTY OF	BEXAR	o

THIS AGREEMENT (“Lease”), dated July 31, 2002 for identification purposes in connection with the letter of credit issued for the benefit of Landlord (defined below), is entered into this      day of                                , 2002, between

1.  LANDLORD

CKW San Antonio, L.P., a Delaware limited partnership, doing business in Texas as San Antonio CKW, L.P.,  herein designated as “Landlord,” and

2.  TENANT

Kinetic Concepts, Inc.                                                                                                 
herein designated as “Tenant.”

Prior to the date hereof, Tenant was the fee owner of the Building (defined below) and occupied the Leased Premises (defined below) in the operation of its business.  On the date hereof, Tenant sold the Building to Landlord and now desires to lease the Building from Landlord and continue its operations from the Leased Premises.

3.  LEASED PREMISES

Landlord, in consideration of covenants and agreements to be performed by Tenant and upon terms and conditions hereinafter stated, does hereby lease to Tenant approximately 138,231 rentable square feet of space (hereinafter called the “Leased Premises”) as more specifically described in Exhibits “A-1” through “A-15” attached hereto, in the building known as KCI Tower (the “Building”), located at 8023 Vantage Drive, San Antonio, Texas 78230, on a tract of land situated in the City of San Antonio, County of Bexar, State of Texas, as described in Exhibit ”B” attached hereto.

4.  TERM

This Lease shall be for a term of ten (10) years, beginning on                                        and ending on                                          .

5.  USE

The Leased Premises shall be used and occupied during term of this Lease by the Tenant for  no other purpose than the following uses currently being made by Tenant in connection with Tenant’s business: general office space; records and file storage, 24-hour call center; computer server rooms; equipment show room; meeting rooms; training center; research, development and engineering laboratory inclusive of bio-medical testing and tissue storage; usage and storage of chemicals in support of R&D operation; design and testing of beds and related items; model mockup and testing; plastics molding of parts and models; mail and document processing and shipping, and in the event of an assignment or sublease for any lawful use permitted by applicable zoning laws, ordinances, and regulations; provided, however, in no event shall the Leased Premises be utilized by Tenant or any subtenant or assignee for (i) any use which violates any non-compete clause in effect with respect to any other tenant in the Building, (ii) a governmental entity or office which has a use that is highly interactive with the general public and involves the ingress and egress of an inordinate number of invitees upon the Building, (iii) a medical clinic or office; (iv) any use which would result in a population density in the excess of one (1) person for every 225 square feet of net rentable space; (v) any use which would substantially increase the expenses or costs of providing building services or be a burden on existing janitorial services or elevators in the Building when compared to the use of the Leased Premises by Tenant prior to the date hereof; and (vi) any use which would require parking in excess of one space per 250 square feet of net rentable space.

6.  BASE RENTAL

A.            In consideration of this Lease, Tenant promises to pay Landlord a total base rental (“Base Rental”) in the sum of  Thirty Million Five Hundred Forty Nine Thousand Fifty One and 24/100ths Dollars ($30,549,051.24) in lawful money of the United States of America, payable initially in monthly amounts of Two Hundred Thirty Thousand Three Hundred Eighty Five and No/100ths Dollars ($230,385.00) ($20.00 per rentable square foot of space in the Leased Premises), in advance, without demand, offset or deduction (except as expressly provided herein), on the first day of each and every calendar month during the term of this Lease, provided, however, that the first such monthly Base Rental payment shall be due upon execution of this Lease.  Should the term of this Lease begin on a day other than the first day of a calendar month or terminate on a day other than the last day of a calendar month, the Base Rental for such partial month shall be proportionately reduced.

All rent and sums provided to be paid under this Lease shall be paid to Landlord at the address stated in Section 42 of this Lease.

B.            Adjustments to Base Rental.  The Base Rental shall be subject to adjustment as follows:

Term	Annual Rent/Square Foot		Monthly Adjusted Rent
Year 2	$	20.50/SF	$	236,144.63
Year 3	$	21.00/SF	$	241,904.25
Year 4	$	21.50/SF	$	247,663.88
Year 5	$	22.00/SF	$	253,423.50
Year 6	$	22.50/SF	$	259,183.13
Year 7	$	23.00/SF	$	264,942.75
Year 8	$	23.25/SF	$	267,822.56
Year 9	$	23.50/SF	$	270,702.38
Year 10	$	23.75/SF	$	273,582.19

C.            Additional Rent.   In addition to the payment of Base Rental, Tenant shall pay as additional rental (“Additional Rental”), Tenant’s Pro Rata Share of Excess Operating Expenses as provided in Section 8 of this Lease.  Base Rental and Additional Rental are sometimes referred to herein together as “Rent” “Rents”, “Rental” or “Rentals”.

7.             SECURITY DEPOSIT

As security for performance by Tenant of Tenant’s obligations under this Lease, and under the Other Master Leases (as hereinafter defined) subject to the provisions set forth in this Paragraph 7, Tenant has delivered to Landlord an irrevocable standby letter of credit (the “Letter of Credit”) in favor of Landlord in the amount of $3,150,000.00, in the form attached hereto as Exhibit H and issued by a financial institution reasonably acceptable to Landlord.  The Letter of Credit shall be for a term of one year, and shall be replaced by Tenant annually at least thirty (30) days prior to the expiry date thereof until the expiration of the fifth (5^th) year of the term of this Lease; provided, however, in the event that Tenant obtains a corporate credit rating of BBB or better, as rated by Standard & Poor’s Ratings Group or its legal successor and, if there is no default under this Lease by Tenant which has not been cured, Landlord shall surrender the Letter of Credit or Replacement Letter of Credit (as hereinafter defined), as the case may be, to the issuer thereof, and Tenant shall be entitled to cancel the Letter of Credit or Replacement Letter of Credit, as the case may  be.  Tenant agrees that for so long as the Letter of Credit is required under this Lease, prior to the expiry date of the Letter of Credit or any Replacement Letter of Credit, as the case may be, Tenant shall provide to Landlord another Letter of Credit (a “Replacement Letter of Credit”) in the same form, for the same length of term and in the same amount as the Letter  of Credit.  If Tenant fails to provide a Replacement Letter of Credit to Landlord at least thirty (30) days prior to the expiry date of the Letter of Credit or any Replacement Letter of Credit, as the case may be, then Landlord shall be permitted to draw upon the Letter of Credit or such Replacement Letter of Credit in the full amount thereof and to hold the full amount of the proceeds of the Letter of Credit as security for the performance of the obligations of Tenant under this Lease, until the earlier of (i) the delivery by Tenant of a Replacement Letter of Credit, (ii) the expiration of the fifth (5^th) year of the term of this Lease, or (iii) the date Tenant obtains a credit rating of BBB. Upon the happening of any of the events described in (i), (ii) and (iii) above and, if there is no default under this Lease by Tenant which has not been cured, Landlord shall deliver to Tenant the full amount of the proceeds obtained by Landlord by drawing on the Letter of Credit or Replacement Letter of Credit, as the case may be.  Upon (i) the failure by Tenant to pay any Rent under this Lease or the Other Master Leases (whether Base Rental or Additional Rental), following the expiration of any applicable grace or cure period, or (ii) the occurrence of any other default by Tenant not involving the payment of Rent under this Lease or either of the Other Master Leases (other than a default under Paragraph 31 of any of such leases (a “Non-Curable Default”)), and if such default remains uncured following the expiration of any applicable grace or cure period, and (a) has not been disputed by Tenant by written notice to Landlord during such period, or (b) involves more than $250,000.00, Landlord shall be entitled to present the Letter of Credit or Replacement Letter of Credit, as the case may be, to the issuer thereof for payment.  Such presentation of the Letter of Credit or Replacement Letter of Credit for payment must be accompanied by a sight draft thereof in the amount equal to (i) the Rent Tenant has so failed to pay if the default is the failure to pay Rent (whether Base Rental or Additional Rental), or (ii) the amount to be drawn to cure any other default and such other documentary evidence as may be required by the Letter of Credit or Replacement Letter of Credit.  If the event of any default by Tenant not involving the payment of Rent (other than a Non-Curable Default) which has been timely disputed by Tenant as provided hereinabove and which involves less than $250,000.00, Landlord shall not be entitled to draw on the Letter of Credit until the default has been

2

arbitrated in the manner set forth herein, an award has been rendered in favor of Landlord for all or any part of the amount which is disputed, and Tenant has failed to pay the amount of the award to Landlord within ten (10) days after receiving written notice of the award from Landlord, at which time Landlord shall be entitled to draw on the Letter of Credit for the amount of the award.  In the event that Landlord makes a partial draw on the Letter of Credit under any of the circumstances in which Landlord is allowed to do under this Paragraph 7, Tenant shall be obligated to restore the amount of the Letter of Credit to $3,150,000.00, within thirty (30) days after Landlord has made a draw on the Letter of Credit, and if Tenant fails to do so, Landlord shall be entitled to draw the full amount of the Letter of Credit.  Landlord shall also be allowed to draw the full amount of the Letter of Credit as a result of a default by Tenant under Paragraph 31 of this Lease or either of the other two Master Leases, or under any other circumstances under which Landlord has terminated this Lease or either of the Other Master Leases, or terminated Tenant’s right to possession of the Leased Premises under this Lease or either of the other two Master Leases.  The Letter of Credit and any proceeds drawn thereon are referred to herein as the “Security Deposit.”  Landlord may, from time to time, in accordance with the foregoing and without prejudice to any other remedy, use the Security Deposit to the extent necessary to pay arrearages of rent or to satisfy any other obligation of Tenant under this Lease or the Other Master Leases, or to be applied to any damages to which Landlord is entitled to receive from Tenant under this Lease or the Other Master Leases.  If Landlord transfers its interest in the Leased Premises during the term of this Lease, Landlord may assign its rights in the Security Deposit to the transferee and shall have no further liability for the return thereof, provided that such assignee executes an agreement in favor of Tenant acknowledging the receipt of the Security Deposit and assuming Landlord’s obligations with respect thereto.  Landlord shall refund to Tenant any unused portion of the Security Deposit, provided Tenant is not then in default, at the expiration of the fifth (5^th) year of the term of this Lease, or in the event that the Letter of Credit is drawn by Landlord in accordance with the foregoing and as a result of any default by Tenant as provided herein, after Landlord has applied the Security Deposit against all amounts owed by Tenant to Landlord, if there is any amount of the Security Deposit remaining.  In the event that an arbitration is required pursuant to this Paragraph 7, the parties agree that arbitration shall be conducted by the American Arbitration Association and in accordance with the Rules for Commercial Disputes of the American Arbitration Association with a request for an expedited decision under the Fast Track process.  The parties may, if they are able to agree to an alternate method, conduct the arbitration through one or more private arbitrators agreed upon by the parties in order to further expedite the process.  In any event, in whichever manner the arbitration is conducted, the award shall be final and binding upon both parties and non-appealable.

8. OPERATING EXPENSES

The term “Base Year” shall mean calendar year 2002.  In the event Operating Expenses (as defined below) of the Landlord upon the Building and the “Other Facilities” as hereinafter defined, in any calendar year during Tenant’s occupancy, exceed the Operating Expenses for the Base Year, Tenant agrees to pay, as Additional Rental, Tenant’s Pro Rata Share of Excess Operating Expenses (as defined below).  “Excess Operating Expenses” shall be defined as the difference between actual Operating Expenses for a given calendar year and Operating Expenses for the Base Year, the difference of which shall be prorated for any partial calendar year in which the Tenant occupies the Leased Premises and/or vacates the Leased Premises by Lease termination.  Computation of Additional Rental under this Section shall operate as follows:  Beginning with the first month of the second calendar year in which the Tenant occupies the Leased Premises and each month thereafter during the Lease Term, or any renewal thereof, Tenant shall pay, as Additional Rental to Landlord, at the same time that Base Rental is paid, an amount equal to 1/12 of the Landlord’s reasonable, good faith estimate (the “Estimate”) of Tenant’s Pro Rata Share of Excess Operating Expenses, if any, for the particular calendar year, such Pro Rata Share of Excess Operating Expenses being defined as the product of Excess Operating Expenses times a fraction with the numerator being the rentable square footage of the Leased Premises and the denominator being the rentable square footage of the Building.  As soon as practicable following the end of each calendar year, but in no event later than 90 days from the end of the year, Landlord shall submit to Tenant a statement setting forth the Estimate, if any.  Beginning with said statement for the third calendar year, it shall also set forth actual Excess Operating Expenses for the preceding year.  To the extent that Tenant’s actual Pro Rata Share of Excess Operating Expenses exceeds the Estimate for the same year, Tenant shall pay the difference to Landlord upon demand in one lump sum.  To the extent that Tenant’s actual Pro Rata Share of Excess Operating Expenses is less than the Estimate, Landlord shall credit the difference against the next due installments of Additional Rental payable under the provision of this Section 8 until such credit is exhausted, or if the term of this Lease has expired, Landlord will refund the difference to Tenant within thirty (30) days following the date of termination.

Provided Tenant has paid the Additional Rental as required hereunder, Tenant shall have the right, at its own expense and at reasonable times, to audit Landlord’s books relevant to the Additional Rental due under this Section.  Should Tenant fail to object in writing to any Excess Operating Expenses within one hundred twenty (120) days after receiving the statement setting forth actual Excess Operating Expenses for the preceding year, Tenant shall be deemed to have waived any objection.  If Tenant does object in writing within the above specified time, Tenant shall have the right to audit Landlord’s books and verify Operating Expenses, at the place where Landlord maintains its books and records, but only with respect to Operating Expenses for such preceding year, provided that (i) such audit commences within thirty (30) days after Tenant’s notice to Landlord and thereafter proceeds regularly and continuously to conclusion, (ii) Tenant or Tenant’s employee is present at such location at all times during the audit, (iii) such audit does not unreasonably interfere with the conduct of Landlord’s business, (iv) such audit is performed by an auditing firm with an established and favorable reputation, and (v) the auditor signs a nondisclosure agreement in favor of Landlord, acceptable to Landlord in its reasonable discretion, agreeing that such audit and information derived from such audit shall not be used directly or indirectly in connection with soliciting additional auditing business from other existing, prior or future tenants in the Building.  Landlord agrees to cooperate in good faith with Tenant in the conduct of such audit.  Notwithstanding anything to the contrary set forth in this Section 8, however, in no event shall Tenant ever be permitted to audit or cause to be audited Landlord’s records concerning Operating Expenses through, or with the assistance of, auditors or others whose compensation is contingent upon, or the amount of whose compensation is affected by, the outcome of such audit, in whole or in part, or on any payment or reimbursement by Landlord to Tenant in connection with such audit, or which is otherwise done in whole or in part on any basis other than reasonable hourly charges for the hours

3

expended in the performance of such audit, and reimbursement of reasonable out-of-pocket expenses incurred by such auditors in connection with such audit.  Tenant hereby waives any audit or similar rights which it may otherwise have, to the extent of such rights exceed the specific rights granted to Tenant in this Section 8.  Notwithstanding the foregoing provisions of this Section 8, in the event that the Base Year’s Operating Expenses shall ever be greater than the Operating Expenses for any year of the Lease term, Tenant shall not be entitled to any reduction in Base Rental, nor any credit, refund, reduction of obligations, or other benefit in respect thereof.   In the event that Tenant’s audit verifies a credit due Tenant, such payment by Landlord is then due within ten (10) days of the completion of the audit.  If said credit is an amount equal to or greater than 5% of Tenant’s Pro Rata Share of Excess Operating Expenses as set forth on Landlord’s statement to Tenant, then Landlord shall pay the auditor all fees incurred, or if Tenant has already paid said fees, then Landlord shall reimburse Tenant for the same.  Unless otherwise agreed to by Tenant and Landlord in writing, Tenant shall not be entitled to any reduction in Base Rental or any reduction of obligations for any credit due under this Section.  In addition to Tenant’s right to audit, as provided herein, Tenant shall have the right, at its own expense and at a reasonable times and with reasonable advance notice, to review Landlord’s books relative to the Additional Rental with Tenant’s own personnel, at any time.

The term “Operating Expenses” as used above shall mean all reasonable and normal operating expenses, determined in accordance with GAAP, incurred with respect to the maintenance and operation of the Building and Other Facilities, including, without limitation, the following: on-site or other security costs, except to the extent paid directly by Tenant, maintenance and repair costs, electricity, gas, water, sewer, courtesy patrol, janitorial, trash and snow removal, landscaping and pest control, reasonable management fees, that portion of the wages and fringe benefits payable to employees of Landlord or managing agents whose duties are connected with the operation and maintenance of the Building and Other Facilities that is equal to the product of that portion of the respective employee’s time spent providing such services to the Building and Other Facilities multiplied by such employee’s total wages and fringe benefits, all services, supplies, replacements or other expenses for maintaining and operating the Building and Other Facilities, including common area, paving and parking area(s), roof, driveway and plaza area maintenance, all real property taxes, assessments and other governmental or quasi-governmental levies of any nature whatsoever and installments of special assessments due to deed restrictions and/or owner’s associations which accrue against the Building and Other Facilities during the term of the Lease, as well as all insurance premiums Landlord is required to pay or deems necessary to pay, including public liability insurance, with respect to the Building (provided that the expenses listed above would qualify as operating expenses, and not capital expenditures under generally accepted accounting principles consistently applied), capital improvement costs amortized over the useful life of such improvements incurred to comply with changes in law, and the cost, amortized over its useful life, of capital improvements or repairs made to the Building  which are primarily for the purpose of reducing Operating Expenses or otherwise improving the operating efficiency of the Building and Other Facilities and which do in fact reduce Operating Expenses or otherwise improve the operating efficiency of the Building and Other Facilities (such capital improvements being referred to herein as the “Included Capital Items”).

Notwithstanding any of the foregoing to the contrary, it is expressly agreed that in no event shall  Operating Expenses include any of the following: (i) any amounts recovered from insurance policies taken out by Landlord which would otherwise be included in Operating Expenses; (ii) costs of repairing or restoring any portion of the Building damaged or destroyed by any casualty or peril whether insured or uninsured; (iii) income taxes, inheritance or gift taxes, transfer or excise taxes, gross receipts taxes, excess profit taxes, franchise taxes or similar taxes of Landlord except to the extent imposed in lieu of ad valorem taxes; (iv) taxes allocable to the tenant improvements of other tenants in the Building; (v) legal fees and/or expenses incurred in leasing to or in procuring tenants, leasing commissions, advertising expenses and expenses for the renovating of space for new tenants; (vi) interest or principal payments on any mortgage encumbering the Building; (vii) and/or any compensation or management fee, or portion thereof, paid to an employee of Landlord or to any third party (that when aggregated with all  other such fees paid in that year of the Lease term exceed an amount equal to three (3%) of Total Rentals; (viii) consulting costs and expenses paid by the Landlord unless they relate to management or operation of the Building; (ix) normal or capitalized tenant improvements for any other spaces leased to, or held for lease to, other tenants; (x) any amounts for which Landlord has received reimbursement from any other tenant of the Building, or for which any other tenant is expressly liable for under the terms of its lease regardless of whether Landlord has collected such amounts from said tenant; (xi) the cost of repair or replacement for any item covered by a warranty in favor of the Landlord; (xii) costs directly resulting from the gross negligence or willful misconduct whether caused by action or omission of the Landlord or its agents, contractors or employees; (xiii) costs or fees relating to the defense of the Landlord’s title to or interest in the real estate containing the Building; (xiv) any ground rents or similar payments to a ground lessor or any increases thereon; (xv) costs of capital improvements that would be considered capital expenditures under generally accepted accounting principles other than the Included Capital Items; (xvi) with respect to Included Capital Items, any amounts in excess of the cost of the capital item amortized over its useful life and multiplied by a fraction with the numerator being the number of months left in the Lease Term and the denominator being the number of months remaining in the useful life of said capital item; (xvii) any amounts attributable to the lease of any item that would qualify as a capital expenditure (other than an Included Capital Item) had said item been purchased; (xviii) any costs, fines or penalties incurred due to violations by Landlord of any governmental rule or authority; (xix) costs arising from Landlord’s charitable or political contributions; (xx) costs or expenses associated with the enforcement of any leases by the Landlord, or the resolution of any disputes arising therefrom; (xxi) the cost of overtime or other expense to Landlord in curing its defaults or performing work expressly provided in this Lease to be borne at Landlord’s expense; (xxii) any amounts paid for goods and services at greater than the prevailing market rates for such goods and services at the time provided; (xxiii) the cost of any work or service performed for any tenant of the Building (other than Tenant) to a materially greater extent or in a materially more favorable manner than furnished generally to the tenants and other occupants (including Tenant) of the Building; and without limiting the generality of the foregoing, this exclusion shall be deemed to include the cost of HVAC provided in excess of that described in the Lease; (xxiv) any amounts related to the repair, maintenance or operation of any vending machines or concessions; (xxv) any fines, penalties, legal judgments or settlements of claims or causes of actions by or against Landlord in connection with ownership of the Building or in connection with Tenant’s Intellectual Property as defined in Section 40 of this

4

Lease; (xxvi) any cost or expenditure for which Landlord is reimbursed by condemnation proceeds; (xxvii) depreciation (except amortization of Included Capital Items); (xxviii) any reserves for future expenditures or liabilities which would be incurred subsequent to the then current accounting year; (xxix) any bad debt loss, rent loss or reserves for bad debt or rent loss which Landlord may make; (xxx) costs of compliance with the Americans With Disabilities Act and the Architectural Barriers Act for the Building, the Building common areas, or for any other spaces leased to, or held for lease to, other tenants; (xxxi) the cost of acquiring, renting and maintaining works of art or objects of art displayed in the common areas; (xxxii) costs incurred in connection with the cleanup and removal of any hazardous materials caused by other tenants; (xxxiii) costs or expenses of preparation of reports, filings and other information (including, without limitation, any and all income tax forms) furnished to any lender or an affiliate, partner, employee or contractor of or in Landlord; and (xxxiv) in the event that Landlord chooses to utilize an electric provider other than City Public Service, any amounts paid for electricity at greater than the rates for such electricity had City Public Service provided it; and (xxxix) any expenses related to the operation of any parking facility for the building to the extent they are less than the revenues directly related to the parking facility.

Landlord agrees to use efforts consistent with that of a prudent and commercially reasonable Landlord of comparable office property in San Antonio, Texas, to provide the services set forth in this Lease and operate and maintain the Building and the Other Facilities in a cost efficient manner, which shall include, without limitation, cost efficient delivery of power and energy to the Building and Leased Premises.  Other Facilities, for purposes of this Lease, shall include the parking facility for the Building and the Fitness Facility, the Track, and the Courts (as those terms are hereinafter defined).

9.  LATE CHARGE

If any Rent payment or other sum due by Tenant to Landlord is received by Landlord later than five (5) days after its due date, Tenant shall pay a late charge of five percent (5%) of such Rent payment or other sum plus eighteen (18%) percent interest per annum until such Rent or other sum is paid.  Landlord’s acceptance of late rent or other sum shall not constitute permission for Tenant to pay the rent or other sum late thereafter and shall not constitute a waiver of Landlord’s remedies for subsequent late payments.  Late payment charges are due immediately upon notice or demand.  All payments shall be by check,  money order or electronic funds transfer.  For each returned check marked insufficient funds or no account, Tenant shall pay all applicable bank charges incurred by Landlord plus $25.00. Payment of Rent by Tenant shall be an independent covenant.  If a check from Tenant is returned for insufficient funds or no account, Landlord may for the next twelve (12) months require that all Rent and other sums due be paid by cashier’s check, certified check, money order, or electronic funds transfer.

10.  SERVICES BY LANDLORD

Landlord agrees to furnish Tenant, while occupying the Leased Premises and subject to Section 8, water (hot, cold and refrigerated) at those points of supply provided for general use of tenants; electric current for ordinary office use; heated and refrigerated air conditioning (HVAC) in season, 7:00 a.m. - 7:00 p.m. Monday through Friday and 8:00 a.m. - 1:00 p.m. on Saturday, and at such temperatures and in such amounts as are consistent with comparable office buildings in Bexar County, Texas (for after-hours HVAC requested by Tenant, the cost for such service shall initially be $25.00 per hour per floor with a two (2) hour minimum and may be adjusted by Landlord annually, to reflect actual increases in utility costs.  Tenant, upon receipt of an invoice by Landlord, shall pay for such after-hours HVAC service at the same time Base Rental is next due); janitor and cleaning services, five (5) days per week for the Building and Leased Premises, but not carpet shampooing in the Leased Premises; electric lighting service for all public areas, and replacement of fluorescent light bulbs and ballasts in Building standard lighting fixtures (but not incandescent light bulbs for nonstandard fixtures or for Tenant’s lamps), and special service areas of the Building  in the manner and to the extent consistent with comparable office buildings in Bexar County, Texas.  Landlord acknowledges and agrees that the electric current used by Tenant in the Leased Premises prior to the date hereof is acceptable to Landlord and shall not be deemed in excess of that necessary for ordinary office use.  Landlord further agrees that it shall provide electrical current to the Leased Premises in a capacity no less than the current capacity used by Tenant in the Leased Premises prior to the date hereof, at no additional cost to Tenant.  In the event that Landlord chooses to utilize an electric provider other than City Public Service, Landlord agrees to pay energy costs for the Building and the Leased Premises to the extent such costs exceed the costs for the same amount of energy consumption if provided by City Public Service.

Failure to furnish these services or any interruption of these services, from any cause whatsoever, shall not make Landlord liable for damage or loss to persons, property or Tenant’s business, shall not be considered an eviction of Tenant and, except as expressly provided in this section, shall not entitle Tenant to any refund or reduction of Rent, and shall not relieve Tenant from compliance with any term or provision of this Lease.  In the event any of the equipment or facilities useful, but not essential or necessary, for provision of the services for which Landlord is responsible hereunder breaks down or ceases to function properly, Tenant shall immediately give Landlord written notice thereof and Landlord shall use reasonable diligence to repair promptly any such equipment or facilities, but Tenant shall have no claim for rebate or abatement of Rent for damages resulting from such repair or from any interruptions in service occasioned by such repair.  Tenant shall pay all utility costs occasioned by electrodata processing machines, telephone equipment, computers and other equipment of high electrical consumption which, as reasonably determined by Landlord, require electric current in excess of Tenant’s current use, including, without limitation, the cost of installing, servicing and maintaining any special or additional inside of outside wiring or lines, meters or submeters, transformers, poles, air conditioning costs, or the cost of any other equipment or facilities necessary to increase the amount or type of electric current or power available to the Leased Premises.  If any essential services, including without limitation, HVAC, elevators, electricity or water, supplied by Landlord are interrupted, the interruption does not result from the negligence or willful misconduct of the Tenant, and the interruption continues for more than seventy two (72) consecutive hours after written notice from Tenant to Landlord, Base Rental and Additional Rental shall be abated commencing on the fourth (4^th) day following Landlord’s receipt of Tenant’s notice and continuing until the service is restored; provided, however, if repairs thereof are of the type or nature that cannot be reasonably completed within seventy-two (72)

5

hours, and provided Landlord has commenced restoration of services within such seventy-two (72) hour period and thereafter continues to diligently pursue the same, no abatement of Base Rental or Additional Rental shall occur unless such service is not repaired prior to the tenth (10^th) day following Landlord’s receipt of Tenant’s notice. If such service is not repaired within such ten (10) day period, Base Rental and Additional Rental shall be abated, and the abatement shall be for the period commencing with the fourth (4^th) day following Landlord’s receipt of Tenant’s notice, and shall end when the service is repaired.  Notwithstanding the foregoing, Tenant shall only be entitled to an abatement of Base Rental and Additional Rental to the extent that Base Rental and Additional Rental would be reimbursed to Landlord pursuant to the rental abatement insurance required to be carried by Landlord under this Lease.   If the interruption continues for ninety (90) consecutive days, Tenant shall have the option, at its sole discretion, to terminate the Lease by delivering written notice to Landlord of such termination anytime after such ninety (90) days, but before the services are restored, in which event this Lease shall terminate on the date Tenant delivers such notice.  Additionally, notwithstanding the provisions of this paragraph 10, if the interruption is caused by fire or other casualty covered by insurance required to be carried by Landlord pursuant to the terms of this Lease, then the provisions of paragraph 27 shall be applicable and govern rather than the provisions of this paragraph 10.

Landlord agrees that as long as Tenant is occupying at least twenty-five percent (25%) of the rentable space in the Building, Landlord shall provide on-site perimeter security for the Building, twenty-four (24) hours per day, seven (7) days per week.  Such security shall consist of a minimum of one (1) security guard to control and monitor access to the Building.  Landlord shall have no duty to provide any security or courtesy patrol services of any kind except as expressly provided above or elsewhere in this Lease.  Landlord shall not be liable to Tenant or Tenant’s employees, family, customers, invitees, contractors, or agents for injury, damage, or loss to person or property caused by criminal conduct of persons other than Landlord, its agents and employees, including theft, burglary, assault, vandalism or other crimes.  Tenant shall lock its office space doors when the last person leaves such office space for the day.  Tenant, its employees, agents, and invitees shall have access to the Leased Premises twenty-four (24) hours per day, seven (7) days per week.  Tenant may, at its expense, and not as a part of Operating Expenses, and with Landlord’s approval, which shall not be unreasonably withheld, conditioned or delayed, provide security service to the Building.  All security related equipment installed and/or used by Tenant and/or its third party contractor prior to or after the date hereof shall remain the property of Tenant and Tenant shall be entitled to remove any such equipment upon the expiration or earlier termination of this Lease, provided Tenant restores the building to its original condition.

11.  PAYMENTS AND PERFORMANCE

Tenant agrees to pay all Rents and all other sums required to be paid to Landlord at the times and in the manner provided in this Lease.  The obligation of Tenant to pay Rent is an independent covenant and, except as expressly provided in this Lease, under no circumstances shall Tenant be released from its obligation to pay Rent.

12.  REPAIRS AND REENTRY

Tenant will maintain the non-structural portion of the Leased Premises in sound condition, at Tenant’s expense, and, subject to the provisions of Sections 23, 27 and 29 of this Lease, shall repair, using only contractors approved by Landlord, any damage done to the Building or any part of the Building by Tenant or Tenant’s agents, contractors, employees and invitees.  If Tenant fails to make such repairs, within fifteen (15) days after Tenant has received written notice from Landlord or is otherwise aware of such damage, or, if such repair is of the type or nature that cannot reasonably be completed within fifteen (15) days,  then such longer period of time as is necessary, provided Tenant has commenced such repair within such fifteen (15) day period and thereafter continues to diligently complete such repair, Landlord shall thereafter have the option to make such repairs itself and Tenant shall reimburse Landlord for the cost of the repairs on demand.  Tenant shall not commit nor allow any waste or damage to be committed on any part of the Leased Premises, and at the time of termination of this Lease, shall deliver the Leased Premises to Landlord in as good condition as existed on the date of Tenant’s taking possession, ordinary wear and tear and casualty damage excepted, and Landlord shall have the right to reenter and resume possession.

Landlord shall, at its expense, repair, maintain and replace the structural elements of the Leased Premises and Building, exterior walls, the roof, the foundation, Building common areas, and Building mechanical, electrical, plumbing and other systems above the ceiling and below the floors.  Landlord shall keep such items in good order, condition and repair.  Landlord shall not be required to make any required repairs until Landlord has received written notice of the need thereof or has otherwise obtained knowledge of the necessity of rendering such repair(s).  Landlord shall also be responsible for maintenance and repair of the Building HVAC, plumbing, electrical and mechanical equipment.  Landlord shall be responsible for repairing, at its sole cost and expense (and the cost thereof shall not be passed through to Tenant as an Operating Expense), all structural defects and all latent defects.  If Landlord fails to promptly make any repair that materially interferes with Tenant’s use and enjoyment of the Leased Premises within fifteen (15) days after written notice, or such repair is of the type or nature that cannot reasonably be completed within fifteen (15) days, such longer period of time as is necessary, provided Landlord has commenced such repair within such fifteen (15) day period and thereafter continues to diligently complete such repair, Tenant may make such repair and offset the cost thereof against Base Rental and other amounts due under the Lease or may recover the amount thereof from Landlord, in addition to its other legal or equitable remedies.

13.  INTENTIONALLY DELETED

14.  ALTERATIONS AND ADDITIONS

 Tenant shall make no alterations, additions or improvements to the Leased Premises, in excess of $100,000.00 per occurrence including the installation of trade fixtures, without the prior written consent of Landlord, which shall not be unreasonably withheld, conditioned

6

or delayed.  Landlord may impose, as a condition to its consent, requirements as to the manner in which, the times at which, and the contractor by whom such work shall be done.  All such alterations, additions or improvements shall be made by Tenant at its sole cost and expense, and excluding trade fixtures, shall be part of the Building, shall become the property of the Landlord at the time they are placed on the Leased Premises, and shall be surrendered with the Leased Premises upon termination of this Lease.  Landlord may, however, by written notice to Tenant given at least thirty (30) days prior to the end of the term, require Tenant, at Tenant’s sole cost and expense, to remove all partitions, counters, railings, cabling, wiring and the like installed by Tenant in the Leased Premises after the commencement date of this Lease, and in any Expansion Space (as defined in Section 48 herein), after the Expansion Space Commencement Date, and to repair any damage caused by such removal; provided however, Tenant shall not be obligated to remove any improvements if at the time Tenant obtains Landlord’s approval thereof Landlord has agreed that Tenant will not be obligated to remove them.  Notwithstanding  anything to the contrary in this Lease, Tenant shall retain ownership of, and shall have the right, at its option, to remove from the Building upon the expiration or earlier termination of this Lease, any and all UPS equipment or systems, raised flooring, generators serving computer rooms and all other computer/communications related equipment. All construction work done by Tenant within the Leased Premises shall be performed in a good and workmanlike manner, in compliance with all governmental requirements, and in such manner as to cause a minimum of interference with other construction in progress and with the transaction of business in the Building.  Tenant agrees to defend, indemnify and hold Landlord harmless from and against any loss, liability, claim or damage resulting from such work.  In addition, Tenant agrees to indemnify and hold Landlord harmless from and against any and all claims for mechanics, materialmen or other liens in connection with any of Tenant’s alterations, additions or improvements, including trade fixtures.  In addition, with respect to alterations, improvements or additions for which Landlord’s prior consent is required, Tenant shall, if required by Landlord, furnish such waiver or waivers of lien in form reasonably satisfactory to Landlord before commencing any work on such alterations, additions or improvements, including trade fixtures.  Landlord reserves the right to enter the Leased Premises for the purpose of posting any notices of nonresponsibility as may be permitted by law or desired by Landlord.

Landlord acknowledges and agrees that the location of all telephone, telecommunications and computer equipment and related cables and wiring used by Tenant in the Leased Premises and Building prior to the date hereof is acceptable to Landlord, and Tenant shall not be required to relocate, remove or change in any manner the location or type of such equipment.

Landlord agrees that Tenant shall be entitled to move furniture or office equipment in or out of the Building, or dispatch or receive any merchandise or materials which requires use of elevators or stairways, or movement through Building entrances or the lobby at any time twenty-four (24) hours per day, seven (7) days per week; provided, however, Tenant shall not unreasonably interfere with or exclude other tenants in the Building from also utilizing elevators or stairways or their movement through Building Entrances or the lobby areas, and shall make reasonable efforts to coordinate its activities with those of other tenants; and provided, further, that any time that Tenant occupies less than twenty-five percent (25%) of the rentable space in the Building, Tenant shall first obtain Landlord’s written consent for and give reasonable notice to Landlord of such activities.  Subject to the provisions of Sections 19, 27 and 29, Tenant agrees to assume all risk as to damage to articles moved and injury to persons or public engaged or not engaged in such movement, including equipment, property and personnel of Landlord if damaged or injured as a result of acts in connection with carrying out this service for Tenant from time of entering property to completion of work; and Landlord shall not be liable for acts of any person engaged in, or any damage or loss of any of said property or persons resulting from, any act in connection with such service performed for Tenant. All damage done to the Building by the improper placing of such heavy items will be repaired at the sole expense of Tenant.

15.  LEGAL USE - VIOLATIONS OF INSURANCE COVERAGE - NUISANCE

Tenant will not use the Leased Premises nor allow the Leased Premises to be used for any purpose other than that stated in this Lease or for any purpose which is unlawful, disreputable, or extra hazardous on account of fire, explosion or other casualty, nor permit any act which would impair, invalidate or increase the fire and casualty insurance on the Building or its contents.  Furthermore, Tenant will not do anything which might emit offensive odors or fumes or make undue noise or vibrations.   If insurance rates on the Building or its contents are increased due to action, conduct or business of Tenant, Tenant will pay such amount of insurance rates increase to Landlord on demand.  Tenant will not create a nuisance or unreasonably interfere with other tenants or Landlord, nor allow Tenant’s agents, employees or invitees to do so.

16. PERSONAL PROPERTY TAXES

Tenant shall be liable for all taxes levied against personal property and trade fixtures placed by Tenant in the Leased Premises.  If any such taxes are levied against Landlord or Landlord’s property and if Landlord elects to pay the same or if the assessed value of the Landlord’s property is increased by inclusion of personal property and trade fixtures placed by Tenant in the Leased Premises and Landlord elects to pay the taxes based on such increase, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is primarily liable hereunder.

17. SUBSTITUTE TAX FOR REAL OR PERSONAL PROPERTY

If at any time during the primary term of this Lease or any renewal or extension hereof, a tax or excise on Rents or other tax however described (except any franchise, estate, inheritance, capital stock, income or excess profits tax imposed upon Landlord) is levied or assessed against Landlord by any lawful taxing authority on account of Landlord’s interest in this Lease or the Rents or other charges reserved hereunder, as a substitute in whole or in part for, or in addition to, the general taxes described in Section 8 or Section 16 above, Tenant agrees to pay Landlord upon demand, and in addition to the Rentals and other charges prescribed in this Lease, the amount of such tax or excise.  In the event any such tax or excise is levied or assessed directly against Tenant, then Tenant shall be responsible for and shall pay the same at such times and in such manner as the taxing authority shall require.

7

18.  HAZARDOUS MATERIAL

Tenant will maintain the Leased Premises in a clean condition, will procure at its sole expense any permits and licenses required for the transaction of business in the Leased Premises and will comply with all laws, ordinances, orders, rules and regulations of any governmental authority having jurisdiction over the use, condition or occupancy of the Leased Premises.

Throughout the term of this Lease and any renewal term hereof, Tenant shall not permit the presence, use, generation, release, discharge, storage, disposal or transportation of any “Hazardous Materials” (as hereinafter defined) on, under, in, above, to or from the Leased Premises other than in compliance with all applicable federal, state and local laws, rules, regulations and orders.  For purposes of this provision, the term “Hazardous Materials” shall mean and refer to any wastes, chemicals, materials or other substances of any kind or character which are or become regulated as hazardous or toxic wastes, chemicals or substances and/or which are prohibited or require notification, reporting or special handling or treatment in their presence, use, generation, release, discharge, storage, disposal or transportation under any applicable federal, state or local law, rule, regulation or order.  Tenant will immediately notify Landlord of (i) any enforcement, clean up, removal or other governmental or regulatory action instituted, completed or threatened pursuant to any Regulations (defined below), (ii) any claim made or threatened by any person against Tenant, Landlord or the Leased Premises relating to damages, contribution, cost recovery compensation, loss or injury resulting from or claimed to result from any Hazardous Materials and (iii) any reports made to any environmental agency arising out of or in connection with any Hazardous Materials in or removed from the Leased Premises (other than compliance reports and correspondence related to normal Tenant operations and research and development activities), including any complaints, notices, warnings or asserted violations in connection therewith.  Tenant also will supply to Landlord as promptly as possible, and in any event within ten (10) business days after Tenant receives or sends the same, copies of all claims, reports, complaints, notices or warnings of asserted violations, relating in any way to the Leased Premises or Tenant’s use thereof.  Tenant will deliver promptly to Landlord copies of hazardous waste manifests reflecting the legal and proper disposal of Hazardous Materials from the Leased Premises.  Tenant shall indemnify, defend and hold Landlord harmless from and against (i) any fines, penalties, liabilities or other sums or charges levied or imposed under any applicable federal, state or local law, rule, regulation or order, or by any governmental agency, authority or political subdivision having jurisdiction over the Leased Premises, arising in connection with the presence, use, generation, release, discharge, storage, disposal or transportation of any Hazardous Materials by Tenant on, under, in, above, to or from the Leased Premises, (ii) any loss, cost, expense, claim or liability arising out of any investigation, monitoring, cleanup, containment, removal, storage or restoration work (for convenience, referred to herein as “Remedial Work”) required by, or incurred by Landlord or any other person or party in a reasonable belief that such Remedial Work is required by any applicable federal, state or local law, rule, regulation or order, or by any governmental agency, authority or political subdivision having jurisdiction over the Leased Premises, insofar as such Remedial Work pertains or relates to the presence, use, generation, release, discharge, storage, disposal or transportation of any Hazardous Materials by Tenant on, under, in, above, to or from the Leased Premises and (iii) any claims paid by Landlord, after consultation with Tenant, to third parties for loss, injury, expense or damage arising out of the presence, use, generation, release, discharge, storage, disposal or transportation of any Hazardous Materials by Tenant on, under, in, above, to or from the Leased Premises.  In the event any Remedial Work is so required under any applicable federal, state or local law, rule, regulation or order, or by any governmental agency, authority or political subdivision having jurisdiction over the Leased Premises,  Tenant shall promptly notify Landlord and, unless Landlord elects, in its sole and absolute discretion, to perform the Remedial Work at Tenant’s expense, Tenant shall promptly perform or cause to be performed such Remedial Work in compliance with such law, rule, regulation or order, or in strict compliance with the requirements of such governmental agency, authority or political subdivision.  Provided Landlord does not elect to perform the Remedial Work, in the event Tenant shall fail to commence the Remedial Work in a timely fashion, or shall fail to prosecute and diligently perform the Remedial Work to its completion, such failure shall constitute an event of default on the part of Tenant under the terms of this Lease and Landlord, in addition to any other rights or remedies afforded it hereunder or at law or in equity, may, but shall not be obligated to, cause the Remedial Work to be performed, and Tenant shall promptly reimburse Landlord for the cost and expense thereof upon demand.

Tenant acknowledges that there are in effect federal, state and local laws, rules, regulations and orders (collectively referred to in this Section 18 as the “Regulations”) and that additional Regulations may hereinafter be enacted or go into effect relating to or affecting the Leased Premises and/or the Building and concerning the impact on the environment of construction, land use, maintenance and operation of structures and conduct of business.  Tenant will not cause, or permit to be caused, any act or practice, by negligence, omission or otherwise, that would adversely affect the environment, or do anything or permit anything to be done that would violate any of said Regulations.  Moreover, Tenant shall have no claim against Landlord by reason of any changes Landlord may make in the Leased Premises and/or the Building pursuant to said Regulations or any charges imposed upon Tenant, Tenant’s customers or other invitees pursuant to same.

The indemnity provisions of this section shall survive the termination of this Lease.

19.  INDEMNITY AND LIABILITY

By moving into the Leased Premises, Tenant acknowledges that the same are received by it in a good state of repair, accepts the Leased Premises as suitable for the purposes for which same are leased, waives , subject to Landlord’s repair obligations, any and all defects of the Leased Premises and assumes all risks of damage to persons, property or Tenant’s business, except to the extent caused by the negligence or willful misconduct (whether caused by action or omission) of Landlord.  Tenant agrees that Tenant shall repair the existing conditions related to the balconies and the planters on the balconies, at Tenant’s expense, but thereafter these shall be a part of Landlord’s repair and maintenace obligation.  Landlord shall not be liable for any injury to person, damage to property or to Tenant’s business arising from any acts or omissions of Landlord or from any cause whatsoever except Landlord’s gross negligence or willful misconduct (whether caused by action or omission).  Subject to the provisions of Section 29 of this Lease, and except to the extent of Landlord’s sole or gross negligence or willful misconduct

8

(whether caused by action or omission), Tenant will indemnify and hold Landlord harmless from all suits, actions, damages, liability and expense in connection with loss of life, bodily or personal injury or property damage arising from the use or occupancy by Tenant of the Leased Premises, and from any acts or omissions of Tenant, its agents, contractors, employees or invitees.  In addition, if Landlord should, without fault on its part, be made a party to any action by or against Tenant, Tenant shall pay all costs, expenses and reasonable attorney’s fees of Landlord.

Subject to the provisions of Section 29 of this Lease, Landlord will indemnify and hold Tenant harmless from all suits, actions, damages, liability and expense in connection with loss of life, bodily or personal injury or property damage arising from or caused by the sole or gross negligence or willful misconduct of Landlord, its agents or employees (whether caused by action or omission), or Landlord’s breach of this Lease.

20.  RULES OF BUILDING

Tenant, Tenant’s agents, contractors, employees and invitees, will comply fully with all Building rules and regulations which are attached to this Lease and made a part of it by this reference and any reasonable amendments or changes to such rules and regulations hereafter implemented by Landlord, provided the rules and regulations are non-discriminatory and enforced in a fair and non-discriminatory manner.  Landlord may amend or change the rules and regulations as it may deem advisable to provide for the safety, protection, care and cleanliness of the Building, and Landlord shall give Tenant a written copy of all such rules and amendments.  In the event of any conflict or contrary provisions between this Lease and any rule or regulation, this Lease shall control.

9

21.  LANDLORD’S RIGHT OF ENTRY

Provided Landlord provides prior notice and is accompanied by an employee, agent or other representative of Tenant if requested by Tenant, Landlord and its agents and representatives may enter the Leased Premises at any time during Tenant’s normal business hours to inspect, clean and make repairs, alterations or additions to the Building as Landlord deems necessary, or to show the Leased Premises to prospective purchasers or lenders, or, during the last six (6) months of the Lease term, prospective tenants.  Tenant will not be entitled to reduction or abatement of rent due to Landlord’s entry for such purposes.  Landlord shall not unreasonably interfere with Tenant’s operations during any such entry.  In the event of an emergency, Landlord shall not be required to notify Tenant prior to entering the Leased Premises for the purpose of taking measures necessary to address the emergency situation.  Notwithstanding anything to the contrary herein, in no event, other than an emergency, shall Landlord be entitled to enter any portion of the Leased Premises as may be designated, from time to time, by Tenant as “Secure Access Areas”, the presently designated area of such portion is shown or described on Exhibit “C” attached hereto.  Tenant reserves the right to designate areas other than that shown on Exhibit “C” as Secure Access Areas, as deemed reasonably necessary by Tenant.

22. INTENTIONALLY DELETED

23.  CONDEMNATION

In the event that the whole or a substantial part of the Leased Premises shall be condemned or taken in any manner for any public or quasi-public use, and as a result thereof, the Leased Premises cannot be used for substantially the same purpose or in substantially the same capacity as prior to such taking, this Lease shall cease and terminate as of the earlier of the date title vests in the condemning authority or the date possession is taken by the condemning authority, and Landlord shall be entitled to receive the entire award, Tenant hereby assigning to Landlord its interest in said award except to the extent of the claims it expressly reserves below. There shall be refunded to Tenant any portion of prepaid Rent covering the period subsequent to such date of termination.  Notwithstanding the foregoing, Tenant may make claim for a separate condemnation award in an amount equal to the value of Tenant’s fixtures and improvements as well as Tenant’s moving expenses (if applicable); Tenant shall make no claim for the value of any unexpired Lease term.

If less than the whole or a substantial part of the Leased Premises shall be so condemned or taken, and after such taking the Leased Premises can be used by Tenant for substantially the same purpose and in substantially the same capacity as prior thereto, the Lease term shall cease only on the part so taken, as of the earlier of the date title vests in the condemning authority or the date possession is taken by the condemning authority, and Tenant shall pay full Rent up to that date (with appropriate refund by Landlord of such Rent as may have been paid in advance for any period subsequent to such taking) and thereafter the Rent shall be equitably adjusted. Landlord shall, at its expense, make all necessary repairs or alterations to the Building so as to constitute the Leased Premises a complete architectural unit, provided that Landlord shall not be obligated to undertake any such repairs and alterations if the cost thereof exceeds the award resulting from such taking.  Notwithstanding anything to the contrary herein, if less than the whole Leased Premises is taken by condemnation, Tenant can elect to terminate this Lease if the remaining portion of the Premises is rendered unsuitable for Tenant’s continued use of the Leased Premises, by giving notice to Landlord within sixty (60) days after the nature and extent of the taking have been finally determined, setting forth the date of termination, which shall not be earlier than thirty (30) days nor later than ninety (90) days after delivery of the notice.

24.  WAIVER OF LANDLORD’S LIEN AND SECURITY INTEREST

Landlord hereby expressly waives any and all liens in Landlord’s favor, whether created hereunder or by law, against the personal property of Tenant located in the Leased Premises.

25.  ABANDONED PROPERTY

Notwithstanding any rule or provision of law to the contrary, all of Tenant’s furniture, movable trade fixtures and personal property not removed from the Leased Premises within thirty (30) days of Landlord’s written request at the termination of this Lease, whether such termination occurs by lapse of time or otherwise, shall be conclusively presumed abandoned by Tenant, and Landlord may declare such property to be the property of Landlord or may dispose of the property by any method it deems advisable.

26.  HOLDING OVER

It is agreed and understood that any holding over by the Tenant of the Leased Premises at the termination of this Lease, whether such termination occurs by lapse of time or otherwise, shall not under any circumstances operate to renew or extend the term of this Lease and shall only be construed as a tenancy at will at a daily rental equal to 1/30th of an amount equal to one and one-half (1½) the monthly Rental payable during the last month prior to termination of this Lease.  Such tenancy shall be subject to all other terms and provisions of this Lease except any right of renewal.

27.  CASUALTY

In the event the Leased Premises or any material portion of the Building are damaged by fire or other casualty which would be covered by the casualty insurance carried or required to be carried by Landlord under the provisions of this Lease, Landlord shall, within seven (7) days following such damage, cause an architect to provide an estimate of the number of days required to repair the damage.  The architect shall provide its estimate to Landlord and Tenant within twenty (20) days following the damage.  If the damage cannot be repaired within one hundred eighty (180) days, this Lease may be terminated by either Landlord or Tenant by written notice within thirty (30) days after receipt of the architect’s damage certification and shall then terminate as of the date of the casualty damage.  In the event this Lease is so terminated,

10

Tenant shall pay all Rent due under this Lease, prorated to the date of such damage, and all other sums owing at that time and shall surrender possession of the Leased Premises to Landlord no later than ninety (90) days from the date of Tenant’s notice of termination.

However, if the damage can be repaired within one hundred eighty (180) days or if it cannot be repaired within such time but neither party exercises its option to terminate this Lease, Landlord shall, within thirty (30) days of such damage, proceed with reasonable diligence to restore the Leased Premises and/or the Building to the same condition as existed immediately prior to the occurrence of such casualty.  The Rent shall be abated during the time and to the extent the Leased Premises are unfit for occupancy.  Landlord shall not be required to rebuild, repair or replace any of the furniture or equipment, which may have been placed on the Leased Premises by Tenant.  In the event that the insurance proceeds from policies carried or required to be carried by Landlord under the provisions of this Lease would be inadequate to rebuild the Building or if any mortgagee under a deed of trust, security agreement or mortgage on the Building should require that the insurance proceeds be used to retire the mortgage debt, Landlord shall have no obligation to rebuild and this Lease shall terminate at Landlord’s election not to rebuild, upon written notice to Tenant, effective as of the date of the casualty damage.  Notwithstanding the foregoing provisions of this Section 27, Tenant agrees that if the Leased Premises or any other part of the building is damaged by fire or other casualty caused by the fault or negligence of Tenant or Tenant’s agents, employees or invitees, Tenant shall have no option to terminate this Lease, even if the damage cannot be repaired within one hundred eighty (180) days, and the rent shall not be abated or reduced before or during the repair period except to the extent that Landlord is covered for such rental loss under the Landlord’s rental abatement insurance.

28.  FORCE MAJEURE

In the event Landlord or Tenant shall be delayed, hindered or prevented from the performance of any act required under this Lease by reason of acts of God; acts of common enemies; fire, storm, flood, explosion or other casualty; strikes, lockouts; labor disputes; labor troubles; inability to procure materials; failure of power; restrictive governmental laws or regulations; riots, insurrection; war; settlement of losses with insurance carriers; injunction; order of any court or governmental authority; or other cause not within the reasonable control of Landlord or Tenant, as the case may be, then the performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay.

29.  SUBROGATION; INSURANCE

A.            Subrogation:  Landlord and Tenant hereby waive and release any and all rights, claims, demands and causes of action each may have against the other on account of any loss or damage occasioned to Landlord or to Tenant, as the case may be, their respective businesses, properties, real and personal, the Leased Premises or its contents, arising from any risk or peril insurable under any policy of insurance required to be maintained by Landlord or Tenant under this Lease or otherwise covered by any insurance policy carried by either party.  Inasmuch as the above mutual waivers will preclude the assignment of any aforesaid claim by way of subrogation (or otherwise) to an insurance company (or any other person), each party hereto hereby agrees immediately to give to its respective insurance companies written notice of the terms of said mutual waivers, and to have said insurance policies properly endorsed, if necessary, to prevent the invalidation of said insurance coverages by reason of said waivers.

B.            Liability Insurance:  Tenant shall procure and maintain throughout the term of this Lease a policy or policies of insurance, at its sole cost and expense, insuring Tenant against any and all liability for property damage or injury to or death of person or persons occasioned by or arising out of or in connection with the use or occupancy of the Leased Premises, the limits of such policy or policies to be in an amount not less than $10,000,000 with respect to injuries to or death of any one person, in an amount not less than $10,000,000 with respect to any one accident or disaster, and in an amount not less than $1,000,000.00 with respect to property damaged or destroyed.  Tenant shall furnish evidence satisfactory to Landlord of the maintenance of such insurance and shall obtain a written obligation on the part of each insurance company to notify Landlord at least thirty (30) days prior to cancellation of such insurance.  Tenant shall cause Landlord to be named as an additional insured under such policies.

Landlord shall procure and maintain throughout the term of this Lease a policy or policies of insurance insuring Landlord against any and all liability for property damage or injury to or death of person or persons occasioned by or arising out of or in connection with the use or occupancy of the Building, the limits of such policy or policies to be in an amount not less than $10,000,000 with respect to injuries to or death of any one person, in an amount not less than $10,000,000 with respect to any one accident or disaster, and in an amount not less than $1,000,000 with respect to property damaged or destroyed.  Landlord shall furnish evidence satisfactory to Tenant of the maintenance of such insurance and shall obtain a written obligation on the part of each insurance company to notify Tenant at least thirty (30) days prior to cancellation of such insurance.

C.            Property Insurance:  Tenant shall, at its sole cost and expense, procure and maintain throughout the term of this Lease a policy or policies of insurance causing Tenant’s fixtures, furniture, equipment and other contents within the Leased Premises to be insured under standard fire and extended coverage insurance to the full insurable value thereof.  Tenant shall furnish evidence satisfactory to Landlord of the maintenance of such insurance and shall obtain a written obligation on the part of each insurance company to notify Landlord at least thirty (30) days prior to cancellation of such insurance.

Landlord shall procure and maintain throughout the term of this Lease a policy or policies of insurance causing the Building to be insured under standard fire and extended coverage insurance in the amount of the full replacement value of the Building as the value may

11

exist from time to time, and a policy of rental abatement insurance in an amount equal to or greater than the amount of at least six (6) months of Base Rental and Additional Rental.  Landlord shall furnish evidence satisfactory to Tenant of the maintenance of such insurance.

D.            Insurance Companies.  All policies of insurance required to be carried by either party under this Lease shall be carried by insurance companies authorized to do business in Texas and having a financial rating of at least AA or higher by Best’s Insurance Reports.

30.  TRANSFER OF LANDLORD’S RIGHTS

Landlord shall have the right to transfer and assign, in whole or in part, all and every feature of its rights and obligations under this Lease and in the Building and property referred to in this Lease.  In such event, Landlord shall be released from any further obligation under this Lease and Tenant agrees to look solely to Landlord’s successor for the performance of such obligations.  Tenant further agrees that it will attorn to and recognize any such successor in interest to Landlord as its landlord for the unexpired balance of the term of this Lease and any renewals or extensions hereof to the extent appropriately exercised.  Any security given by Tenant to secure performance of Tenant’s obligations hereunder may be assigned and transferred by Landlord to such successor in interest and Landlord shall, upon such assignment and provided such successor expressly assumes in writing such security, thereby be discharged of any further obligations relating thereto.

31.  BANKRUPTCY

Bankruptcy, insolvency or inability to pay its debts as such become due of Tenant or any guarantor of this Lease; filing by or against Tenant or any guarantor in any court pursuant to any statute either of the United States or of any State of a petition in bankruptcy or insolvency or for reorganization, arrangement or for the appointment of a receiver or trustee of all or a portion of Tenant’s or any such guarantor’s property; or the making by Tenant or any such guarantor of a general assignment for the benefit of creditors, shall constitute a default by Tenant under this Lease and this Lease shall terminate, and Landlord shall have all of its remedies for an event of a default as provided under Paragraph 33 hereof.  Tenant shall then immediately surrender the Leased Premises to Landlord. If Tenant fails to do so, Landlord may expel or remove Tenant and its property and retake possession of the Leased Premises without liability for any prosecution or any claim for damages by reason of such re-entry.

32.  DEFAULT

The following shall constitute events of default by Tenant under this Lease:

(a)           Tenant’s failure to pay Rent and other sums due and payable by Tenant under this Lease within seven (7) days following receipt of written notice from Landlord that such Rent and/or other sum is past due; provided, however, Landlord shall not be required to give written notice of default of the payment of Rent or any other sum more often than twice in any consecutive twelve (12) month period.

(b)           Any transfer of a material portion of Tenant’s property by Tenant for the purpose of defrauding Landlord or defeating the collection of Rent due or to become due under this Lease.

(c)           Any assignment or sublease by Tenant in violation of the terms of this Lease;

(d)           Tenant’s failure to maintain any insurance required to be maintained by Tenant under this Lease, if such failure continues for a period of ten (10) days following receipt of written notice from Landlord of such failure;

(e)           Tenant’s failure to restore any amount drawn under the Letter of Credit as required under Paragraph 7 hereof; and

(f)            Tenant’s failure to comply with other provisions of this Lease, and such failure continues for a period of thirty (30) days following receipt of written notice from Landlord of such failure; provided, that if such failure cannot be cured within such thirty (30) day period, so long as Tenant has commenced to cure such failure within such thirty (30) day period and continues with diligence to effect such cure, Tenant shall have a reasonable period of time following such thirty (30) day period to effect such cure not to exceed, however, a total of one hundred twenty (120) days.

33.  REMEDIES

A.            Upon the occurrence of any event of default under this Lease, Landlord shall have the right, at its option, then or at any time thereafter during the continuance of such event of default, to pursue any one or more of the following remedies, in addition to all other rights or remedies provided herein or at law or in equity, without any notice or demand of any kind or nature whatsoever to Tenant or to any other party liable, in whole or in part, for the performance of Tenant’s obligations under this Lease:

(1)           Landlord may do or cause to be done whatever Tenant is obligated to do under the terms of this Lease and, if necessary to such end, Landlord may enter upon the Leased Premises, by picking or changing the locks if necessary, without being liable for prosecution or any claim for damages therefor (Tenant hereby waiving any claim by reason of such entry).  Such action on the part of Landlord, if taken, shall in no event or circumstance be construed as or deemed to be a waiver by Landlord of the event of default on the part of Tenant hereunder. Further, Tenant agrees that Landlord shall not be liable for any damages resulting to Tenant from Landlord’s actions in effecting compliance with Tenant’s obligations hereunder, except to the extent caused by the sole or gross negligence or willful misconduct (whether by

12

action or omission) of Landlord, or otherwise.  All sums expended by Landlord in effecting compliance with Tenant’s obligations under this Lease (including, without limitation, reasonable attorneys’ fees and related legal costs), together with interest thereon at a rate  equal to the  lesser of  (i) one and one-half percent (1-1/2%) per month or (ii) the maximum rate permitted by applicable law from the date of the making of any such expenditure to the date of repayment thereof to Landlord, shall be payable to Landlord on demand.

(2)           Landlord may terminate this Lease by written notice to Tenant, in which event Tenant shall immediately surrender the Leased Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which Landlord may have for possession or arrearages in Rent (including any interest which may have accrued thereon), enter upon and take possession of the Leased Premises and property therein, by picking or changing the locks if necessary, and lock out, expel and remove Tenant and/or any other person or party who may be occupying all or any portion of the Leased Premises, without being liable for prosecution or any claim for damages therefore (Tenant hereby waiving any claim by reason of such entry, taking possession or removal or by issuance of any distress warrant or writ of sequestration, or otherwise), and upon any such entry and taking possession by Landlord, Tenant’s right to possession of the Leased Premises and leasehold estate and options hereunder shall immediately cease and terminate. Landlord shall be entitled to recover damages from Tenant by reason of any such termination of this Lease, such damages to include the unpaid rentals and other sums and charges due at the time of termination, plus interest thereon at a rate equal to the lesser of (i) one and one-half percent (1-1/2%) per month or (ii) the maximum rate permitted by applicable law from the date due, and all other sums of money or damages to which Landlord is rightfully entitled hereunder and/or otherwise at law or in equity.

(3)           Landlord may terminate Tenant’s right of possession of the Leased Premises (without terminating this Lease) and, without prejudice to any other remedy which Landlord may have for possession or arrearages in Rent (including any interest which may have accrued thereon), enter upon and take possession of the Leased Premises and property therein, by picking or changing the locks if necessary, and lock out, expel and remove Tenant and/or any other person or party who may be occupying all or any portion of the Leased Premises, without being liable for prosecution or any claim for damages therefore (Tenant hereby waiving any claim by reason of such entry, taking possession or removal or by issuance of any distress warrant or writ of sequestration, or otherwise).  Notwithstanding any such entry by Landlord and termination of Tenant’s right of possession of the Leased Premises as aforesaid, same shall not work a termination of this Lease, nor shall Tenant be relieved of its obligation to pay Rentals and to perform its other obligations under this Lease, it being understood that Tenant shall remain liable for the payment of all Rentals and other sums and charges due or to become due hereunder and for the performance of all other obligations of Tenant hereunder.  On any such termination of Tenant’s right of possession of the Leased Premises, Landlord shall be obligated to use commercially reasonable efforts to relet the Leased Premises for the account of Tenant for such rent and on such terms and conditions as Landlord, in its sole discretion, may determine; provided, however, in the event Landlord, in its sole discretion, shall elect to relet the Leased Premises, such action by Landlord shall not be deemed as an acceptance of Tenant’s surrender of the Leased Premises unless Landlord expressly notifies Tenant of such acceptance in writing, Tenant hereby acknowledging that Landlord shall be reletting as Tenant’s agent and Tenant furthermore agreeing to pay to Landlord on demand any deficiency.  Landlord shall have the right to collect from Tenant any sums due Landlord under the terms of this subparagraph 33(A)(3) by suits or proceedings brought from time to time on one or more occasions without Landlord being obligated to wait until the expiration of the term of this Lease.  Landlord shall have the right to allow such sums to accumulate and to bring an action on several or all of the accrued sums at one time.  Any such suit shall not prejudice in any way the right of Landlord to bring a similar action for any subsequent sum becoming due hereunder; and no delivery or recovery of any portion due Landlord hereunder shall be any defense in any action to recover any amount not theretofore reduced to judgment in favor of Landlord, nor shall any reletting be construed as an election on the part of Landlord to terminate this Lease unless a written notice of such intention and election is given to Tenant by Landlord.  Notwithstanding any reentry and repossession of the Leased Premises by Landlord pursuant to this subparagraph 33(A)(3) without termination of this Lease, Landlord may at any time thereafter elect to terminate this Lease and recover from Tenant such sums and damages to which Landlord is then entitled.

(4)           With or without terminating this Lease, Landlord may elect to treat such event of default as an entire breach of this Lease, whereupon Tenant will immediately become liable to Landlord, as damages for such entire breach, for an amount equal to the total of (a) all unpaid Rentals and other sums and charges then due to Landlord hereunder, including interest thereon at a rate equal to the lesser of (i) one and one-half percent (1-1/2%) per month or (ii) the maximum rate permitted by applicable law from the date due, (b) in the event the Leased Premises have not been leased to another tenant, the present value [discounted at the rate of eight percent (8%) per annum] of the balance of the Rentals and other sums and charges becoming due hereunder for the remainder of the term of this Lease reduced by the reasonable cash market value of the Lease for such period, (c) in the event the Leased Premises have been leased to another tenant, the Rentals and other sums and charges becoming due hereunder for the remainder of the term of this Lease reduced by the amounts to be received from the new tenant (but in no event shall Tenant be liable for any damages under this subparagraph 33(A)(4)(c) which would exceed the amount of damages calculated under subparagraph 33(A)(4)(b)), and (d) any other sums of money or damages owed by Tenant to Landlord or to which Landlord is entitled hereunder and/or otherwise at law or in equity.

B.            Landlord shall be entitled to the benefit of all provisions of applicable laws respecting the speedy recovery of lands and tenements held over by Tenant and proceedings in forcible entry and detainer.  Tenant hereby waives notice of reentry, of institution of legal proceedings to that end and/or the intention of Landlord to recover attorneys’ fees in connection therewith, and any right of redemption, reentry or repossession with respect to the Leased Premises or any of Tenant’s property therein which may be repossessed by Landlord hereunder.

13

C.            It is expressly agreed that in determining the “Rentals and other sums and charges due hereunder,” as such phrase is used throughout subparagraphs 33(A)(2)-33(A)(4) above, there shall be added to the Base Rental as provided for in this Lease a sum equal to Tenant’s Pro Rata Share of Excess Operating Expenses as provided in Section 8 hereof plus all other sums and charges for which Tenant is responsible for paying pursuant to this Lease.

D.            It is further agreed that, in addition to payments required pursuant to subparagraphs 33(A)(1) –33(A)(4) above (but only to the extent Landlord has not otherwise been compensated therefor pursuant to subparagraphs 33(A)(1) –33(A)(4), and as long as the maximum benefit recovered by Landlord does not exceed the lesser of (i) the Base Rental and Additional Rental which Tenant would have been required to pay under the terms of this Lease), and (ii) the actual damages (subject to any mitigation thereof in accordance with applicable law) Landlord would have been entitled to recover under applicable law and this Lease, Tenant shall compensate Landlord for all expenses incurred by Landlord in retaking possession of the Leased Premises and/or any of Tenant’s property therein (including, among other expenses, any increase in insurance premiums caused by a vacancy of the Leased Premises), all reasonable expenses incurred by Landlord in reletting (including, among other reasonable expenses, repairs, remodeling, replacements, advertisements and brokerage fees), all concession granted to a new tenant upon reletting (including, among other concessions, free rent period and renewal options), all losses incurred by Landlord as a direct or indirect result of Tenant’s default (including, among other losses, any adverse reaction by Landlord’s mortgagee or by any other tenants or potential tenants of the building) and a reasonable allowance for Landlord’s administrative efforts, salaries and overhead attributable directly or indirectly to Tenant’s default and Landlord’s pursuing the rights and remedies provided herein and under applicable law.

E.             Notwithstanding any rule or provision of law to the contrary, in the event Landlord shall, for the purpose of reentering or regaining possession of the Leased Premises, or for the purpose of excluding Tenant therefrom, or for the purpose of taking possession of any of Tenant’s property located within the Leased Premises, as authorized by law and/or the terms of this Lease, change the lock(s) to the Leased Premises, Landlord shall not be obligated to provide Tenant with the new key(s) to the Leased Premises or otherwise provide Tenant with access to the Leased Premises unless and until Tenant shall have first (1) brought current all Rentals and other sums or charges due to Landlord under the provisions of this Lease [but if Landlord has theretofore formerly terminated Tenant’s right of possession of the Leased Premises or has terminated this Lease pursuant to the provisions above, then Landlord shall be under no obligation to provide the new key(s) to Tenant regardless of Tenant’s payment of past due Rentals or other sums or charges due hereunder, damages or any other payments or amounts of any kind or nature whatsoever]; (2) fully cured and remedied to Landlord’s reasonable satisfaction all other defaults by Tenant of which Tenant has received notice under this Lease; and (3) given Landlord security and assurances satisfactory in all material respects to Landlord, in Landlord’s reasonable discretion, that Tenant intends to and is able to meet and comply with Tenant’s future obligations under this Lease, both monetary and nonmonetary.  Further, the provisions of this Lease pertaining to Landlord’s waiver of notice and demand in the event of the exercise of any right or remedy by Landlord hereunder shall supersede the provisions of any statute or provision of law pertaining to the affixation of notice on the door of the Leased Premises advising of any lockout and/or disclosing the time at which, and/or person from whom, the new key(s) to the Leased Premises may be obtained, and Tenant hereby waives the requirement of any such notice.

F.             Tenant agrees to look solely to the estate and interest of Landlord in the Project for the collection of any judgement or other judicial process requiring the payment of money by Landlord in the event of a default or breach by Landlord with respect to this Lease, and no other assets of Landlord shall be subject to levy of execution or other procedures for the satisfaction of Tenant’s rights.

G.            Notwithstanding anything to the contrary in this Lease, in the event of any default by Tenant, Landlord shall use commercially reasonable effort to mitigate any damages which may arise from any such default.

34.  NO WAIVER

No action by Landlord or its agents shall constitute an acceptance of an attempted surrender of the Leased Premises and no agreement to accept such a surrender of the Leased Premises shall be valid unless in writing.  Reentry of the Leased Premises by Landlord shall not constitute an election by Landlord to terminate this Lease unless Landlord so notifies Tenant in writing.  Acceptance of rent by Landlord following the occurrence of an event of default shall not waive such default, except to the extent such payment cures in full such default, nor shall the receipt by Landlord of rent from any assignee, subtenant or occupant of the Leased Premises other than Tenant be deemed a waiver of Section 62 of this Lease, Landlord’s waiver of any default or breach of the terms of this Lease (including any violation or failure to enforce the Building Rules and Agreed Regulations attached hereto) or failure by Landlord to enforce one or more of the remedies provided herein upon such default or breach shall not constitute a waiver of any other default or breach of this Lease.  No provision of this Lease shall be deemed waived by Landlord unless evidence in writing, Landlord’s rights and remedies under this Lease shall be cumulative of every other right or remedy Landlord may have otherwise at law or in equity, and Landlord’s exercise of one or more of the rights or remedies shall not bar or in any way impair Landlord’s exercise of other rights and remedies.

35.  SUBORDINATION

As a condition precedent to Tenant’s obligations under this Lease, Landlord shall deliver to Tenant concurrently with the execution of this Lease by Landlord a subordination and non-disturbance agreement in form and substance acceptable to Tenant pursuant to which tenant subordinates its interest in this lease and each lender holding an interest superior to this Lease agrees that if there is not an uncured event of default by Tenant under this Lease, then upon foreclosure or other acquisition by any such lender, Tenant’s right to continue in possession of the Leased Premises shall not be disturbed.  Similarly, Tenant shall subordinate its interest under this Lease to any future deed of trust or other lien

14

but only if and when the prospective lienholder furnishes to Tenant a subordination and non-disturbance agreement in form and substance reasonably satisfactory to Tenant.  Tenant agrees that a subordination and non-disturbance agreement in the form attached hereto as Exhibit I, or in a substantially similar form, is and will be reasonably satisfactory to Tenant.  However, notwithstanding the foregoing provisions of this Section 35, Tenant agrees that any such mortgagee shall have the right at any time to subordinate any such deeds of trust, mortgages or other instruments of security to this Lease on such terms and subject to such conditions as such mortgagee may deem appropriate in its discretion.  Provided Tenant has been provided with a non-disturbance agreement reasonably acceptable to Tenant, Tenant further agrees, upon demand by Landlord’s mortgagee at any time, before or after the institution of any proceedings for the foreclosure of any such deeds of trust, mortgages or other instruments of security, or sale of the Building pursuant to any such deeds of trust, mortgages or other instruments of security, to attorn to such purchaser upon any such sale and to recognize such purchaser as “Landlord” under this Lease.

36.  ESTOPPEL CERTIFICATES

From time to time, upon ten (10) days prior written request from Landlord, Tenant shall execute and deliver to Landlord the estoppel certificate attached as Exhibit “D” (as may be changed as reasonably required by a prospective purchaser or lender) signed by Tenant and if true, certifying that this Lease is then presently in full force and effect and unmodified; that the term of this Lease has commenced and the full Rental is then accruing hereunder; that Tenant has accepted possession of the Leased Premises and that any improvements required (if any) by the terms of this Lease to be made by Landlord have been completed to the satisfaction of Tenant; that no Rent under this Lease has been paid more than thirty (30) days in advance of its due date; that the address for notices to be sent to Tenant is as set forth in this Lease; that Tenant, to its knowledge, as of the date of such certificate, has no charge, lien or claim of offset under this Lease or otherwise against Rent or other charges due or to become due hereunder; and that to the knowledge of Tenant, Landlord is not then in default under this Lease.  The certificate shall also contain an agreement by Tenant with such prospective purchaser or lender that, from and after the date of such certificate, Tenant will not pay any Rent under this Lease more than thirty (30) days in advance of its due date, will not surrender or consent to the modification of any of the terms of this Lease nor to the termination of this Lease by Landlord, and will not seek to terminate this Lease by reason of any act or omission of Landlord until Tenant shall have given written notice of such act or omission to the prospective purchaser or lender (at such prospective purchaser or lender’s last address furnished to Tenant) and until the same period of time which Landlord would have to cure such act or omission shall have elapsed following the giving of such notice, during which period such prospective purchaser or lender shall have the right, but shall not be obligated, to remedy such act or omission; provided, however, that (i) the agreement of Tenant described in this sentence will be of no effect under such certificate unless Tenant is furnished by such prospective purchaser or lender with a copy of any assignment to such prospective purchaser or lender of Landlord’s interest in this Lease within one hundred twenty (120) days after the date of such certificate, and (ii) the agreement of Tenant with such prospective purchaser or lender that is embodied in such certificate shall terminate upon the subsequent termination of any such assignment.

15

37.  JOINT AND SEVERAL LIABILITY

The obligations imposed upon Tenant (if more than one) under this Lease shall be joint and several.  If Tenant has a guarantor or guarantors, the obligations of Tenant under this Lease shall be joint and several obligations of Tenant and any guarantor(s).  Landlord may proceed against any guarantor without first proceeding against Tenant, and no guarantor shall be released from its guaranty for any reason, including, but not limited to, any amendment of this Lease, any waiver of Landlord’s rights, failure of Landlord to give Tenant or any guarantor any notices, or release of any party liable for payment and performance of Tenant’s obligations under this Lease.

38.  ATTORNEY’S FEES

If Landlord or Tenant brings any action under this Lease or consults or places this Lease or any amount payable under it with an attorney for the enforcement of any of Landlord’s or Tenant’s rights under this Lease, the non-prevailing party agrees in each case to pay the prevailing party reasonable attorney’s fees and other costs and expenses incurred by such prevailing party in connection therewith.

39.  QUIET POSSESSION

If Tenant is current and in compliance with all of Tenant’s obligations under this Lease, Tenant shall be entitled to peaceful and quiet possession and enjoyment of the Leased Premises, subject to the terms and conditions of this Lease.  Tenant shall have access to the Building common areas, the Building parking garage and common parking areas at all times, subject to all applicable Building Rules and Agreed Regulations.  Landlord shall make diligent efforts to have all other tenants in the Building comply with Building rules.  Otherwise, failure of other tenants to comply with such rules shall not be considered a default by Landlord.

40.  BUILDING NAME

Landlord understands that “KCI,” “KCI Tower,” “Kinetic Concepts, Inc.,” and any logos or designs associated with foregoing are registered or unregistered trademarks, service marks, trade names, and/or business names of Tenant and/or Tenant’s related companies (collectively, “Tenant’s Intellectual Property”), and Landlord acknowledges that Tenant and/or Tenant’s related companies, as the case may be, shall retain sole ownership of Tenant’s Intellectual Property.  The name of the Building shall continue to be “KCI Tower,” as long as Tenant occupies at least twenty-five percent (25%) of the space in the Building.  Landlord hereby agrees that Tenant shall be entitled to maintain and continue to display and erect all existing signage of Tenant, whether located within or on the exterior of the Leased Premises, within any common area of the Building, or on the exterior of the Building or on the land upon which the Building is located, so long as Tenant continues to occupy at least twenty-five percent (25%) of the space in the Building.  Further, so long as Tenant occupies at least twenty-five percent (25%) of the space in the Building, Tenant shall be entitled to install and/or erect any sign on the exterior of the Leased Premises, the interior or exterior of the Building, and/or the land upon which the Building is located, so long as such signage complies with all applicable laws, ordinances, and regulations.  So long as Tenant continues to occupy at least twenty-five percent (25%) of the space in the Building, Landlord shall not alter, change, or otherwise modify the appearance or location of the name of the Building or any other signage embodying Tenant’s Intellectual Property without the express written approval of Tenant.  Except as expressly provided herein, Landlord shall not use Tenant’s Intellectual Property in any manner whatsoever without the prior written approval of Tenant.   Tenant specifically authorizes Landlord, so long as the name of the Building is KCI Tower, to use that name in Landlord’s marketing materials, on any letterhead of Landlord related to the Building, or similar type materials relating to the Landlord’s ownership and management of the Building.  If Tenant completely vacates the Leased Premises, within thirty (30) days of such vacation, Landlord at its sole expense shall remove from public view all embodiments of Tenant’s Intellectual Property then remaining at the Leased Premises.  Tenant shall at such time as the name of the Building is changed from KCI Tower, remove all signs of Tenant from the exterior of the Building or the interior of the Building and the land upon which the Building is located, at Tenant’s expense, reflecting such name.  Tenant shall be responsible for the repair of any damage to the Building caused by Tenant’s removal of such signs.

41.  PARKING

41.           PARKING.  Landlord agrees that Tenant shall be entitled to the exclusive use of 476 of the 586 parking spaces contained within the parking garage (the “Tenant Spaces”) which is located upon the land upon which the Building is located (see the KCI Tower Parking Garage Parking Plan attached hereto as Exhibits E-1 through E-8).  The Tenant Spaces shall be marked KCI-RES, and shall consist of spaces numbered 1-48, 52-70, 84-90, 92-96, 99-107, 115-117, 120-126, 128-131, 138-144, 148-153, 159-161, 175-207, 224-229, 234-235, 237-239, 245, 262-273, and 277-576, as shown in Exhibits E-1 through E-8.  Landlord acknowledges that in addition to the Tenant Spaces, 29 parking spaces, consisting of spaces numbered 162-174 and 208-223, shall be designated as visitor parking spaces for the Building (the “Visitor Spaces”) as identified as spaces marked with a “V” on the Visitor Parking Plan attached hereto as Exhibit “F”.  Any parking spaces located in the parking garage which have not previously been specifically reserved or otherwise allocated for Tenant or other tenants of the Building or visitors of the Building may be used by Tenant and other tenants of the Building (the “Third Party Tenants”) on a first come, first served basis, or as previously agreed upon between Tenant and the Third Party Tenants.  Landlord and Tenant agree that the total number of parking spaces set forth above is based on a ratio of 3.44 parking spaces per 1000 rentable square feet of space occupied by Tenant (the “Parking Ratio”), and to the extent the rentable square footage occupied by Tenant from time to time during the term of this Lease changes, the total number of Tenant Spaces shall also change based on the Parking Ratio.  It is further agreed that if in the future any lease space currently occupied by Tenant should be vacated by Tenant for any reason other than a subletting of such space by Tenant, additional parking spaces for new Third Party Tenants shall be provided based on applying the Parking Ratio to the amount of rentable square feet of lease space taken over by said Third Party Tenants.  The location of such new Third Party Tenants’ spaces shall be determined as follows: thirty percent (30%) of the total number of spaces (the “Low Spaces”) derived in accordance with such application of the Parking Ratio shall be assigned to consecutively

16

numbered spaces beginning with the space identified as space number 298 and continuing with each consecutive higher numbered space until all such Low Spaces are assigned, and seventy percent (70%) of such spaces (the “High Spaces”) shall be assigned to consecutively numbered spaces beginning with the space identified as space  number 576, and continuing with each consecutive lower numbered space until all such High Spaces are assigned.  In the event of a subletting of any lease space currently occupied by Tenant, there shall be no change to the Tenant Spaces, and Tenant shall have the right to designate which of the Tenant Spaces shall be available for use by Tenant’s subtenant. Landlord and Tenant agree to make a good faith effort to adjust Tenant space and Third Party Tenant space within the parking garage so as to consolidate Third Party Tenant parking in consecutive spaces on Levels L2, L1 and the Lobby level to the extent possible, with consideration for such issues as oversized vehicles and spaces for senior management personnel of Tenant, so as not to disrupt existing arrangements for such spaces.

In addition to the foregoing Landlord hereby grants to Tenant an irrevocable license to use the loading dock and freight elevator twenty-four (24) hours per day, seven (7) days per week.  Pursuant to such license, Tenant shall be entitled to utilize the loading dock, freight elevators and all portions of the Building appurtenant thereto at any time; provided, however, Tenant shall not unreasonably interfere with or exclude other tenants in the Building from also utilizing the loading dock, freight elevators, and all portions of the Building appurtenant thereto, and shall make reasonable efforts to coordinate its activities with those of other tenants; and provided, further, that any time that Tenant occupies less than twenty-five percent (25%) of the rentable space in the Building, Tenant shall first obtain Landlord’s written consent to and give reasonable notice to Landlord of such activities.  Additionally, Landlord agrees that, as long as Tenant occupies at least twenty-five percent (25%) of the rentable space in the Building, Tenant shall be entitled to the exclusive use of six (6) of the nine (9) parking spaces in the parking area located appurtenant to the loading dock as more specifically shown on Exhibit “G” attached hereto.

42.  NOTICES

Whenever written notice is required or permitted under this Lease, such notice shall be in writing and shall be either (a) hand delivered personally to the party being notified, (b) hand delivered to or inside such party’s mailing address, (c) delivered via facsimile, or (d) delivered at such party’s mailing address by certified mail, return receipt requested, postage prepaid, or by overnight delivery to such party’s mailing address  by a recognized overnight delivery service.  Notice delivered by facsimile shall be effective upon receipt of confirmation of successful transmission by the transmitting facsimile, or if such confirmation is received after five o’clock p.m. (5:00 p.m.) on the day of transmission, the next business day thereafter.  Notice deposited in the mail in the manner set forth above shall be effective three (3) days after it is so deposited.  Notice deposited with a recognized overnight courier shall be effective the next business day after it is so deposited.  Notice sent by hand delivery shall be effective upon delivery.  The mailing address of Landlord shall be the address set forth below unless Landlord notifies Tenant of a different address in writing.  The mailing address of Tenant shall be the addresses set forth below, unless Tenant notifies Landlord of a different address in writing.  Hand delivered notice is required only when expressly required in the Lease.  Notice by non-certified mail is sufficient if actually received by the addressee or an employee or agent of addressee.  The term “notice” shall be inclusive of notices, billings, requests, and demands.

If to LANDLORD:	If to TENANT:
Philip W. Capron	Manager of Facilities
President	KCI
Kennedy-Wilson Austin, Inc.	8023 Vantage Drive
5929 Balcones Dr., Suite 100	San Antonio, Texas 78230
Austin, Texas 78731	Fax #: (210) 341-0241
Fax #: (512) 451-3773

17

With a copy to:	With a copy to:
Robert L. Davis	VP Human Resources
Brown McCarroll, L.L.P.	KCI
111 Congress Ave., Suite 1400	8023 Vantage Drive
Austin, Texas 78701	San Antonio, Texas 78230
Fax #  (512) 479-1101	Fax # (210) 255-6925
and to:	and to:
William H. Muenzberg	General Counsel
Senior Investment Manager	KCI
Cargill Financial Services Corp.	8023 Vantage Drive
12700 Whitewater Drive	San Antonio, Texas  78230
Minnetonka, Minnesota 55343	Fax#:  (210) 255-6990
Fax: (952) 984-3905
	and to:
	CFO
	KCI
	8023 Vantage Drive
	San Antonio, Texas  78230
	Fax#:  (210) 255-6993

Either party may change its address as designated above by written notice to the other party.  Notices, requests, or agreements to, from, or with one of multiple Tenants shall be deemed to be to, from, or with all such Tenants.

43.  FINANCIAL STATEMENTS

Tenant shall furnish Landlord, from time to time when, if requested by Landlord, but not more often than once in any calendar year, and not later than ten (10) days following such request, the consolidated 10K of Tenant most recently filed with the Securities and Exchange Commission as of the date of the request by Landlord.

44.  LEASEHOLD IMPROVEMENTS

If the Leased Premises are not ready for occupancy by Tenant on the Lease commencement date, because Tenant’s leasehold improvements are not substantially complete or for any other reason, the obligations of Landlord and Tenant shall nevertheless continue in full force and effect.  In the event the Leased Premises are not ready for occupancy for reasons other than any delay in the installation of Tenant’s leasehold improvements due to any changes or additions ordered by Tenant, then the Rent hereinabove provided shall abate and not commence until the date the leasehold improvements to the Leased Premises are substantially complete; but such abatement of Rent shall constitute full settlement of all claims that Tenant might otherwise have against Landlord by reason of the Leased Premises not being ready for occupancy by Tenant on the Lease commencement date.  If the Leased Premises are not ready for occupancy by Tenant on the Lease commencement date, the term of this Lease shall be extended by the period of time which elapses between the Lease commencement date and the date the Leased Premises are ready for occupancy by Tenant, and the parties agree to execute an agreement between them confirming any such extension of the Lease term.

45.  COMMUNICATION DEVICES

Landlord grants Tenant an irrevocable license during the Lease term, as it may be extended from time to time without any additional rental charge, to (i) maintain as it exists on the date hereof, Tenant’s communication devices and equipment on the roof of the Building, and (ii) with Landlord’s prior written consent, which will not be unreasonably withheld, conditioned or delayed to install, operate, and maintain on the roof of the Building at Tenant’s sole cost and expense and in such areas mutually agreeable between Landlord and Tenant, such communications devices and equipment and necessary related equipment and cabling to portions of the Leased Premises through riser space in the Building as Tenant deems desirable and/or necessary during the term of this Lease (collectively, the “Communications Equipment”), subject to the following conditions:

(a)Prior to installation, Tenant must obtain Landlord’s written approval of the type, size, height, weight, location, and method of installation of each individual piece of Communications Equipment.

(b)Tenant shall bear all costs to install, maintain, operate, and repair the Communications Equipment.

(c)Prior to commencement of installation, Tenant shall:

18

(i)            submit to Landlord and obtain Landlord’s written approval of plans and specifications for all Communications Equipment; and

(ii)           obtain all necessary approvals for the Communications Equipment from the Federal Communications Commission or any other governmental agency having jurisdiction over the installation or use of the Communications Equipment, if any.

(d)Installation of the Communications Equipment on the roof of the Building must be performed so as not to void any applicable roof warranty.  Cables and transmission lines must be routed, anchored, and attached in accordance with good industry practices.

Tenant shall have the right, at its option, to remove any Communications Equipment from the Building upon the expiration or earlier termination of this Lease.  Tenant shall be responsible for any damage caused to the roof of the Building from Tenant’s installation, maintenance or removal of any Communications Equipment.

46.  FITNESS FACILITY, RUNNING TRACK AND ATHLETIC COURTS

As of the date hereof, the top of the parking garage serving the Building includes a premises used as a fitness facility and exercise room (the “Fitness Facility”), and contains certain fitness and exercise equipment.  In addition, a walking/jogging track (the “Track”)  and two (2) multi-purpose athletic courts (the “Courts”) are located on the roof of such parking garage.  Landlord hereby acknowledges and agrees that the location of the Fitness Facility, the Track and the Courts is acceptable to Landlord, and Landlord shall not relocate, remove or change in any manner the location of the Fitness Facility, Track or Courts nor shall Landlord remove any of the equipment from the Fitness Facility other than to replace worn or obsolete equipment with new suitable equipment.  Landlord further acknowledges that the Fitness Facility, the Track and the Courts are and shall remain during the term of this Lease, as it may be extended from time to time, part of the common area of the Building, accessible to all tenants of the Building, and as part of the common area, maintained and repaired by Landlord in accordance with Section 8 of this Lease.  Notwithstanding that the Fitness Facility, the Track and the Courts are part of the common area of the Building, Landlord hereby grants Tenant, and Tenant’s employees, agents, and invitees, a non-exclusive, irrevocable license during the term of this Lease, as it may be extended from time to time, to use the Fitness Facility, Track and Courts in common with other tenants of the Building from 5 a.m. until midnight, seven (7) days per week.

47.  RENEWAL OPTION

Provided there is not then any uncured default  or event of default by Tenant hereunder, Tenant shall have two (2) options (each referred to herein as an “Option”) to renew the Lease for a term of three (3) or five (5) years each (each referred to herein as a “Renewal Term”) at the then prevailing terms and conditions for renewing tenants, including the Prevailing Market Rental Rate (as defined below).  Tenant may exercise its options by providing prior written notice to Landlord at least six (6) months prior to the expiration of the then existing term.  The term “Prevailing Market Rental Rate” shall mean the rental rate for properties of equivalent quality, size, utility and location, with the length of the lease term, and credit standing of the tenant, as determined by Landlord in its reasonable discretion, taken into account.  Additionally, Landlord shall provide Tenant with a tenant improvement allowance, if any, in addition to any other inducements and benefits available to renewing tenants consistent with the then current renewal market for tenants comparable to Tenant in a building comparable to the Building.  These allowances, inducements and benefits along with the Prevailing Market Rental Rate shall together constitute the “Prevailing Market Terms”.

Upon notification from Tenant of the exercise of an Option, Landlord shall, within fifteen (15) days thereafter, notify Tenant in writing of the proposed Prevailing Market Terms for the applicable Renewal Term; Tenant shall, within fifteen (15) days following receipt of same, notify Landlord in writing of its acceptance or rejection of the proposed Prevailing Market Terms.  If Tenant rejects Landlord’s proposal and Tenant and Landlord have not agreed on the Prevailing Market Terms for the extended term within fifteen (15) days of such rejection notice (the “Negotiation Period”), then within ten (10) days after the end of the Negotiation Period, Tenant may withdraw its extension notice and this Lease shall terminate at the end of the then current term, or Tenant may elect to invoke the appraisal process to determine the Prevailing Market Terms.  If Tenant does timely invoke the appraisal process, the Prevailing Market Rental Terms shall be determined in accordance with the following:

Within fifteen (15) days of Tenant’s election to invoke the appraisal process, Landlord and Tenant shall each appoint a disinterested and qualified real estate brokerage or appraisal professional (the “Professional” or “Professionals”).  If the Professionals cannot agree upon the Prevailing Market Rental Terms within fifteen (15) days following their appointment, the Professionals shall forthwith select a third disinterested and qualified Professional, and the decision of any two Professionals shall be binding.  Notification in writing of this decision shall be made by the Professionals to Landlord and Tenant within fifteen (15) days following the selection of the third Professional.  Landlord and Tenant shall bear the expense of the Professional appointed by each, and the expense of the third Professional shall be shared jointly by both parties.

19

In the event Tenant fails to exercise its first Option within the time and in the manner provided herein, such Option as well as the second Option shall be deemed waived by Tenant and shall not be exercisable thereafter.  In the event Tenant fails to exercise its second Option within the time and in the manner provided herein, such Option shall be deemed waived by Tenant and shall not be exercisable thereafter.

48.  RIGHT OF FIRST OFFER

During the first three years of the term of this Lease, Tenant shall have the right of first offer (the “Right of First Offer”), to lease space located in the Building from time to time as such space may “become available” (defined below), provided that at the time Tenant exercises the Right of First Offer, the Lease is in full force and effect and there is not any uncured default or event of default by Tenant hereunder.

Subject to the other terms of this Section 48, after any space in the Building other than the Leased Premises (hereinafter referred to as the “Expansion Space”) has or will “become available” (defined below), Landlord shall not, during the first three years of the term of this Lease, offer on the market or lease to another tenant the Expansion Space within the Building that has or will become available without first offering Tenant the right to lease the Expansion Space on the terms described below.  Expansion Space shall be deemed to become available when the lease for the current occupant of the Expansion Space expires or is otherwise terminated.  Notwithstanding anything to the contrary herein, Expansion Space shall not be deemed to become available if the Expansion Space is (1) assigned or subleased by the current tenant of the Expansion Space, (2) relet by the current tenant of the Expansion Space by renewal, extension, or renegotiation, or (3) subject to a specific expansion right of another tenant in the Building existing as of the date hereof.

Landlord shall not offer any such Expansion Space on the open market unless and until Landlord has first notified Tenant in writing (the “First Offer Leasing Notice”) that Landlord intends to offer the designated Expansion Space to third parties and until a period of ten (10) days has elapsed from the date that Landlord has delivered to Tenant the First Offer Leasing Notice without Tenant having notified Landlord in writing of Tenant’s desire to lease all of the Available Expansion Space (defined below). The First Offer Leasing Notice shall (1) advise Tenant that Landlord intends to offer on the market the Available Expansion Space, (2) describe the amount and location of the Expansion Space that has or will become available (the “Available Expansion Space”) and attach a floor plan showing the Available Expansion Space cross-hatched, and (3) state the date on which the Available Expansion Space will be available for leasing by Tenant which shall not be more than six (6) months after the date of the First Offer Leasing Notice.

If Tenant delivers to Landlord written notice of Tenant’s desire to lease all of the Available Expansion Space within the ten (10) day period, the Available Expansion Space shall be leased by Tenant on the terms and conditions set forth in this Section 48.  If Tenant declines or fails to effectively exercise the Right of First Offer as provided herein, Landlord shall thereafter be free to offer the particular Available Expansion Space previously identified in such First Offer Leasing Notice on the open market and to lease some or all of such Available Expansion Space at any time without regard to the restrictions in this Section 48 and on whatever terms Landlord may decide in its sole discretion.  If Tenant leases any Expansion Space under this Section 48, the following terms and conditions shall apply to such Expansion Space:

(1)           Tenant shall be entitled to finish out the Expansion space in the same manner and quality as the remainder of the Leased Premises.  Landlord shall provide to Tenant an allowance which shall be used by Tenant to recarpet and repaint the Expansion Space.  The allowance shall be an amount sufficient to recarpet and repaint the Expansion Space in the manner and to the extent consistent with a class “A” office building in Bexar County, Texas.  The allowance shall be paid to Tenant within thirty (30) days of Landlord receiving each of Tenant’s invoices therefore, provided each invoice is accompanied by each of the vendors’ and contractors’ invoices for the improvements and the work shown on the invoice has been substantially completed.

(2)           The commencement date of the lease for each particular Expansion Space (the “Expansion Space Commencement Date”) shall be the earlier to occur of (i) the date Tenant  completes its standard finish out of the Expansion Space and (ii) thirty (30) days after such Expansion Space is delivered to the tenant broom clean, free of tenants or other occupants, and otherwise in reasonably good condition, and the termination date shall be the same as the termination date for this Lease, including any extension or renewal terms;

(3)           Any improvements made by Tenant to the Expansion space other than its standard finish out shall be subject to Section 14 of this Lease;

(4)           As of the Expansion Space Commencement Date, the Base Rental shall be increased by an amount equal to the product of the rentable square feet for the Expansion Space multiplied by the then current per square foot Base Rental rate;

(5)           As of the Expansion Space Commencement Date, the Tenant’s Pro Rata Share of Excess Operating Expenses shall be increased by an amount computed by multiplying Excess Operating Expenses by a fraction with the numerator being the rentable square footage of the Expansion Space and the denominator being the rentable square footage of the Building;

(6)           Any Expansion Space taken by Tenant shall be deemed part of the Leased Premises as of the Expansion Space Commencement Date;

20

(7)           As of the Expansion Space Commencement Date, Tenant’s allotment of parking spaces shall be increased to include, in addition to all spaces provide din this Lease, the exclusive use of all parking spaces previously allocated to the former tenant(s) of the applicable Expansion Space; and

(8)           Except as modified by items (1) through (7) above, all of the terms and conditions of this Lease shall apply to the Expansion Space.

Landlord shall use commercially reasonable efforts to remove any holdover tenants or other occupants from any Expansion Space which Tenant leases under this Section 48.  Although Landlord shall not be liable for any damages for any holdover tenant or other occupant of any Expansion Space leased by Tenant, (unless Landlord is not using commercially reasonable efforts to remove the holdover tenant or other occupant), all of Tenant’s obligations regarding any such Expansion Space shall be abated until the holdover tenant or other occupant is removed and such Expansion Space Commencement Date shall be delayed until the holdover tenant or other occupant is removed.

The parties shall, within thirty (30) days after each notice from Tenant that it elects to add any Expansion Space, confirm in writing (1) the commencement date for such Expansion Space, (2) the Expansion Space that will be leased showing that space cross-hatched, (3) the additional Base Rental to be paid for such Expansion Space, (4) the increased Pro Rata Share of Excess Operating Expenses allocated to such Expansion Space, and (5) any other terms related to such Expansion Space or this Lease that either party reasonably requests to be confirmed.

49.  ENTIRE AGREEMENT

This Lease contains the entire agreement of the parties.  No other written or oral promises or representations have been made, and none shall be binding.  This Lease supersedes and replaces any previous lease between the parties on Tenant’s office space, including any renewals or extensions or options thereunder.  Except for reasonable changes in written rules, this Lease shall not be amended or changed except by written instrument, signed by both Landlord and Tenant.  Landlord’s agents do not and will not have authority to (1) make exceptions, changes or amendments to this Lease, or factual representations not expressly contained in this Lease, (2) waive any right, requirement, or provision of this Lease, or (3) release Tenant from all or part of this Lease, unless such action is in writing.  Under no circumstances shall Landlord or Tenant be considered an agent of the other.  Nonsubstantial errors in space footage calculations shall entitle the parties to correct the rental figures in the Lease and adjust previously paid rentals accordingly, but not to terminate the Lease.  The Lease shall not be construed against either party more or less favorably by reason of authorship or origin of language.  If any date of performance or exercise of a right ends on a Saturday, Sunday, or state holiday, such date shall be automatically extended through the next business day.  Time is of the essence and all performance dates, time schedules, and conditions precedent to exercising a right shall be strictly adhered to without delay except where otherwise expressly provided.

50.  SEVERABILITY

If any provision of this Lease is illegal, invalid or unenforceable under present or future laws during the term of this Lease, it is the intention of both parties that the remainder of this Lease shall not be affected, and that a clause be added to this Lease as similar to such illegal, invalid or unenforceable clause as possible and be legal, valid and enforceable.

51.  CAPTIONS

The captions of each paragraph of this Lease are added as a matter of convenience only and shall not be considered in the construction or interpretation of any part of this Lease.

21

52.  BINDING EFFECT

The provisions of this Lease shall be binding upon and inure to the benefit of Landlord and Tenant, and any guarantors, respectively, and to their heirs, legal and personal representatives, successors and assigns, subject to the provisions of Section 30 above.

53.  APPLICABLE LAW

The laws of the state of Texas shall govern the interpretation, construction, validity, performance and enforcement of this Lease.  Venue for any action arising under this Lease shall be Bexar County, Texas.

54. LEASING AGENT COMMISSIONS

Tenant represents that it has not had any dealings with any real estate broker or other person with respect to this Lease in any manner, except for Kennedy-Wilson, who shall be compensated by Landlord.

55.  REPRESENTATIONS AND WARRANTIES BY LANDLORD

Landlord warrants that Landlord is the sole owner of the land and improvements comprising the Building and that Landlord has full right to enter into this Lease.  Landlord’s duties and warranties are limited to those expressly stated in this Lease and shall not include any implied duties or implied warranties, now or in the future.  No representations or warranties have been made by Landlord other than those expressly contained in this Lease.  Landlord expressly disclaims any warranty of suitability that may otherwise have arisen by operation of law.  Landlord does not warrant that there are no latent defects in the facilities that are vital to the Tenant’s use of the Leased Premises for their intended commercial purpose and that these essential facilities will remain in a suitable condition.  Subject to Landlord’s obligations under this Lease, Tenant expressly agrees to the property “as is”, whether suitable or not, and expressly waives the implied warranty of suitability.

56. REPRESENTATIONS AND WARRANTIES BY TENANT

Tenant warrants to Landlord that (1) there has been no significant adverse change in Tenant’s financial condition since the date of the financial statements, (2) the financial statements fairly represent the financial condition of Tenant upon those dates and at the time of execution hereof, (3) there are no delinquent taxes due and unpaid by Tenant, and (4) Tenant has never declared bankruptcy.  Tenant warrants that Tenant has disclosed in writing to Landlord, by providing to Landlord copies of its 10Q and 10K statements, all material lawsuits pending or threatened against Tenant and, to the best of Tenant’s knowledge, Tenant has made no material misrepresentation or material omission of facts regarding Tenant’s financial condition or business operations.  All financial statements must be dated and signed by Tenant.  Tenant acknowledges that Landlord has relied on the above information furnished by Tenant to Landlord and that Landlord would not have entered into this lease otherwise.

As used in this Lease, the phrase “to the best of Tenant’s knowledge,” or any similar phrase shall refer to and mean the current actual, conscious knowledge of Rush E. Cone, Vice President, Human Resources and Chuck E. Williams, Corporate Facilities Manager, without any duty of inquiry, review or investigation.

57.  NO MERGER

The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, will not work a merger, and, at the option of Landlord, will terminate all or any existing subleases or subtenancies or operate as an assignment to Landlord of any or all of such subleases or subtenancies.

58.  NO LIGHT, AIR OR VIEW EASEMENT

Any diminution or shutting off of light, air or view of any structure that may be erected on lands adjacent to the Building in no way will affect this Lease or impose any liability on Landlord.

59.   AUTHORITY

Each person executing this Lease on behalf of the Tenant hereby covenants and warrants that: (i) the entity on whose behalf such person is signing is duly organized and validly existing under the laws of its state of organization; (ii) such entity has and is qualified to do business in Texas; (iii) such entity has full right and authority to enter into this Lease and to perform all of Tenant’s obligations hereunder; and (iv) each person executing this Lease on behalf of Tenant is duly and validly authorized to do so.

60. AMERICANS WITH DISABILITIES ACT AND ARCHITECTURAL BARRIERS ACT

The Americans with Disabilities Act (“ADA”) and the Architectural Barriers Act (“ABA”) deal with the rights of the disabled in employment, use of public transportation, and access to places of public accommodation and commercial business.  To the extent that the ADA or the ABA is applicable to the Leased Premises, the Building and/or the parking, Landlord shall be responsible for making all necessary modifications to all areas other than the Leased Premises and Tenant shall be responsible for making all other necessary modifications to the Leased Premises in full compliance with all requirements of the ADA or the ABA in order to furnish services in a non-discriminatory manner.  Landlord and Tenant shall use their best efforts to comply with the ADA  and the ABA to the extent the ADA and the ABA are applicable to the Building or parking, or the Leased Premises, respectively.   Notwithstanding the foregoing, however, Landlord shall have no obligation to Tenant to make any modifications to the Leased Premises to the extent that they are not currently in compliance with ADA or ABA, and Tenant expressly accepts the Building and the Leased Premises in their current condition.

22

61.  LANDLORD DEFAULT

Except as expressly provided otherwise in this Lease, if Landlord defaults in the observance or performance of any term or covenant required to be performed by it under the Lease, Tenant, after not less than thirty (30) days written notice to Landlord, may, but shall not be obligated to, remedy such default and in connection therewith may pay expenses and employ counsel, provided, however, in the event of an emergency, Tenant shall have the right to stabilize the situation so as to prevent additional damage to the Building or Leased Premises or to other property or persons without notice to Lessor.  All sums expended or obligations incurred by Tenant in connection therewith shall be paid by Landlord to Tenant upon demand.  Landlord shall not be considered to be in default of this Lease if within said thirty (30) day period landlord takes action to cure such default but is unable, by reason of the nature of the work involved, to cure the same within such period, provided Landlord continues diligently and without unnecessary delays to take whatever action is necessary to effect such cure; provided, however, Landlord shall be in default of this Lease if such cure is not completed within one hundred twenty (120) days following receipt of Tenant’s notice.  Tenant shall not be entitled to claim a constructive eviction from the Leased Premises unless Tenant has first notified Landlord in writing of the condition giving rise thereto and Landlord fails to cure such condition in accordance with the foregoing provisions.  If Landlord does not reimburse Tenant for the expenses so incurred and Tenant obtains a final, non-appealable judgment in its favor against Landlord, Tenant may set off the amount o the judgment against the Rent payable to Landlord under this Lease.  Notwithstanding anything herein to the contrary, Tenant shall not have the right to terminate this Lease as a result of any default by Landlord, or otherwise, except as expressly provided herein.

62.  SPECIAL CONDITIONS

A.            Right to Assign or Sublease.  Subject to the terms of this Section 62. A., Tenant shall, during the course of this Lease, have the right to assign or sublease any and all of the Leased Premises to new tenants approved in advance in writing by Landlord at Rental rates no less than the rates set forth in this Lease.  If any portion of the Leased Premises is so assigned to a new tenant in accordance with the foregoing, Tenant shall be released from all liability and obligations under this Lease with respect to such space arising on or after the date of the release, except that Tenant shall be responsible for all expenses associated with tenant improvements and leasing commissions for any such new tenant.  If any portion of the Leased Premises is subleased to a new tenant in accordance with the foregoing and the term of the sublease is coterminous with the term of this Lease, such sublease shall be assigned to Landlord and Landlord shall assume all obligations of lessor under such sublease arising on or after the date of the release, and Tenant shall be released from all liability and obligations under this Lease with respect to such subleased space arising on or after the date of the release, except that Tenant shall be responsible for all expenses associated with tenant improvements and leasing commissions for any such new tenant.  In the event that prior to giving Landlord the notice contemplated by Section 62. B., and without having engaged any independent real estate agent and/or broker, Tenant has located and secured a party to whom it  desires to assign or sublease any of the Leased Premises, it must so notify Landlord at least thirty (30) days in advance of the date on which Tenant desires to make such assignment or sublease.  Tenant must provide Landlord with a copy of the proposed assignment or sublease and such information as Landlord might reasonably request concerning the proposed assignee or sublessee to allow Landlord to make informed judgments as to the financial condition, reputation and operations of such proposed assignee or sublessee.  Within fifteen (15) days after Landlord’s receipt of notice of Tenant’s proposed assignment or sublease, Landlord must provide notice to Tenant of its approval or rejection of such assignment or sublease.  Notwithstanding anything herein to the contrary, Landlord shall have the right to approve or disapprove, in its sole discretion, any proposed assignment or sublease and, additionally, Landlord may, as a condition to its approval for release of Tenant, require that the proposed new tenant enter into a new lease with Landlord, on Landlord’s standard form lease, rather than doing an assignment or sublease, in which event, upon execution of the new lease between Landlord and the new tenant, an amendment to this Lease shall be entered into between Landlord and Tenant, excluding the space covered by the new lease from this Lease and reducing the rental to be paid by Tenant under this Lease by the rental previously contracted to be paid by Tenant for the space covered by the new lease.  Tenant shall not under any circumstance be entitled to be released in connection with an assignment to an Affiliate (as hereinafter defined).  Tenant shall be obligated to reimburse Landlord  for all reasonable actual out-of-pocket expenses incurred by Landlord in reviewing any tenants proposed by Tenant as to which Tenant requests a release from liability.

In the event that any sublease for a new tenant approved in advance in writing by Landlord would expire prior to the end of the term of this Lease, Tenant may at its option pay an early termination fee to Landlord upon commencement of such new tenant sublease in an amount equal to fifty percent (50.0%) of the total Base Rental payable for the time period between the expiration date of this Lease and the expiration date of any such sublease, and upon payment of such fee, Tenant shall be relieved of all liabilities and obligations related to that portion of the Leased Premises subleased by the new tenant, and such new tenant sublease shall be assigned to Landlord and Landlord shall assume all obligations of the lessor under such lease.  For example, if a new tenant were to commence a lease on the first day of the seventh month after the date hereof which was to expire pursuant to its terms eighteen months prior to the expiration of this Lease, Tenant would at its option make a payment to Landlord in an amount equal to nine (9) months Base Rental under the new tenant sublease, which nine (9) months is fifty percent (50.0%) of the eighteen (18) months of time remaining on this Lease following the end of the new tenant sublease.  If, however, Tenant does not elect to pay the early termination fee upon commencement of the applicable sublease, then Tenant shall remain liable for all Rents and expense reimbursements for such space during the entire seven-year term of this Lease, as well as for all expenses related to tenant finishout and leasing commissions for the space.

In the event that any new tenants located by Tenant or its broker (any such engagement being subject to the expiration of the exclusive period in favor of Landlord’s broker described in Section 62. B.) are not acceptable to Landlord for acceptance of the assignment or sublease to such tenant and release of the Tenant as provided hereinabove, Tenant shall nonetheless have the right to sublease its space to such new tenant

23

without the payment of any fee contemplated by Section 62. B.; provided however, that (i) the proposed use of such space by such new tenant is in compliance with all applicable zoning laws, ordinance and regulations, does not violate any non-compete clause in effect with respect to any other tenant, and does not conflict with the permitted uses under this Lease; (ii) the proposed subtenant is not a governmental entity or office which has a use that is highly interactive with the general public and involves the ingress and egress of an inordinate number of invitees to and from the Building, (iii) the proposed subtenant is not a medical clinic or office; (iv) the population density of the proposed subtenant will not exceed a ratio of one (1) person for every 225 square feet of net rentable space; (v) the character of the business to be conducted by the proposed subtenant is not likely to substantially increase the expenses or costs of providing Building services or be a burden on existing janitorial services or elevators in the Building; and (vi) the proposed subtenant will not be permitted parking in excess of one space per 250 square feet of net rentable space; provided, however, Tenant shall remain liable for all Rents and expense reimbursements for such space during the entire seven-year term of this Lease, as well as for all expenses related to tenant finishout and leasing commissions for the space.

Except as expressly set forth above, and except for an assignment or sublease (which shall not release Tenant from liability under this Lease) to (i) any entity that purchases all or substantially all of the assets of Tenant, (ii) a parent, subsidiary or Affiliate of Tenant (it being hereby agreed that the term “Affiliate” shall mean, for the purposes hereof, any corporation, partnership, or other business entity which controls or is controlled by, or is under common control with, Tenant, and the term “control” [including “controlled by,” “under common control with,” and “controlling”] as used herein with respect to any corporation, partnership or other business entity shall mean the possession of the power to direct or cause the direction of the management and policies of such corporation, partnership or other business entity, whether through the ownership of voting securities or contract), or (iii) any corporation or other entity into which or with which Tenant, or Tenant’s permitted successors or assigns, has merged or consolidated, in accordance with the applicable statutory provisions governing merger and consolidation of entities, Tenant shall not assign or sublease, in whole or in part, all or any portion of the Leased Premises.  The transfer of shares of common stock of Tenant shall not constitute an assignment of this Lease.

B.            Leasing Fees.  Tenant  or its broker shall notify Landlord in writing of its intent to vacate and/or sublease space leased under this Lease and make such space available for lease no later than sixty (60) days prior to the planned date of vacation.  Upon receipt of such written notification by Landlord, any broker hired by Landlord  shall have the exclusive right to lease the space to be vacated for the period commencing on the date such notice is received and ending on the date that is thirty (30) days following the date identified in the notice as the vacation date (such period being referred to herein as the “Exclusive Listing Period”).  In the event Landlord’s broker locates and secures a tenant for such space prior to the expiration of the Exclusive Listing Period, Tenant shall pay Landlord’s broker a commission equal to four percent (4%) if no other broker is involved, and six percent (6%) if an outside broker is involved, permitting payment of a four percent (4%) fee to such outside broker and a two percent (2%) fee to Landlord’s broker.  The method of calculation of the above broker commissions shall be set forth in a written Commission Agreement by and among Landlord, Landlord’s Broker, and Tenant.  In the event Landlord’s broker is unable to secure a tenant for the space to be vacated prior to the expiration of the Exclusive Listing Period, Landlord’s broker shall be entitled to continue to attempt to locate a tenant for such space, but Tenant or its broker shall also be entitled to locate and secure a tenant for such space.  Any tenant secured by Landlord’s broker following the expiration of the Exclusive Listing Period shall entitle Landlord’s broker to receive the same commission from Tenant that Landlord’s broker would receive for securing a tenant during the Exclusive Listing Period.  If Tenant or its broker locates and secures a tenant following the expiration of the Exclusive Listing Period, no commission shall be payable to Landlord’s broker.

C.            Release of Space.  With respect to any portion of the Leased Premises that Tenant, in accordance with (B) above, has notified Landlord that it desires to vacate, and for which (i) Landlord has located a replacement tenant to whom it desires to lease such space, Landlord shall notify Tenant in writing of any lease agreement it reaches with any new tenant for any such space, and Tenant shall notify Landlord in writing of its approval or disapproval of such new lease within ten (10) days after receipt of Landlord’s notice.  If Tenant approves (which approval or disapproval shall be in Tenant’s sole discretion) of such new lease, Tenant shall vacate the space subject to the new lease within thirty (30) days after delivering its written approval of the new lease to Landlord and, thereafter, Tenant shall have no liability under this Lease (for Rent or otherwise) with respect to such space.  In no event shall Landlord or any third party interfere with Tenant’s right to occupy any space leased under this Lease until the expiration of thirty (30) days following delivery by Tenant to Landlord of its notice of approval of any new lease.  If, following the expiration of the Exclusive Listing Period, Tenant or its broker locates and secures any such new tenant for the portion of the Leased Premises to be vacated for a term at least as long as the then remaining current term of this Lease and Landlord approves of such new tenant, Tenant shall be released from  its obligations under this Lease with respect to that portion of  the Leased Premises to be vacated in accordance with the first paragraph of Section 61(A) above.  If, however, the term of the lease for such new tenant is shorter than the then remaining current term of this Lease, Tenant shall have the option to pay an early termination fee to Landlord in accordance with the second paragraph of Section 62(A) above, and upon payment of such fee, Tenant shall be relieved of its obligations related to that portion of the Leased Premises to be vacated.  In the event Landlord does not approve of the new tenant which Tenant or its broker has secured, Tenant shall still have the right to sublease that potion of the Leased Premises to be vacated provided the new tenant meets the criteria set forth in the third paragraph of Section 62(A) above, but upon such subletting, Tenant shall not be released from its obligations under this Lease.

63.  CROSS-DEFAULT

Landlord and Tenant have entered into two other lease agreements of even date herewith, one relating to Building A of KCI Plaza and one relating to Building B of KCI Plaza (the “Other Master Leases”).  Any default under the terms of either of the Other Master Leases shall also constitute an event of default by Tenant under this Lease and any default under this Lease shall also constitute a default under each of the Other Master Leases.  Notwithstanding anything herein to the contrary, in the event that Landlord sells the Property subject to one of the Other Master

24

Leases, this Lease shall, effective upon the date of the conveyance of such property by Landlord to a third party, cease to be cross-defaulted with such Other Master Lease, and default under such Other Master Lease shall no longer constitute a default under this Lease, and a default under this Lease shall no longer constitute a default under such Other Master Lease, and the obligations of Tenant under the Other Master Lease shall no longer be secured by the Letter of Credit or the Security Deposit under Paragraph 7 hereof.

64.  INTENTIONALLY DELETED

65.  EXHIBITS

The following exhibits are attached hereto and incorporated herein and made a part of this Lease for all purposes:

Rules and Regulations
Exhibit “A-1 through A-15”	-	Floor Plan of Leased Premises
Exhibit “B”	-	Legal Description
Exhibit “C”	-	Secure Access Areas
Exhibit “D”	–	Estoppel Certificate
Exhibit “E1 through E-8”	–	Tenant Parking Plan
Exhibit “F”	–	Visitor Spaces
Exhibit “G”	–	Loading Dock Spaces
Exhibit “H”	-	Letter of Credit
Exhibit “I”	-	Subordination, Non-Disturbance and Attornment Agreement

SUBMISSION OF THIS INSTRUMENT FOR EXAMINATION OR SIGNATURE BY TENANT DOES NOT CONSTITUTE A RESERVATION OF OR OPTION FOR LEASE, AND IT IS NOT EFFECTIVE AS A LEASE OR OTHERWISE UNTIL EXECUTION AND DELIVERY BY BOTH LANDLORD AND TENANT.

The names and signatures of all parties shown below have been duly authorized to sign.

	TENANT:
	KINETIC CONCEPTS, INC.
Date:	By:
	Title:
	LANDLORD:
	CKW SAN ANTONIO, L.P., a Delaware limited partnership
	By:	KWC General Partner, Inc.
Date:		By:
		Title:

25

ACKNOWLEDGMENT

STATE OF TEXAS	o
	o
COUNTY OF TRAVIS	o

BEFORE ME, the undersigned, on this day personally appeared Stephen A. Pyhrr, Executive Vice President of KWC San Antonio General Partner, Inc., as general partner of CKW San Antonio, L.P., on behalf of said limited partnership.

GIVEN UNDER MY HAND AND SEAL OF OFFICE this        day of                          , 2002.

Notary Public, State of Texas

26

CORPORATE ACKNOWLEDGMENT

STATE OF	o
	o
COUNTY OF	o

BEFORE ME, the undersigned, a Notary Public in and for said County and State, on this day personally appeared                                                             , known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that the same was the act of Kinetic Concepts, Inc., and acknowledged to me that he/she executed the same for the purposes and consideration therein expressed, and in the capacity therein stated.

GIVEN UNDER MY HAND AND SEAL OF OFFICE this           day of                                , 200   .

Notary Public, State of

27

BUILDING RULES AND AGREED REGULATIONS

1.             Landlord will initially provide one (1) master entry card and/or key for each one thousand two hundred (1,200) square feet of Rentable Area in the Premises.  Tenant shall reimburse Landlord for the cost (plus an administrative charge equal to ten percent (10%) of the cost plus applicable sales tax) of each additional card and/or key and for each replacement card and/or key for any card and/or key lost by or stolen from Tenant.  Tenant agrees to surrender all master entry cards and/or keys in its possession upon the expiration or earlier termination of this Lease.  Any lost cards and/or keys shall be canceled.

2.             Tenant will refer all contractors, contractor’s representatives and installation technicians rendering any service to Tenant to Landlord for Landlord’s supervision, approval and control before performance of any contractual service.  This provision shall apply to all work performed in the Building, including installations of telephones, telephone wiring or fiber optics, telegraph equipment, electrical devices and attachments, and installations of any nature affecting floors, walls, woodwork, trim, windows, ceilings, equipment, or any other physical portion of the Building.

3.             Landlord hereby agrees that Tenant shall be entitled to maintain and continue to display and erect all existing signage of Tenant, whether located within or on the exterior of the Leased Premises, within any common area of the Building, or on the exterior of the Building or on the land upon which the Building is located, so long as Tenant continues to occupy any portion of the Leased Premises.  Further, so long as Tenant occupies any portion of the Leased Premises, Tenant shall be entitled to install and/or erect any sign on the exterior of the Leased Premises, the interior or exterior of the Building, and/or the land upon which the Building is located, so long as such signage complies with all applicable laws, ordinances, and regulations.

4.             With respect to movement in or out of the Building of furniture or office equipment, or dispatch or receipt by Tenant of any merchandise or materials which requires use of elevators or stairways, or movement through building entrances or the lobby, Tenant is to assume all risk as to damage to articles moved and injury to persons or public engaged or not engaged in such movement, including equipment, property and personnel of Landlord if damaged or injured as a result of acts in connection with carrying out this service for Tenant from time of entering property to completion of work; and Landlord shall not be liable for acts of any person engaged in, or any damage or loss of any of said property or persons resulting from, any act in connection with such service performed for Tenant. All damage done to the Building by the improper placing of heavy equipment or objects which may overstress any portion of the floor will be repaired at the sole expense of Tenant.

5.             No portion of Tenant’s area or any other part of Building shall at any time be used or occupied as sleeping or lodging quarters.

6.             Tenant shall not place, install or operate on the Leased Premises, or in any part of the Building, any engine, stove or machinery, or conduct mechanical operations or cook thereon or therein, excepting a microwave oven, or place or use in or about the Leased Premises any explosives, gasoline, kerosene, oil, acids, caustics or any other flammable (including Christmas trees and ornaments), explosive or hazardous material without the prior written consent of Landlord.  Tenant is responsible for the cost and installation of any fire extinguishers required by the fire marshal.

7.             Landlord will not be responsible for lost or stolen personal property, equipment, money or jewelry from Tenant’s area or from public rooms, regardless of whether such loss occurs when area is locked against entry or not.

8.             No birds or animals shall be brought into or kept in or about the Building, except those assisting the disabled.

28

9.             Employees of Landlord shall not receive or carry messages for or to Tenant or other person, nor contract with or render free or paid services to Tenant or Tenant’s agents, employees, or invitees.

10.           Landlord will not permit entrance to Tenant’s offices by use of pass keys controlled by Landlord to any person at any time without written permission by Tenant, except employees, contractors, or service personnel directly supervised by Landlord.  Tenant may not add locks, change locks, or rekey locks without written permission of Landlord.  Locks may be changed at Tenant’s request and expense.  If locks to the office space are changed, Landlord may specify kind and brand of locks, placement, installation, master key compatibility, etc.

11.           Sidewalks, doorways, vestibules, halls, stairways, and similar areas shall not be obstructed nor shall refuse, furniture, boxes or other items be placed therein by Tenant or its officers, agents, servants, and employees, or used for any purpose other than ingress and egress to and from the Leased Premises, or for going from one part of the Building to another part of the Building.  Tenant shall be responsible, at its sole cost, for the removal of any large boxes or crates not used in the ordinary course of business.  Nothing shall be swept or thrown into the corridors, halls, elevator shafts or stairways.  Canvassing, soliciting, distributing handbills, advertising and peddling in the Building are prohibited.

12.           Landlord desires to maintain the highest standards of environmental comfort and convenience for the tenantry.  It will be appreciated if any undesirable conditions or lack of courtesy or attention are reported directly to the management.

13.           Tenant shall not tamper with or attempt to adjust temperature control thermostats in the Leased Premises unless Tenant is paying electricity by separate meter. Landlord shall adjust thermostats as required to maintain temperatures as provided in Section 10 of the Lease.

14.           Tenant shall permit Landlord six (6) months prior to the termination of this Lease to show Leased Premises during business or non-business hours to prospective tenants or, with reasonable notice, at any time to a potential buyer or lender, and to advertise the Leased Premises for rent; however, Landlord shall not unreasonably disturb Tenant’s business.

15.           The parties to this Lease Agreement do hereby acknowledge that this is a “Clean-Air” facility, and specifically that no smoking is permitted within the Building itself, and no closer than fifteen (15) feet from an entrance or exit of the Building.  Smoking will be permitted outdoors in designated areas only.

16.           Plumbing fixtures and appliances shall be used only for the purpose for which constructed, and no unsuitable material shall be placed therein.  Any stoppage or damage to any such fixtures or appliances from misuse on the part of Tenant or Tenant’s officers, agents, contractors, employees, guests and customers shall be paid by Tenant, and Landlord shall not in any case be responsible therefore.

17.           Corridor doors, when not in use, shall be kept closed.

18.           No bicycles, motorcycles or similar vehicles will be allowed in the Building.

19.           Landlord has the right to evacuate the Leased Premises in the event of an emergency or catastrophe.  Tenant shall cause its officers, partners and employees to participate in any fire safety or emergency evacuation drills scheduled by Landlord.

29

20.           Tenant will not locate furnishings or cabinets adjacent to mechanical or electrical access panels or over air conditioning outlets so as to prevent operating personnel from servicing such units as routine or emergency access may require.  The cost of moving such furnishings for Landlord’s access will be at Tenant’s expense.  Tenant shall instruct all of its employees to refrain from any attempts to adjust thermostats.  The lighting and air conditioning equipment of the Building will remain the exclusive charge of personnel designated by Landlord.

21.           No supplemental heating, air ventilation or air conditioning equipment, including space heaters and fans, shall be installed or used by Tenant without the prior written consent of Landlord.

22.           No unattended children shall be allowed within the Building.

23.           During other than normal business hours, Building access will be limited and will be by entry card or key entry together with Landlord’s registration procedures.

24.           Landlord reserves the right to rescind any of these rules and regulations and make such other and further rules and regulations as in its judgment shall from time to time be necessary or advisable for the operation of the Building, providing that such rules and regulations are in writing and uniformly enforced against all other tenants of the Building and are not discriminatory towards Tenant.  Such rules and regulations shall be binding upon Tenant upon delivery to Tenant of notice thereof in writing.

25.           In the event of any inconsistency between these rules and regulations and the terms of the Lease, the terms of the Lease shall control.

30

EXHIBIT  “A-1” through “A-15”

FLOOR PLAN OF LEASED PREMISES

Exhibits A-1 through A-15 are to be attached prior to execution of the Lease.

EXHIBIT “B”

KCI TOWER LEGAL DESCRIPTION

FIELD NOTES FOR 1.974 ACRES

OUT OF LOT 5, BLOCK 23.  NEW CITY BLOCK 13627, OMNI/GRANDVIEW SUBDIVISION, SAN ANTONIO, BEXAR COUNTY, TEXAS, ACCORDING TO THE PLAT THEREOF RECORDED IN VOLUME 9506.  PAGE 107 OF THE DEED AND PLAT RECORDS OF BEXAR COUNTY, TEXAS, BEING THAT SAME TRACT RECORDED IN VOLUME 2667, PAGE 280 OF THE OFFICIAL PUBLIC RECORDS OF REAL PROPERTY OF BEXAR COUNTY, TEXAS, AND BEING MORE PARTICULARLY DESCRIBED BY METES AND BOUNDS AS FOLLOWS.

COMMENCING:	At a found “+” Scribed on concrete at the intersection of the southeast right-of-way line of Callaghan Road (60’ wide public right-of-way), and the east right-of-way line of Interstate Highway 10 (right-of-way varies, 300” minimum), the northwest corner of the remaining portion of Lot 4, Block 23, New City Block 13627, GREENBRIAR UNIT 12, as recorded in Volume 5870, Page 201;
THENCE:	South 14°11’50” East (bearings are based on the plat recorded in Volume 9506, Page 107) (this line held for rotation) 175 00” with the east right-of-way line I.H. 10 to a found 1/2” rebar, the northwest corner of Lot 5, the northwest corner and POINT OF BEGINNING of this tract;
THENCE:	North 75°42’15” East 35.99’ with the northwest line of Lot 5 to found 1/2” rebar, an angle point;
THENCE:	North 41°09’01” East 131.01’ with the northwest line of Lot 5 to a found nail and shiner, an angle point;
THENCE:	North 08°37’18” West 151.43’ with the northwest line of Lot 5 to a found 1/2” rebar, the north corner of 1 of 5;
THENCE:	South 48°47’26” Fast 214.77’ with the northeast line of Lot 5 to a found 1/2” rebar, an angle point;
THENCE:	South 48°50’31” Ease 168.48’ to a found 1/2” rebar on the northwest line of Vantage Drive, a 60’ ingress and egress basement described by deed recorded in Volume 2683, Page 661 of the Official Public Records of Real property, the east corner of the tract;
THENCE:	South 41°07’20” West 77.78’ with the northwest line of Vantage Drive to a found 1/2” rebar, the beginning of a curve to the right’

150 West Rhapsody Drive • San Antonio, Texas 78216
[210] 366-4600 - FAX [210] 366-4673

THENCE:	With the northwest line of Vantage Drive and the curve to the right, concave to the northwest, having a radius of 370.00’,  a delta of 34°36’01”, and an arc length of 223.44’ and a chord bearing South 58°28’46” West to a found 1/2” rebar;
THENCE:	South 75°44’17” West 77.12’ with the northwest line of Vantage Drive to a found 1/2” rebar, the beginning of a curve to the right joining I.H. 10
THENCE:	With the northwest line of Vantage Drive and the curve to the right concave to the northeast, having a radius of 25.00’, a delta of 90°08’08”, an arc length of 39 33’ and a chord bearing North 59°10’54” West to a found 1/2” rebar on the aforementioned east right-of-way line of I.H. 10
THENCE:	North 14°11’50” West 174.97’ with the east right-of-way line of I.H. 10 to the POINT OF BEGINNING, containing 1.974 acres of land.

THESE FIELD NOTES TOGETHER WITH A SURVEY MAP WERE PREPARED FROM AN ACTUAL SURVEY MADE ON THE GROUND BY EMPLOYEES OF GIBBONS SURVEYING & MAPPING, INC. WHO WERE WORKING UNDER MY SUPERVISION AND DIRECTION.

Gary A. Gibbons, R.P.L.S. #4716
GIBBONS SURVEYING & MAPPING, INC
Date: September 13, 1991; January 2, 1992.
October 31, 1997; November 19, 2001; Up-dated June 10, 2002
Job No.: 91-0053-02; Doc I.D.: fnKCI-Tower; GAG/ps [SEAL]

EXHIBIT “C”

SECURE ACCESS AREA

Loan Number 030812147

EXHIBIT “D”

TENANT ESTOPPEL CERTIFICATE

                   ,

Christine H. Moran

Greenwich Capital Financial Products, Inc.

550 West Jackson Boulevard

Suite 1700

Chicago, Illinois 60661

Re: Lease between                                           , as Landlord or its assignees (“Landlord”) and                                                                                as Tenant (“Tenant”) dated                     ,          for approximately                  square feet of space in                  (the “Project”) as amended by the following amendments [list or if none, say None”]:

Dear Ms. Moran:

The undersigned Tenant understands and acknowledges that                                                  (“Borrower”) has obtained or is in the process of obtaining a mortgage loan from Greenwich Capital Financial Products, Inc. (“Lender”) which loan is or will be evidenced by a note secured by a deed of trust upon the captioned property and that Lender, in making the loan, is relying upon Tenant’s certification herein.

Tenant hereby certifies to Borrower and Lender that:

The Lease attached hereto (the “Lease”) is a true and exact copy of the complete Lease together with all amendments, modifications, side letters, guaranties, letters of credit and other documents evidencing, governing or securing the Tenant’s obligations under the Lease; there are no other agreements, either written or oral, between the Landlord and the Tenant;

The Lease is in full force and effect; there are no amendments or modifications of any kind to the Lease except as referenced above; there are no other promises, agreements, understandings, or commitments between Landlord and Tenant relating to the premises leased under the Lease; and Tenant has not given Landlord any notice of termination hereunder;

There has not been and is now no subletting of the leased premises, or any part thereof, or assignment by Tenant of the Lease, or any rights therein, to any party, except as follows [if none so state]:

The Lease has commenced pursuant to its terms and is in full force and effect and except as otherwise set forth in the Lease, the Tenant has no right to vacate the Demised Premises or cease to operate its business therefrom;

No uncured default, event of default, or breach by Landlord exists under the Lease, no facts or circumstances exist that, with the passage of time or giving of notice, will or could constitute a default, event of default, or breach under the Lease.  Tenant has made no claim against Landlord alleging Landlord’s default under the Lease;

Except as otherwise expressly agreed in writing, Lender, and its successors and assigns, assume no liability or obligations under the Lease, or any extension or renewal thereof, either by virtue of assignment or any receipt or collection of rents under the Lease.

Tenant is open for business and in operation in the Project.

Tenant is in full and complete possession of its leased premises in the Project and has accepted its leased premises in the Project, including any work of Landlord performed thereon pursuant to the terms and provisions of the Lease, and all common areas of the Project (including, without limitation, parking areas, sidewalks, access ways and landscaping) are in compliance with the Lease and are satisfactory for Tenant’s purposes;

To the best of Tenant’s knowledge and belief, there are no rental, lease, or similar commissions payable with respect to the Lease, except as may be expressly set forth therein;

The term of the Lease commenced on                     ,          and terminates on                              ,         , unless sooner terminated in accordance with the terms of the Lease.  Tenant has no option to renew or extend the lease term except as follows [if none, so state:

                                                                 .

Tenant is current with respect to, and is paying the full rent and other charges stipulated in the Lease (including, without limitation, common area maintenance charges) with no offsets, deductions, defenses or claims; and Tenant is not in default under the Lease.

The amount of my last rental payment was                              and the date of my last rental payment was                                 .

This rental payment was comprised of the following charges:

Base Rent:	$
Operating Expense	$
Total:	$

As of the date hereof, Tenant is not entitled to any credits, reductions, offsets, defenses, free rent, rent concessions or abatements of rent under the Lease or otherwise against the payment of rent or other charges under the Lease;

We will deliver to Lender a copy of all notices we serve on or receive from the Landlord to Greenwich Capital Financial Products, Inc., c/o Christine H. Moran, 550 West Jackson Boulevard, Suite 1700, Chicago, Illinois 60661.

All of the obligations of the Landlord under the Lease have been duly performed and completed including, without limitation, any obligations of the Landlord to make or to pay the Tenant for any improvements, alterations or work done on the Demised Premises, and the improvements described in the Lease have been constructed in accordance with the plans and specifications therefor and have been accepted by us.

The Lease is in full force and effect, no advance rentals have been paid, and we have no unsatisfied claims against the Landlord.

A letter of credit in the amount of $                       has been given by Tenant under the terms of, or with respect to, the Lease.

Tenant has no option or right to purchase the property of which the premises are a part, or any part thereof;

Tenant has not at any time and does not presently use the leased premises for the generation, manufacture, refining, transportation, treatment, storage or disposal of any hazardous substance or waste or for any purpose which poses a substantial risk of imminent damage to public health or safety or to the environment, except in compliance with all applicable laws.

The undersigned representative of Tenant is duly authorized and fully qualified to execute this instrument on behalf of Tenant thereby binding Tenant;

Tenant understands and acknowledges that you are about to make a loan to Landlord and receive as part of the security for such loan (i) a Mortgage/Deed of Trust encumbering Landlord’s fee interest in the Project (of which the demised premises are a potion) and the rents, issues and profits of the Lease (the “Mortgage”), and (ii) an Assignment of Leases and Rents (“Assignment of Leases”) which affects the Lease, and that you (and persons or entities to whom the Mortgage and/or Assignment of Leases may subsequently be assigned) are relying upon the representations and warranties contained herein in making such loan.  Further, Tenant has notice that the Lease and the rent and all other sums due thereunder have been assigned or are to be assigned to you as security for the aforesaid loan secured by the Mortgage.  In the event that you (or any person or entity to whom the Mortgage and/or Assignment of Leases may subsequently be assigned) notify Tenant of a default under the Mortgage of Assignment of Leases and demand that Tenant pay its rent and all others sums due under the Lease to you (or such future lender) Tenant shall honor such demand, to the extent permitted by applicable law, and pay its

rent and all other sums due under the Lease directly to you (or such future lender) or as otherwise required pursuant to such notice.

Neither Tenant nor any guarantor of the Lease is presently the subject of any proceeding pursuant to the United States Bankruptcy Code of 1978, as amended.

Tenant acknowledges and agrees that Landlord and Lender shall be entitled to rely on Tenant’s certifications set forth herein.  Tenant hereby further agrees for a period of thirty (30) days from the date hereof to notify Landlord and Lender in writing at the address set forth above of any changes in the trust and accuracy of any of the certifications contained herein promptly upon Tenant’s learning of each such change.

TENANT
(please type or print name of Tenant)
	By:
	Name:
	Title:

EXHIBIT “E-1 through E-8”

TENANT PARKING PLAN

EXHIBIT “E-2”

KCI TOWER PARKING GARAGE PARKING PLAN

EXHIBIT “E-3”

KC TOWER PARKING GARAGE PARKING PLAN

EXHIBIT “E-4”

KCI TOWER PARKING GARAGE PARKING PLAN

EXHIBIT “E-5”

EXHIBIT “E-6”

KCI TOWER PARKING GARAGE PARKING PLAN

EXHIBIT “E-7”

KCI TOWER PARKING GARAGE PARKING PLAN

EXHIBIT “E-8”

KCI TOWER PARKING GARAGE PARKING PLAN

EXHIBIT “F”

VISITOR SPACES

EXHIBIT “H”

LETTER OF CREDIT

DRAFT FOR DISCUSSION PURPOSES ONLY

DATE:

IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 

BENEFICIARY	APPLICANT
CKW SAN ANTONIO, L.P.	KINETIC CONCEPTS, INC.
5929 BALCONES DR., SUITE 100	8023 VANTAGE DRIVE
AUSTIN, TX 7873            1	SAN ANTONIO, TX 78230
ATTN: PHILIP W. CAPRON

AMOUNT: $3,150,000.00

THREE MILLION ONE HUNDRED AND FIFTY THOUSAND US DOLLARS

EXPIRATION

, 2003

WE HEREBY ESTABLISH IN YOUR FAVOR OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO.                                   WHICH IS AVAILABLE WITH BANK OF AMERICA, N.A. 333 S. BEAUDRY AVE. 19^TH FLOOR, LOS ANGELES, CA  90017. BY PAYMENT AGAINST PRESENTATION OF THE ORIGINAL OF THIS LETTER OF CREDIT AND YOUR DRAFTS AT SIGHT DRAWN ON BANK OF AMERICA, N.A., ACCOMPANIED BY THE FOLLOWING DOCUMENT:

A CERTIFICATE OF THE BENEFICIARY CERTIFYING THAT, IN ACCORDANCE WITH SECTION 7 OF THAT CERTAIN STANDARD OFFICE BUILDING LEASE AGREEMENT (THE “LEASE”) DATED                 , 2002, AS THE SAME MAY BE AMENDED FROM TIME TO TIME BY AND BETWEEN BENEFICIARY, AS LANDLORD, AND KINETIC CONCEPTS, INC., AS TENANT, THE BENEFICIARY IS ENTITLED TO PRESENT THE ACCOMPANYING SIGHT DRAFT FOR PAYMENT.

WE HEREBY AGREE WITH THE BENEFICIARY THAT DRAFTS DRAWN AND DOCUMENTS PRESENTED TO OUR OFFICE IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT WILL BE DULY HONORED AS SPECIFIED HEREIN.

THIS LETTER OF CREDIT IS VALID UNTIL                         , 2003, PROVIDED, HOWEVER, THAT THIS LETTER OF CREDIT WILL BE AUTOMATICALLY EXTENDED WITHOUT FURTHER ACTION OR AMENDMENT FOR ONE (1) YEAR FROM THE PRESENT OR ANY FUTURE EXPIRATION DATE HEREOF, BUT IN NO CASE PAST                          , 2007, UNLESS FORTY-FIVE (45) DAYS PRIOR TO ANY SUCH EXPIRATION DATE WE ELECT NOT TO RENEW THIS LETTER OF CREDIT AND GIVE YOU NOTICE OF SUCH ELECTION, WHICH NOTICE SHALL BE DEEMED GIVEN WHEN RECEIVED BY YOU.  ANY SUCH NOTICE SHALL BE IN WRITING AND DELIVERED BY COURIER OR BY CERTIFIED MAIL (RETURN RECEIPT REQUESTED) AT THE ADDRESS ABOVE (OR SUCH OTHER ADDRESS FOR ANY SUCH NOTICES WHICH YOU MAY HEREAFTER SPECIFY IN A WRITTEN NOTICE DELIVERED TO US.)

PARTIAL DRAWINGS ARE PERMITTED.

THIS LETTER OF CREDIT IS TRANSFERABLE.  TRANSFER OF THIS LETTER OF CREDIT MAY BE EFFECTED UPON PRESENTATION TO US OF THIS ORIGINAL LETTER OF CREDIT, A TRANSFER REQUEST IN THE FORM OF EXHIBIT A ATTACHED HERETO AND PAYMENT OF OUR TRANSFER FEE.

THIS LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICE 1998 (“ISP98”), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION 590.

AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE

EXHIBIT “A”

REQUEST FOR ENTIRE ABSOLUTE AND IRREVOCABLE TRANSFER OF

LETTER OF CREDIT WITHOUT SUBSTITUTION OF INVOICES

                                                , 20                    

NAME                                  

LETTEROF CREDIT NO.

ADDRESS
ISSUED BY

TO:         BANK OF AMERICA, N.A.

WE REQUEST YOU TO TRANSFER ALL OF OUR RIGHTS AS BENEFICIARY UNDER THE LETTER OF CREDIT REFERENCED ABOVE TO THE NEW BENEFICIARY NAMED BELOW:

NAME OF NEW BENEFICIARY

ADDRESS

BY THIS TRANSFER, ALL OUR RIGHTS AS THE ORIGINAL BENEFICIARY, INCLUDING ALL RIGHTS TO MAKE DRAWINGS UNDER THE LETTER OF CREDIT, GO TO THE NEW BENEFICIARY.  THE NEW BENEFICIARY SHALL HAVE SOLE RIGHTS AS BENEFICIARY, WHETHER EXISTING NOW OR IN THE FUTURE, INCLUDING SOLE RIGHTS TO AGREE TO ANY AMENDMENTS, INCLUDING INCREASES OR EXTENSIONS OR OTHER CHANGES.  ALL AMENDMENTS WILL BE SENT DIRECTLY TO THE NEW BENEFICIARY WITHOUT THE NECESSITY OF CONSENT BY OR NOTICE TO US.

WE ENCLOSE THE ORIGINAL LETTER OF CREDIT AND ANY AMENDMENTS.  PLEASE INDICATE YOUR ACCEPTANCE OF OUR REQUEST FOR THE TRANSFER BY ENDORSING THE LETTER OF CREDIT AND SEND IT TO THE NEW BENEFICIARY WITH YOUR CUSTOMARY NOTICE OF TRANSFER.

FOR YOUR TRANSFER FEE:

ENCLOSED IS OUR CHECK FOR $250.00

YOU MAY DEBIT MY/OUR ACCOUNT NO.            

WE ALSO AGREE TO PAY YOU ON DEMAND ANY EXPENSES WHICH MAY BE INCURRED BY YOU IN CONNECTION WITH THIS TRANSFER.

THE SIGNATURE AND TITLE AT THE RIGHT CONFORM WITH THOSE SHOWN IN OUR FILES AS AUTHORIZED TO SIGN  FOR  THE BENEFICIARY.  POLICIES GOVERNING SIGNATURE AUTHORIZATION AS REQUIRED FOR WITHDRAWALS FROM CUSTOMER ACCOUNTS SHALL ALSO BE APPLIED TO THE AUTHORIZATION OF SIGNATURES ON THIS FORM.

NAME OF BANK

AUTHORIZED SIGNATURE AND TITLE

NAME OF BENEFICIARY

NAME OF AUTHORIZED SIGNER AND TITLE

AUTHORIZED SIGNATURE

Loan Number: 030812147

EXHIBIT “I”

SUBORDINATION, NON-DISTURBANCE

AND ATTORNMENT AGREEMENT

NOTICE: THE SUBORDINATION PROVIDED FOR IN THIS AGREEMENT RESULTS IN YOUR LEASEHOLD ESTATE IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE SECURITY INTEREST INTHE PROPERTY CREATED BY SOME OTHER OR LATER INSTRUMENT.

THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this “Agreement”), made as of the              day of                    ,          between Greenwich Capital Financial Products, Inc., a Delaware corporation (“Lender”),                                                     , a                                                     (“Tenant”), and                                                                          (“Landlord”).

WITNESSETH:

WHEREAS, the Property, as hereinafter defined, is to be encumbered by a Deed of Trust (hereinafter called the “Mortgage”); covering the real property described in Exhibit “A” attached hereto and made a part hereof for all purposes, and the buildings and improvements thereon (collectively, the “Property”) securing the payment of a promissory note payable to the order of Lender (the “Note”); and

WHEREAS, by that certain Lease Agreement entered into as of                                 , between Landlord and Tenant (the “Lease”), Landlord has leased all or portion of the Property (the “Premises”) to Tenant; and

WHEREAS, Lender will not make the loan secured by the Mortgage unless Tenant subordinates the Lease and Tenant’s rights thereunder to the lien and provisions of the Mortgage; and

WHEREAS, Tenant and Lender desire to confirm their understanding with respect to the Lease and the Mortgage.

NOW, THEREFORE, in consideration of the premises, the covenants, conditions, provisions and agreement set forth herein, and other good and valuable consideration, receipt and sufficiency of which whereof is hereby acknowledged, Lender, Tenant and Landlord do hereby mutually represent, acknowledge, covenant and agree as follows:

1.  The Lease.  The Lease is in good standing, and in full force and effect without any modification or amendment as of the date hereof. The Lease shall not be amended without the written approval of Lender and shall not be terminated or canceled except as expressly provided in the Lease.

2.  Subordination.  Tenant hereby subordinates in all respects and at all times its interests in the Lease and to the Premises under and pursuant to the Lease to all of the terms, conditions and provisions of the Mortgage insofar as it affects the Property of which the Premises form a part, to all advances made or to be made thereunder, to the full extent of the principal sum and interest thereon from time to time secured thereby, and to any renewals, modifications and extensions or modifications thereof including any increase in the indebtedness secured thereby or supplements thereto, subject to the terms and conditions set forth in

this Agreement.

3.  Non-disturbance.  So long as Tenant is not in default (beyond any period(s) given under the Lease to Tenant to cure such default) in (i) the payment of any monetary obligation under the Lease, or (ii) the performance of any of the other terms, covenants or conditions with which Tenant is obligated to comply pursuant to the Lease, then:

(a)  The right of possession of Tenant to the Premises shall not be affected or disturbed by Lender in the exercise of any of its rights under the Mortgage or the Note; nor shall Tenant be named as a party defendant to any foreclosure of the lien of the Mortgage, nor in any other way be deprived of its rights under the Lease except in accordance with the terms of the Lease.

(b)  In the event Lender or any party that acquires title through any foreclosure proceeding or through a deed in lieu of foreclosure (such party being referred to herein as a “Purchaser’) succeeds to the interest of Landlord under the Lease, the Lease shall not be terminated or affected thereby, and any sale of the Premises by Lender or pursuant to the judgment of any court in an action to enforce the remedies provided for in the Mortgage, shall be made subject to the Lease and the rights of Tenant thereunder.

4.  Recognition and Attornment.  If Lender or any Purchaser succeeds to the interest of Landlord under the Lease and all terms therein, and the rights of Tenant thereunder, the Lease shall continue in effect, shall not be altered, terminated, or disturbed, and Tenant shall be bound to Lender or such Purchaser under all of the terms, covenants and conditions of the Lease for the balance of the term of the Lease as specified in the Lease (the “Term”), with the same force and effect as if Lender or such Purchaser were the landlord under the Lease except that, notwithstanding anything to the contrary herein or in the Lease, the provisions of the Mortgage will govern with respect to the disposition of proceeds of insurance policies or condemnation or eminent domain awards. In such event, Tenant shall attorn to Lender or such Purchaser as its landlord, such attornment to be effective and self-operative without the execution of any other instruments on the part of Lender, such Purchaser or Tenant, immediately upon Lender or such Purchaser succeeding to the interest of Landlord under the Lease. Provided, however, Tenant shall be under no obligation to pay any monetary obligation set forth in the Lease to Lender or such Purchaser until Tenant receives written notice from Lender or such Purchaser that Lender has succeeded to the interest of Landlord under the Lease. Upon receipt by Tenant of such notice from Lender or such Purchaser, Tenant shall make all payments due by Tenant under the Lease to Lender or such Purchaser or as Lender or such Purchaser may in writing direct. The respective rights and obligations of Tenant and Lender or such Purchaser upon such attornment, to the extent of the then remaining balance of the Term, shall be and are the same as are then in existence, as set forth in the Lease.

5.  Rights Under the Lease.  If Lender shall succeed to the interests of Landlord in and to the Premises or under the Lease, Lender shall not be:

(a) liable for any acts or omissions of any prior landlord (including, but not limited to, Landlord); or

(b)  subject to any offsets, deductions or defenses which Tenant might have arising out of acts or omissions of any prior landlord (including, but not limited to Landlord), which offsets or deductions are in amounts greater than, or which defenses relate to claims for amounts which are greater than, one (1) month’s then current rent, and with respect to which Tenant has provided Lender with any required notice and opportunity to cure in accordance with paragraph 7 hereinbelow;

(c)  obligated to give Tenant a credit for and/or acknowledge any rent or additional rent which Tenant has paid to Landlord or any prior landlord more than one (1) month in advance of the due date for such rent or additional rent, unless such payment is provided for in the Lease as presently existing or as amended in accordance with this Agreement; or

(d)  bound by any agreement or modification of the Lease made after the date hereof without Lenders consent, except as permitted by the Mortgage.

The foregoing provisions shall be self-operative and effective without the execution of any further instruments on the part of either party hereto. However, Tenant agrees to execute and deliver to Lender or to any person to whom Tenant herein agrees to attorn such other instruments as either shall request in order to effectuate said provisions.

6.  Collection of Rents and/or Possession of the Premises by Lender.  Upon receipt of written notice from Lender, Landlord and Tenant agree that Tenant shall pay all rent and other amounts owing under the Lease to a bank account or accounts designated by Lender. Any such payment by Tenant made in the manner directed by Lender shall be credited against the rental obligations of Tenant under the Lease in the direct order of maturity of the rental and other installments due thereunder, and Landlord hereby releases Tenant from all claims and liabilities as to the payment of rent or any other amount due under the Lease if such payment is made pursuant to the written direction of Lender.

7.  Notice and Opportunity to Cure Landlord Default.  Tenant shall furnish to Lender copies of all notices (each, a “First Notice”) which Landlord is entitled to receive under the Lease, and upon request by Lender, Tenant agrees to certify in writing to Lender whether or not any default on the part of Landlord exists under the Lease and the nature of any such default. Furthermore, Tenant shall provide notice (“Landlord Default Notice”) to Lender in writing of the occurrence of any default by Landlord (if no cure period is associated with a First Notice and the facts and circumstances associated with a First Notice constitute a default on the part of Landlord, a Landlord Default Notice may be given at the same time as the respective First Notice and shall permit Lender a period of thirty (30) days from the date of such notice (the “Cure Period”) in which to cure such default prior to proceeding to exercise any of the rights or remedies of Tenant under the Lease, including termination of the Lease, abatement of rental payments due thereunder, or performance of Landlord’s covenants or obligations which Tenant asserts to be in default.  The Cure Period for defaults, other than Exigent Circumstances Defaults (as defined below), (i) shall be extended by a reasonable period of time so long as Lender is diligently pursuing the cure of a default which can not reasonably be expected to be cured within the initial thirty (30) day Cure Period, and (ii) shall not be deemed to commence until after any period of time during which Lender is pursuing acquisition of title to the Premises through foreclosure or otherwise, such period to include, without limitation, any period of time during which Lender’s acquisition of title to the Premises is stayed by any proceeding in bankruptcy, any injunction or other judicial process.  With respect to defaults which are personal to Landlord, such as bankruptcy, and thus not capable of being cured by Lender, or with respect to defaults which are not capable of being cured without possession of the Premises, then Lender shall be deemed to be diligently pursuing a cure of such default if, within the above described thirty (30) day Cure Period, Lender commences and thereafter pursues (subject to any judicial stays, injunctions or other delays) foreclosure proceedings for the Premises.  Furthermore, in the case of defaults personal to Landlord, Lender shall be deemed to have cured such defaults upon final foreclosure of the Premises.  Notwithstanding anything herein to the contrary, in the event of the occurrence of any facts or circumstances which, if allowed by Landlord to continue, would constitute a default of a type that would deprive Tenant of any essential service or would result in a condition that constitutes an emergency or involves other exigent circumstances that may reasonably be expected to cause Tenant, its employees, agents or invitees material harm if Tenant were required to provide Lender a

Landlord Default Notice and the Cure Period (such condition being referred to herein as an “Exigent Circumstances Default”), Lender shall have the same period of time (an “Exigent Circumstances Cure Period”) from the date Tenant delivers a First Notice to Lender, as Landlord would have following Tenant’s delivery of such First Notice to Landlord, in which to cure such potential Exigent Circumstances Default, prior to Tenant proceeding to exercise any of the rights or remedies of Tenant under the Lease.  In no event shall any Exigent Circumstances Cure Period be extended beyond the period of time set forth above.

8.  Limitation of Lender Liability.  Notwithstanding anything to the contrary contained in this Agreement or the Lease, in the event of any default or breach by Lender with respect to any of the terms, covenants and conditions of the Lease to be observed, honored or performed by Lender as Landlord, Tenant shall look solely to the estate and property of Lender in the Premises for the recovery of any judgment (or any other judicial procedures requiring the payment of money by Lender) from Lender, it being agreed that Lender shall never be personally liable for any such judgment and that no property or assets of Lender other than Lenders interest in the Premises shall be subject to levy, execution or other procedures for satisfaction of Tenant’s remedies. Lender shall not be required to respond in monetary damages from any of its properties or assets other than Lenders interests in the Premises.

9.  Succession in Interest.  For purposes of this Agreement, Lender will be deemed to have succeeded to the interest of Landlord under the Lease upon (i) the transfer of title to the Premises to Lender, whether by virtue of foreclosure, sale or transfer in lieu of foreclosure, or pursuant to the exercise of any rights and remedies under the Mortgage or otherwise, or (ii) the occurrence of any other event as a result of which Lender may acquire the right, title and interest of Landlord in and to the Lease or the Premises.

10.  Notices.  All notices, requests and communications (“Notice”) hereunder shall be given in writing or by telegram confirmed in writing, and shall be delivered or mailed by first class registered or certified mail, postage prepaid, return receipt requested to Lender, Landlord or Tenant, as the case may be, at the addresses listed next to the signature of each of the foregoing parties. Any Notice provided for herein shall become effective only upon and at the time of receipt by the party to whom it is given, unless such Notice is mailed by registered or certified mail, in which case it shall be deemed to be received on the earlier of (i) the second business day observed by Lender following the mailing thereof, or (ii) the day of its receipt if such day is a business day of Lender (or if not a business day, the first business day thereafter). Any party may, by proper written notice hereunder to the other parties, change the individual address to which such Notice shall thereafter be sent to such party.

11.  Binding Agreement.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors and assigns where permitted by the Agreement. For purposes of this Agreement, all references herein to “Lender” shall be deemed to include also any subsequent holder of the Mortgage who has given notice to Tenant of its ownership of the Mortgage and who has furnished to Tenant its mailing address and/or any other person succeeding to title to the Premises and/or the Lease encumbered by the Mortgage or any part thereof and who claims by, through or under Lender, whether by virtue of foreclosure, or sale or transfer in lieu of foreclosure, or pursuant to the exercise of any rights and remedies under the Mortgage or otherwise.

12.  Attorney’s Fees.  In the event any legal action or proceeding is commenced to interpret or enforce, the terms of, or obligations arising out of this Agreement, or to recover damages for the breach thereof; the party prevailing in any such action or proceeding shall be entitled to recover from the nonprevailing party all reasonable attorney’s fees, costs and expenses incurred by the prevailing party as shall be plead and proven by such party and awarded by a court of competent jurisdiction.

13.  Severability.  In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein.

14.  Headings.  The headings of this Agreement are for convenience of reference only.

15.  Modification.  This Agreement may not be modified other than by an agreement in writing signed by the parties hereto or their respective successors.

16.  Counterparts.  This Agreement may be signed in counterparts.

17.  Termination.  From and after payment in full of the loan secured by the Mortgage and the recordation of a release or satisfaction thereof, without the transfer of the Properly to Lender as a purchaser, this Agreement shall become void and of no further force or effect.

18.  Governing Law.  THE INTERPRETATION, VALIDITY AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF TEXAS.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed effective as of the day and year first above written although actually executed on the date(s) set forth in the acknowledgments below:

LENDER ADDRESS:	LENDER:
600 Steamboat Road Greenwich, Connecticut 06830	Greenwich Capital Financial Products, Inc., a Delaware corporation
	By:
	Name:
	Title:
LANDLORD ADDRESS:	LANDLORD:
	By:
	Name:
	Title:
TENANT ADDRESS:	TENANT:
	By:
	Name:
	Title:

STATE OF ILLINOIS	o
	o
COUNTY OF COOK	o

On this              day of                     ,         , before me, the undersigned, a Notary Public in and for the State of Illinois, personally appeared                                         , to me personally known, who, being by me duly sworn, did say that he is the                                          of said corporation executing the foregoing instrument to which this is attached, that said instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors and that                                          as such officer acknowledged the execution of said instrument to be the voluntary act and deed of said corporation, by it and by him voluntarily executed.

Notary Public in and for the State of Illinois

THE STATE OF TEXAS	§
	§
COUNTY OF	§

Before me, a Notary Public, on this day personally appeared                      , known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the same for the purpose and consideration therein expressed.

Given under my hand and seal of office this          day of             , 2002.

Notary Public, State of Texas

Commission Expires:

THE STATE OF TEXAS	§
	§
COUNTY OF	§

Before me, a Notary Public, on this day personally appeared         , known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the same for the purpose and consideration therein expressed.

Given under my hand and seal of office this          day of                 , 2002.

Notary Public, State of Texas

Commission Expires:

EX-10.29

Exhibit 10.29

FIRST AMENDED AND RESTATED MANAGEMENT SERVICES
AGREEMENT

This agreement, dated August 11, 2003 (this “First Amended and Restated Management Services Agreement” or this “Agreement”) by and among Kinetic Concepts, Inc., a Texas corporation (the “Company”), Dr. James Leininger (“Leininger”), Blum Capital Partners, L.P. (“Blum”), Blum Strategic GP II, L.L.C., Fremont Partners, L.L.C. (“Fremont II”) and Fremont Partners III, L.L.C. (“Fremont III” and together with Leininger, Blum, Blum Strategic GP II, L.L.C. and Fremont II, the “Managers” and each a “Manager”) amends and restates that certain Management Services Agreement (the “Initial Agreement”) entered into as of November 5, 1997 by and between the Company, Leininger, Richard C. Blum & Associates, L.P. and  Fremont II, pursuant to which the Managers were retained by the Company to provide management, consulting, financial, strategic planning, tax and accounting services to the Company pursuant to the terms and subject to the conditions set forth in the Initial Agreement.  Upon the effectiveness of this Agreement as contemplated by paragraph 9 hereof, the Initial Agreement shall be amended (pursuant to paragraph 7(d) thereof) and restated in its entirety as set forth in this Agreement:

1.The Company has retained the Managers, and the Managers hereby agree to accept such retention, to provide to the Company and to its divisions, subsidiaries and affiliates (collectively, “PortCo”), when and if called upon, certain management, consulting, financial, strategic planning, tax and accounting services of the type customarily performed by the Managers (the “Advisory Services”).

2.The parties acknowledge that the Company has previously paid to each of the Managers a management fee in consideration for Advisory Services performed between January 1, 2003 and June 30, 2003 pursuant to the Initial Agreement equal to the respective amounts set forth below:

Manager	Amount
Leininger	$	250,000
Blum	$	200,000
Fremont II	$	300,000

Except as set forth in paragraph 3 hereunder, no other management fees shall be due to the Managers under this Agreement.

3.Each Manager may also invoice the Company for additional investment banking fees in connection with acquisition, divestiture or certain other transactions or in the event that such Manager or any of its affiliates performs services for PortCo above and beyond those called for by this Agreement; provided, however, that any such fees must be agreed to in advance by the Company.

4.In addition to any fees that may be payable to any Manager under this Agreement, the Company also agrees to reimburse each Manager and its respective affiliates, from time to time upon request, for all reasonable out-of-pocket expenses incurred prior to the date of such request in connection with the provision of Advisory Services, including, without limitation, all unreimbursed travel expenses and expenses of their counsel and other advisors.

5.The Company agrees to indemnify and hold each Manager and its respective affiliates, members, partners, executives, officers, directors, employees, agents, representatives and controlling persons (including without limitation, the respective members of the Board of Directors of the Company designated by each Manager (each such person, including such Manager, being an “Indemnified Party”) harmless from and against any and all losses, claims, damages and liabilities (including, without limitation, losses, claims, damages and liabilities arising from or in connection with legal actions brought by or on behalf of the holders or future holders of the outstanding securities of PortCo or creditors or future creditors of PortCo), joint, several or otherwise, to which such Indemnified Party may become subject under any applicable federal or state law, or otherwise, related to or arising out of any activity contemplated by this Agreement or the retention of such Manager or its affiliates pursuant to, and such Manager’s or its affiliates’ performance of the Advisory Services contemplated by, this Agreement and will reimburse any Indemnified Party for all expenses (including counsel fees and disbursements) upon request as they are incurred in connection with the investigation of, preparation for or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party and whether or not such claim, action or proceeding is initiated or brought by the Company and/or PortCo; provided, however, that the Company will not be liable to any Manager or its affiliates under the foregoing indemnification provision to the extent that any loss, claim, damage, liability or expense is found in a final, non-appealable judgment by a court to have resulted from the willful misconduct, bad faith or gross negligence of such Manager or its affiliates.  The Company also agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to PortCo related to or arising out of any activity contemplated by this Agreement or the retention of any Manager or its affiliates pursuant to, and any Manager’s or its affiliates’ performance of the Advisory Services contemplated by, this Agreement, except to the extent that any loss, claim, damage, liability or expense is found in a final, non-appealable judgment by a court to have resulted from the willful misconduct, bad faith or gross negligence of such Manager or its affiliates; provided, however, that in no event shall any such liability in the aggregate exceed the amount of management fees actually received by such Manager or any fees actually received by such Manager pursuant to paragraphs 2 and 3 of this Agreement.

The Company also agrees that, without the prior written consent of the relevant Manager or its relevant affiliate, the Company and PortCo will not settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which an Indemnified Party related to such Manager is an actual or potential party and in respect of which indemnification could be sought under the indemnification provision in the immediately preceding paragraph, unless such

2

settlement, compromise or consent (i) includes an unconditional release of each Indemnified Party from all liability arising out of such claim, action or proceeding and (ii) does not include any statement as to any admission of fault, culpability or failure to act by or on behalf of any indemnified party.

Promptly after receipt by an Indemnified Party of notice of any suit, action, proceeding or investigation with respect to which an Indemnified Party may be entitled to indemnification hereunder, such Indemnified Party will notify the Company in writing of the assertion of such claim or the commencement of such suit, action, proceeding or investigation, but the failure so to notify the Company shall not relieve the Company from any liability which it may have hereunder, except to the extent that such failure has materially prejudiced the Company.  If the Company so elects within a reasonable time after receipt of such notice, the Company may participate at its own expense in the defense of such suit, action, proceeding or investigation.  Each Indemnified Party may employ separate counsel to represent it or defend it in any such suit, action, proceeding or investigation in which it may become involved or is named as a defendant and, in such event, the reasonable fees and expenses of such counsel shall be borne by the Company; provided, however, that the Company will not be required in connection with any such suit, action, proceeding or investigation, or separate but substantially similar actions arising out of the same general allegations or circumstances, to pay the fees and disbursements of more than one separate counsel (other than local counsel) for all Indemnified Parties related to a given Manager in any single action or proceeding.  Whether or not the Company participates in the defense of any claim, both the Company and each Manager and its affiliates shall cooperate in the defense thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearing, trial and appeals, as may be reasonably requested in connection therewith.

If the indemnification provided for hereunder is finally judicially determined by a court of competent jurisdiction to be unavailable to an Indemnified Party, or insufficient to hold any Indemnified Party harmless, in respect of any losses, claims, damages or liabilities (other than any losses, claims, damages or liabilities found in a final, non-appealable judgment by a court to have resulted from the willful misconduct, bad faith or gross negligence of the Manager or its affiliates to which such Indemnified Party is related), then the Company, on the one hand, in lieu of indemnifying such Indemnified Party, and such Manager or its relevant affiliate, on the other hand, will contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received, or sought to be received, by PortCo, on the one hand, and such Manager or its relevant affiliate, solely in its capacity as advisor under this Agreement, on the other hand, in connection with the transactions to which such indemnification, contribution or reimbursement is sought, or (ii) if (but only if) the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of PortCo, on the one hand, and such Manager or its relevant affiliate, on the other hand, as well as any other relevant equitable considerations; provided, however, that in no event

3

shall any Manager’s aggregate contribution hereunder exceed the amount of management fees actually received by such Manager or any fees actually received by such Manager pursuant to paragraphs 2 and 3 of this Agreement.  The amount paid or payable by a party as a result of the losses, claims, damages and liabilities referred to above will be deemed to include any legal or other fees or expenses reasonably incurred in defending any action or claim.  The Company and each Manager and its affiliates agree that it would not be just and equitable if contribution pursuant to this paragraph were determined by pro rata allocation or by any other method, which does not take into account, the equitable considerations referred to in this paragraph.  The indemnity, contribution and expenses reimbursement obligations the Company has under this paragraph shall be in addition to any liability the Company or PortCo may have, and notwithstanding any other provision of this Agreement, shall survive the termination of this Agreement.

6.Any advice or opinions provided by any Manager may not be disclosed or referred to publicly or to any third party (other than PortCo’s legal, tax, financial or other advisors), except in accordance with the prior written consent of such Manager.  In addition, this Agreement may not be disclosed or referred to publicly or to any third party (other than PortCo’s legal, tax, financial or other advisors), except (a) in accordance with the prior written consent of each Manager or (b) to the extent, and only to the extent, compelled by applicable law, regulation, stock exchange rules or legal process (including any discovery request or judicial or governmental order).

7.Each Manager shall act as an independent contractor, with duties solely to the Company.  The provisions hereof shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors and assigns.  Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns, and, to the extent expressly set forth herein, the Indemnified Parties, any rights or remedies under or by reason of this Agreement.  Without limiting the generality of the foregoing, the parties acknowledge that nothing in this Agreement, expressed or implied, is intended to confer on any present or future holders of any securities of the Company or its subsidiaries or affiliates, or any present or future creditor of the Company or its subsidiaries or affiliates, any rights or remedies under or by reason of this Agreement or any performance hereunder.

8.This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts made and to be performed therein.  The parties hereto hereby agree to submit to the non-exclusive jurisdiction of the federal and state courts located in the City of San Francisco in any action or proceeding arising out of or relating to this Agreement.

9.The terms of this Agreement are effective as of the date hereof and this Agreement amends, restates and replaces the Initial Agreement in its entirety.  This Agreement shall continue in effect until the termination of that certain Amended Agreement Among Shareholders (the “Amended Shareholder Rights Agreement”) dated November 5, 1997 and amended August 11, 2003 by and among the Company, Fremont Partners, L.P., Fremont Partners III, L.P., Blum Capital Partners, L.P., Leininger and the other shareholders of the Company that are party thereto; provided, however, that this

4

Agreement shall terminate earlier with respect to any individual Manager when such Manager no longer has a right to designate a member of the Board of Directors of the Company pursuant to the terms of the Amended Shareholder Rights Agreement; provided further, however, that the terms of paragraphs 3 through 6, 8, and 10 through 12 of this Agreement shall survive indefinitely; provided further, however, that no member of the Board of Directors of the Company (each, a “Director”) shall have any rights to indemnification under paragraph 5, in his or her capacity or purported capacity as a director, with respect to any action or inaction of such Director that is taken or not taken, as the case may be, after the time that such Director shall no longer be a director.

10.Each party hereto represents and warrants that the execution and delivery of this Agreement by such party has been duly authorized by all necessary action of such party.

11.If any term or provision of this Agreement or the application thereof shall, in any jurisdiction and to any extent, be invalid and unenforceable, such term or provision shall be ineffective, as to such jurisdiction, solely to the extent of such invalidity or unenforceability without rendering invalid or unenforceable any remaining terms or provisions hereof or affecting the validity or enforceability of such term or provision in any other jurisdiction.  To the extent permitted by applicable law, the parties hereto waive any provision of law that renders any term or provision of this Agreement invalid or unenforceable in any respect.

12.Each of PortCo and the Managers waives all right to trial by jury in any action, proceeding or counterclaim (whether based upon contract, tort or otherwise) related to or arising out of any activity contemplated by this Agreement or the retention of any Manager pursuant to, and each Manager’s or its affiliates’ performance of the Advisory Services contemplated by, this Agreement.

13.Any notice or other communication under this Agreement must be given in writing and either (i) delivered in person, (ii) transmitted by facsimile or (iii) mailed by certified or registered mail, postage prepaid, receipt requested as follows:

If to the Company, addressed to:

Kinetic Concepts, Inc.

8023 Vantage Drive

San Antonio, TX 78230

Attn:  Dennis E. Noll

Fax:  (210)-255-6204

with a copy (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP

525 University Avenue

Palo Alto, CA 94301

Attn:  Thomas J. Ivey, Esq.

Fax:  (650) 470-4570

5

If to Fremont II, addressed to:

Fremont Partners, L.L.C.

199 Fremont Street, Suite 2300

San Francisco, CA 94105

Attn:  Kevin Baker, Esq.

Fax:  (415) 284-8191

with a copy (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP

525 University Avenue

Palo Alto, CA 94301

Attn:  Thomas J. Ivey, Esq.

Fax:  (650) 470-4570

If to Fremont III, addressed to:

Fremont Partners III, L.L.C.

199 Fremont Street, Suite 2300

San Francisco, CA 94105

Attn:  Kevin Baker, Esq.

Fax:  (415) 284-8191

with a copy (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP

525 University Avenue

Palo Alto, CA 94301

Attn:  Thomas J. Ivey, Esq.

Fax:  (650) 470-4570

If to Leininger, addressed to:

Dr. James Leininger

Mission City Management, Inc.

8122 Datapoint Drive, Suite 900

San Antonio, TX 78229

Attn:  General Counsel

Fax:  (210) 614-5841

If to Blum, addressed to:

Blum Capital Partners, L.P.

909 Montgomery Street, Suite 400

San Francisco, CA 94133-4625

Attn:  Murray Indick, Esq.

Fax:  (415) 283-0641

6

with a copy (which shall not constitute notice) to:

Wilmer, Cutler & Pickering

2445 M Street, N.W.

Washington D.C. 20037

Attn:  Michael R. Klein, Esq.

Fax:  (202) 663-6363

If to Blum Strategic GP II, L.L.C., addressed to:

Blum Strategic GP II, L.L.C.

909 Montgomery Street, Suite 400

San Francisco, CA 94133-4625

Attn:  Murray Indick, Esq.

Fax:  (415) 283-0641

with a copy (which shall not constitute notice) to:

Wilmer, Cutler & Pickering

2445 M Street, N.W.

Washington D.C. 20037

Attn:  Michael R. Klein, Esq.

Fax:  (202) 663-6363

or to such other address or to such other person as any party shall have last designated by such notice to the other parties hereto.  Each notice or other communication shall be effective, if given by facsimile, when transmission to the applicable facsimile number is confirmed; if given by mail, three days after such communication is deposited in the mails with first-class postage prepaid, addressed as foresaid; and if given by any other means, when actually delivered to such address.

14.This Agreement may not be assigned by any party hereto without the prior written consent of each other party hereto; provided that nothing in this Agreement shall preclude changes in the composition of the members constituting Fremont II, Fremont III, Blum or Blum Strategic GP II, L.L.C.; and provided further that Fremont II, Fremont III, Blum or Blum Strategic GP II, L.L.C. may be reconstituted or reorganized from the limited liability company form to the partnership form or to the corporate form or other form of business entity or vice versa.

15.This Agreement may be executed through the use of separate signature pages and in any number of counterparts, and each of such counterparts shall, for all purposes, constitute one agreement binding on all the parties, notwithstanding that all the parties are not signatories to the same counterpart.  Facsimile signatures shall constitute original signatures for all purposes under this Agreement.

[Rest of page intentionally left blank]

7

IN WITNESS WHEREOF, the parties have executed this Management Services Agreement as of the date first set forth above.

KINETIC CONCEPTS, INC., a Texas corporation		FREMONT PARTNERS, L.L.C., a Delaware limited liability company
		By:  Fremont Group, L.L.C., its managing member
By:
	Name:	By:  Fremont Investors, Inc., its manager
	Title:
		By:
			Name:
			Title:
FREMONT PARTNERS III, L.L.C., a Delaware limited liability company		BLUM CAPITAL PARTNERS, L.P., a California limited partnership
By:  Fremont Group, L.L.C., its managing member		By:  Richard C. Blum & Associates, Inc., its sole general partner
By:  Fremont Investors, Inc., its manager		By:
			Name:
			Title:
By:
	Name:
	Title:
		James R. Leininger, M.D.

[SIGNATURE PAGE TO FIRST AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT]

8

BLUM STRATEGIC GP II, L.L.C., a Delaware limited liability company
By:
	Name:
	Title:

[SIGNATURE PAGE TO FIRST AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT]

9

EX-12.1

Exhibit 12.1

KINETIC CONCEPTS, INC.

Ratio of Earnings to Fixed Charges

(dollars in thousands, except ratio amounts)

											YTD June 30,				LTM June 30, 2003 (2)
	1998		1999		2000 (1)		2001		2002 (2)		2002		2003
Net Earnings	11,776		(314	)	9,129		23,901		43,744		20,029		35,945		59,660
Income Tax	7,851		620		6,476		17,307		29,163		12,538		21,567		38,192
Interest Expense	48,594		46,502		48,635		45,116		40,943		20,692		16,228		36,479
	68,221		46,808		64,240		86,324		113,850		53,259		73,740		134,331
Interest Expense	48,594		46,502		48,635		45,116		40,943		20,692		16,228		36,479
Interest in Operating Leases	4,945		5,387		5,129		4,797		6,531		2,966		3,575		7,140
Total Fixed Charges	53,539		51,889		53,764		49,913		47,474		23,658		19,803		43,619
Fixed-Charge Ratio	1.3	x	0.9	x(3)	1.2	x	1.7	x	2.4	x	2.3	x	3.7	x	3.1	x

(1)  In December 2000, we began reporting international results on a current-month basis.  As a result of this change, the 2000 fiscal year included a 13th monthly period for the international segment which increased reported revenue and operating earnings by approximately $8.0 million and $1.1 million, respectively.

(2)  This calculation excludes pretax income of $173.3 million ($175.0 million less expenses of $1.7 million) from Hillenbrand as part of an antitrust settlement.

(3)  In 1999, the fixed charge ratio indicated less than one-to-one coverage of $5.1 million.

EX-23.3

Exhibit 23.3

Consent of Independent Auditors

We consent to the reference to our firm under the caption “Experts” in the Registration Statement on Form S-4 and related Prospectus of Kinetic Concepts, Inc. for the registration of $205,000,000 of Kinetic Concepts, Inc. Senior Subordinated Notes due 2013 and to the use therein of our report dated February 7, 2003, with respect to the consolidated financial statements and schedules of Kinetic Concepts, Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 2002, filed with the Securities and Exchange Commission.

	/s/ Ernst & Young LLP
San Antonio, Texas
September 22, 2003

EX-25.1

Exhibit 25.1

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM T-1

STATEMENT OF ELIGIBILITY UNDER
THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE

Check if an Application to Determine Eligibility of

a Trustee Pursuant to Section 305(b)(2)

U.S. BANK NATIONAL ASSOCIATION

(Exact name of Trustee as specified in its charter)

31-0841368
I.R.S. Employer Identification No.
180 East Fifth Street St. Paul, Minnesota	55101
(Address of principal executive offices)	(Zip Code)
Frank Leslie U.S. Bank National Association 180 East Fifth Street St. Paul, MN 55101 (651) 244-8677
(Name, address and telephone number of agent for service)

Kinetic Concepts, Inc.

(Issuer with respect to the Securities)

Texas	74-1891727
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
8023 Vantage Drive San Antonio, Texas	78230
Address of Principal Executive Offices)	(Zip Code)

Series B 7 3/8% Senior Subordinated Notes due 2013

(Title of the Indenture Securities)

TABLE OF ADDITIONAL REGISTRANTS

Name of Additional Registrant*	State of Incorporation or Formation	Primary Standard Industrial Classification ode Number	IRS Employer ID Number
KCI Holding Company, Inc.	Delaware		74-2804102
KCI Real Holdings, L.L.C.	Delaware		N/A
KCI International, Inc.	Delaware		51-0307888
KCI Licensing, Inc.	Delaware		74-2928553
KCI Properties Limited	Texas		74-2621178
KCI Real Property Limited	Texas		74-2644430
KCI USA, Inc.	Delaware		74-2152396
KCI USA Real Holdings, LLC	Delaware		N/A
Medclaim, Inc.	North Carolina		56-2200462

The address and telephone number of the principal executive offices of each of the registrants listed above are the same as those of Kinetic Concepts, Inc.

2

FORM T-1

Item 1.GENERAL INFORMATION.  Furnish the following information as to the Trustee.

a)Name and address of each examining or supervising authority to which it is subject.

Comptroller of the Currency

Washington, D.C.

b)Whether it is authorized to exercise corporate trust powers.

Yes

Item 2.AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the Trustee, describe each such affiliation.

None

Items 3-15Items 3-15 are not applicable because to the best of the Trustee’s knowledge, the obligor is not in default under any Indenture for which the Trustee acts as Trustee.

Item 16.LIST OF EXHIBITS:  List below all exhibits filed as a part of this statement of eligibility and qualification.

1.A copy of the Articles of Association of the Trustee.*

2.A copy of the certificate of authority of the Trustee to commence business.*

3.A copy of the certificate of authority of the Trustee to exercise corporate trust powers.*

4.A copy of the existing bylaws of the Trustee.*

5.A copy of each Indenture referred to in Item 4.  Not applicable.

6.The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939, attached as Exhibit 6.

7.Report of Condition of the Trustee as of June 30, 2003, published pursuant to law or the requirements of its supervising or examining authority, attached as Exhibit 7.

* Incorporated by reference to Registration Number 333-67188.

3

NOTE

The answers to this statement insofar as such answers relate to what persons have been underwriters for any securities of the obligors within three years prior to the date of filing this statement, or what persons are owners of 10% or more of the voting securities of the obligors, or affiliates, are based upon information furnished to the Trustee by the obligors.  While the Trustee has no reason to doubt the accuracy of any such information, it cannot accept any responsibility therefor.

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of St. Paul, State of Minnesota on the 19th day of September, 2003.

		U.S. BANK NATIONAL ASSOCIATION
		By:	/s/ Frank P. Leslie III
			Frank P. Leslie III
			Vice President
By:	/s/ Lori-Anne Rosenberg
	Lori-Anne Rosenberg
	Assistant Vice President

4

Exhibit 6

CONSENT

In accordance with Section 321(b) of the Trust Indenture Act of 1939, the undersigned, U.S. BANK NATIONAL ASSOCIATION hereby consents that reports of examination of the undersigned by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor.

Dated:  September 19, 2003
		U.S. BANK NATIONAL ASSOCIATION
		By:	/s/ Frank P. Leslie III
			Frank P. Leslie III
			Vice President
By:	/s/ Lori-Anne Rosenberg
	Lori-Anne Rosenberg
	Assistant Vice President

5

Exhibit 7

U.S. Bank National Association

Statement of Financial Condition

As of 6/30/2003

($000’s)

	6/30/2003
Assets
Cash and Due From Depository Institutions	$	11,987,100
Federal Reserve Stock	0
Securities	35,336,411
Federal Funds	4,955,134
Loans & Lease Financing Receivables	118,648,100
Fixed Assets	1,864,465
Intangible Assets	9,999,520
Other Assets	8,735,830
Total Assets	$	191,526,560
Liabilities
Deposits	$	132,461,590
Fed Funds	5,061,915
Treasury Demand Notes	0
Trading Liabilities	303,140
Other Borrowed Money	20,320,775
Acceptances	150,586
Subordinated Notes and Debentures	6,326,523
Other Liabilities	5,864,946
Total Liabilities	$	170,489,475
Equity
Minority Interest in Subsidiaries	$	999,216
Common and Preferred Stock	18,200
Surplus	11,015,123
Undivided Profits	9,004,546
Total Equity Capital	$	21,037,085
Total Liabilities and Equity Capital	$	191,526,560

To the best of the undersigned’s determination, as of the date hereof, the above financial information is true and correct.

U.S. Bank National Association
By:	/s/ Frank P. Leslie III
	Vice President
Date:  September 19, 2003

6

EX-99.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 99.1

LETTER OF TRANSMITTAL

KINETIC CONCEPTS, INC.

offer for all outstanding
Series A 7³/8% Senior Subordinated Notes due 2013
and the related guarantees
in exchange for
Series B 7³/8% Senior Subordinated Notes due 2013
and the related guarantees
which have been registered under
the Securities Act of 1933, as amended,
pursuant to the prospectus dated            , 2003

        THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2003, UNLESS EXTENDED (SUCH TIME AND DATE, AS SO EXTENDED, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE.

The exchange agent for the exchange offer is:
U.S. Bank, N.A.

For all forms of delivery:

U.S. Bank, N.A.
60 Livingston Avenue
St. Paul, Minnesota 55197
Attention: Corporate Trust Department

Facsimile (for eligible institutions only):
(651) 495-8097

For confirmation call
(651) 495-3913

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR FACSIMILE NUMBER OTHER THAN AS INDICATED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.

THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.

        The prospectus of Kinetic Concepts, Inc., a Texas corporation (the "Issuer") and certain subsidiaries of the Issuer (collectively the "Guarantors"), dated                        , 2003, as the same may be amended or supplemented from time to time (the "Prospectus"), and this letter of transmittal together constitute the Issuer's and the Guarantors' offer, referred to as the exchange offer, to exchange an aggregate principal amount of up to $205,000,000 of the Issuer's Series B 7³/8% Senior Subordinated Notes due 2013, including the guarantees thereof by the Guarantors, which have been registered under the Securities Act of 1933, as amended (the "New Notes"), for a like principal amount of the Issuer's issued and outstanding Series A 7³/8% Senior Subordinated Notes due 2013, including the guarantees thereof by the Guarantors, (the "Old Notes"). Capitalized terms used but not defined in this letter of transmittal shall have the same meaning given to them in the Prospectus, as it may be amended or supplemented.

        This letter of transmittal is to be completed by a holder of Old Notes if either (a) a tender of Old Notes is to be made by book-entry transfer to the account of the exchange agent at The Depository Trust Company ("DTC"), pursuant to the procedures for tender by book-entry transfer set forth in the Prospectus under "The Exchange Offer—Procedures for Tendering Old Notes" and an agent's message, as defined below, is not delivered or (b) certificates for such Old Notes are to be forwarded herewith. Certificates or book-entry confirmation of the transfer of Old Notes into the exchange agent's accountant DTC, as well as this letter of transmittal, properly completed and duly executed, with any required signature guarantees, and any other documents, such as endorsements, bond powers, opinions of counsel, certifications and powers of attorney, if applicable, required by this letter of transmittal, must be received by the exchange agent at its address set forth herein on or prior to the expiration date. In connection with any tender of Old Notes by book-entry transfer, an agent's message may be delivered as part of the book-entry confirmation in lieu of this letter of transmittal. The term "book-entry confirmation" means a confirmation of a book-entry transfer of Old Notes into the exchange agent's account at DTC. The term "agent's message" means a message transmitted to the exchange agent by DTC which states that DTC has received an express acknowledgment that the tendering holder agrees to be bound by the letter of transmittal and that the Issuer and the Guarantors may enforce the letter of transmittal against such holder.

        If Old Notes are tendered pursuant to book-entry procedures, the exchange agent must receive, no later than 5:00 p.m., New York City time, on the expiration date, book-entry confirmation of the tender of the Old Notes into the exchange agent's account at DTC, along with a completed letter of transmittal or an agent's message.

By crediting the Old Notes to the exchange agent's account at DTC and by complying with the applicable procedures of DTC's Automated Tender Offer Program, or ATOP, with respect to the tender of the Old Notes, including by the transmission of an agent's message, the holder of Old Notes acknowledges and agrees to be bound by the terms of this letter of transmittal, and the participant in DTC confirms on behalf of itself and the beneficial owners of such Old Notes all provisions of this letter of transmittal as being applicable to it and such beneficial owners as fully as if such participant and each such beneficial owner had provided the information required herein and executed and transmitted this letter of transmittal to the exchange agent.

        Holders of Old Notes whose certificates for such Old Notes are not immediately available or who are unlikely to be able to deliver all required documents to the exchange agent on or prior to the expiration date or who cannot complete a book-entry transfer on a timely basis may tender their Old Notes according to the guaranteed delivery procedures described in the Prospectus under "The Exchange Offer—Guaranteed Delivery Procedures".

DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.

        The undersigned has completed the appropriate boxes below and signed this letter of transmittal to indicate the action the undersigned desires to take with respect to the exchange offer.

        List below the Old Notes to which this letter of transmittal relates. The name(s) and address(es) of the registered holder(s) of the Old Notes tendered hereby should be printed below, if they are not already set forth below, as they appear on the certificates representing such Old Notes. The certificate number(s) and the principal amount of Old Notes that the undersigned wishes to tender should be indicated in the appropriate boxes below. If the space provided below is inadequate, the certificate numbers and principal amount of Old Notes should be listed on a separate, signed schedule affixed hereto.

2

DESCRIPTION OF OLD NOTES
Name(s) and Address(es) of Registered Holder(s) (Please fill in, if blank)	Certificate Number(s)*	Aggregate Principal Amount of Old Notes	Principal Amount Tendered**
		Total:

*

Need not be completed if Old Notes are being tendered by book-entry transfer.

**

Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Notes represented by the Old Notes indicated in the second column. See Instruction 4. Old Notes tendered hereby must be in denominations of $1,000 or any integral multiple thereof.

CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING:

Name of Tendering Institution

DTC Account Number

Transaction Code Number

CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.

CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING (SEE INSTRUCTION 1):

Name(s) of Registered Holder(s)

Window Ticket Number (if any)

Date of Execution of Notice of Guaranteed Delivery

Name of Eligible Institution which Guaranteed Delivery

If Guaranteed Delivery is to be Made by Book-Entry Transfer:

Name of Tendering Institution

DTC Account Number

Transaction Code Number

CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.*

Name:

Address:

*

You are entitled to as many copies as you reasonably believe necessary. If you require more than 10 copies, please indicate the total number required in the following space:                                .

3

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

Ladies and Gentlemen:

        The undersigned hereby tenders to the Issuer the principal amount of Old Notes indicated above, upon the terms and subject to the conditions of the exchange offer. Subject to and effective upon the acceptance for exchange of all or any portion of the Old Notes tendered herewith in accordance with the terms and conditions of the exchange offer, including, if the exchange offer is extended or amended, the terms and conditions of any such extension or amendment, the undersigned hereby irrevocably sells, assigns and transfers to or upon the order of the Issuer all right, title and interest in and to such Old Notes.

        The undersigned hereby irrevocably constitutes and appoints the exchange agent as its agent and attorney-in-fact, with full knowledge that the exchange agent is also acting as agent of the Issuer and the Guarantors in connection with the exchange offer and as trustee under the indenture governing the Old Notes and the New Notes, with respect to the tendered Old Notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), subject only to the right of withdrawal described in the Prospectus, to (1) deliver certificates representing such Old Notes, together with all accompanying evidences of transfer and authenticity, to or upon the order of the Issuer upon receipt by the exchange agent, as the undersigned's agent, of the New Notes to be issued in exchange for such Old Notes, (2) present certificates for such Old Notes for transfer and to transfer the Old Notes on the books of the Issuer and (3) receive for the account of the Issuer all benefits and otherwise exercise all rights of beneficial ownership of such Old Notes, all in accordance with the terms and conditions of the exchange offer.

        The undersigned hereby represents and warrants that (1) the undersigned has full power and authority to tender, exchange, sell, assign and transfer the Old Notes tendered hereby, (2) the Issuer will acquire good, marketable and unencumbered title to the tendered Old Notes, free and clear of all liens, restrictions, charges and other encumbrances, and (3) the Old Notes tendered hereby are not subject to any adverse claims or proxies. The undersigned warrants and agrees that the undersigned will, upon request, execute and deliver any additional documents requested by the Issuer or any Guarantor or the exchange agent to complete the exchange, sale, assignment and transfer of the Old Notes tendered hereby. The undersigned agrees to all of the terms and conditions of the exchange offer.

        The undersigned understands that tenders of Old Notes pursuant to any one of the procedures described in "The Exchange Offer—Procedures for Tendering Old Notes" in the Prospectus and in the instructions accompanying this letter of transmittal will, upon the Issuer's acceptance for exchange of such tendered Old Notes, constitute a binding agreement between the undersigned and the Issuer upon the terms and subject to the conditions of the exchange offer and that the tendering holder will be deemed to have waived the right to receive any payment in respect of interest or otherwise on such Old Notes accrued up to the date of issuance of the New Notes. The undersigned recognizes that, under certain circumstances set forth in the Prospectus, the Issuer may not be required to accept for exchange any of the Old Notes tendered hereby.

        Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, the undersigned hereby directs that the New Notes be issued in the name(s) of the undersigned or, in the case of a book-entry transfer of Old Notes, that such New Notes be credited to the account indicated above maintained at DTC. If applicable, substitute certificates representing Old Notes not exchanged or not accepted for exchange will be issued to the undersigned or, in the case of a book-entry transfer of Old Notes, will be credited to the account indicated above maintained at DTC. Similarly, unless otherwise indicated under "Special Delivery Instructions," the undersigned hereby directs that the New Notes be delivered to the undersigned at the address shown below the undersigned's signature. The

4

undersigned recognizes that the Issuer and the Guarantors have no obligation pursuant to "Special Delivery Instructions" to transfer any Old Notes from a registered holder thereof if the Issuer does not accept for exchange any of the principal amount of such Old Notes so tendered.

        By tendering Old Notes and executing this letter of transmittal, the undersigned hereby represents and agrees that (i) the undersigned is not an "affiliate," as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"), of the Issuer or any of the Guarantors, (ii) any New Notes to be received by the undersigned are being acquired in the ordinary course of its business, (iii) the undersigned is not engaged in, does not intend to engage in and has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of the New Notes and (iv) the undersigned is not acting on behalf of any person who could not truthfully make the foregoing representations.

        The undersigned hereby acknowledges and agrees that any broker-dealer and any holder of Old Notes using the Exchange Offer to participate in a distribution of the New Notes (1) could not under SEC policy, as in effect on March 11, 2003, rely on the position of the SEC enunciated in its no-action letters entitled Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in Shearman & Sterling (available July 2, 1993), and similar no-action letters, and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of New Notes obtained by such holder in exchange for Old Notes acquired by such holder directly from the Issuer.

        If the undersigned is not a broker-dealer, the undersigned hereby acknowledges that it is not engaged in, and does not intend to engage in, a distribution of the New Notes.

        If the undersigned is a broker-dealer holding Old Notes acquired for its own account as a result of market-making activities or other trading activities, the undersigned hereby acknowledges that it will deliver a prospectus that meets the requirements of the Securities Act in connection with any resale of New Notes received in respect of such Old Notes pursuant to the Exchange Offer. However, by so acknowledging and delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

        All authority conferred or agreed to be conferred herein and every obligation of the undersigned under this letter of transmittal shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, legal representatives, successors and assigns of the undersigned. Except as stated in the Prospectus under "The Exchange Offer—Withdrawal Rights," this tender is irrevocable.

        The undersigned, by completing the box entitled "Description of Old Notes" above and signing this letter of transmittal, will be deemed to have tendered the Old Notes as set forth in such box.

5

TO BE COMPLETED BY ALL TENDERING HOLDERS

(See Instructions 2 and 7)

PLEASE SIGN HERE
(Please Complete Substitute Form W-9 on Page 14
or a Form W-8; See Instruction 11)

Signature(s) of Holder(s)

Date:                                                  

        (Must be signed by the registered holder(s) exactly as name(s) appear(s) on certificate(s) for the Old Notes tendered or on a security position listing or by person(s) authorized to become the registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information and see Instruction 7.)

Name(s):

(Please Print)

Capacity (full title):

Address:

Area Code and Telephone No.:

Taxpayer Identification Number:

GUARANTEE OF SIGNATURE(S)
(See Instruction 2)

Authorized Signature:
Name:
(Please Type of Print)
Title:
Name of Firm:
Address:	(Including Zip Code)
Area Code and Telephone No.:
Date:

6

SPECIAL ISSUANCE
(Signature Guarantee Required—See Instructions 2, 6, 8 and 15)

            TO BE COMPLETED ONLY if New Notes or Old Notes not tendered or not accepted are to be issued in the name of someone other than the registered holder(s) of the Old Notes whose signature(s) appear(s) above, or if Old Notes delivered by book-entry transfer and not accepted for exchange are to be returned for credit to an account maintained at DTC other than the account indicated above.

Issue (check appropriate box(es))

o Old Notes to:

o New Notes to:

Name	(Please Print)
Address
	(Include Zip Code)
	Taxpayer Identification Number
o Credit unaccepted Old Notes tendered by book-entry transfer to the following account at DTC:

SPECIAL DELIVERY INSTRUCTIONS
(Signature Guarantee Required—
See Instructions 2, 6, 8 and 15)

            TO BE COMPLETED ONLY if New Notes or Old Notes not tendered or not accepted are to be sent to someone other than the registered holder(s) of the Old Notes whose signature(s) appear(s) above, or to such registered holder at an address other than that shown above.

Deliver (check appropriate box(es))

o Old Notes to:

o New Notes to:

Name	(Please Print)
Address
	(Include Zip Code)

7

INSTRUCTIONS

Forming Part of the Terms and Conditions of the Exchange Offer

        1.    Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery Procedures.    This letter of transmittal is to be completed by a holder of Old Notes to tender such holder's Old Notes if either (a) tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth in "The Exchange Offer—Procedures for Tendering Old Notes" in the Prospectus and an agent's message, as defined on page 2 hereof, is not delivered or (b) certificates are to be forwarded herewith. Certificates or book-entry confirmation of transfer of Old Notes into the exchange agent's account at DTC, as well as this letter of transmittal, properly completed and duly executed, with any required signature guarantees, and any other documents, such as endorsements, bond powers, opinions of counsel, certifications and powers of attorney, if applicable, required by this letter of transmittal, must be received by the exchange agent at its address set forth herein on or prior to the expiration date. If the tender of Old Notes is effected in accordance with applicable ATOP procedures for book-entry transfer, an agent's message may be transmitted to the exchange agent in lieu of an executed letter of transmittal. Old Notes may be tendered in whole or in part in integral multiples of $1,000.

        For purposes of the exchange offer, the term "holder" includes any participant in DTC named in a securities position listing as a holder of Old Notes. Only a holder of record may tender Old Notes in the exchange offer. Any beneficial owner of Old Notes who wishes to tender some or all of such Old Notes should arrange with DTC, a DTC participant or the record owner of such Old Notes to execute and deliver this letter of transmittal or to send an electronic instruction effecting a book-entry transfer on his or her behalf. See Instruction 7.

        Holders who wish to tender their Old Notes and (i) whose certificates for the Old Notes are not immediately available or for whom all required documents are unlikely to reach the exchange agent on or prior to the expiration date; or (ii) who cannot complete the procedures for delivery by book-entry transfer on a timely basis, may tender their Old Notes by properly completing and duly executing a notice of guaranteed delivery pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer—Guaranteed Delivery Procedures" in the Prospectus. Pursuant to such procedures: (i) such tender must be made by or through an eligible institution; (ii) a properly completed and duly executed notice of guaranteed delivery, substantially in the form made available by the Issuer, must be received by the exchange agent on or prior to the expiration date; and (iii) the certificates for the Old Notes, or a book-entry confirmation, together with a properly completed and duly executed letter of transmittal, or an agent's message in lieu thereof, with any required signature guarantees and any other documents required by this letter of transmittal, must be received by the exchange agent within three New York Stock Exchange trading days after the date of execution of such notice of guaranteed delivery for all such tendered Old Notes, all as provided in "The Exchange Offer—Procedures for Tendering Old Notes—Guaranteed Delivery" in the Prospectus.

        The notice of guaranteed delivery may be delivered, by an eligible institution, by telegram, telex, facsimile transmission, mail or hand delivery to the exchange agent, and must include a guarantee by an eligible institution in the form set forth in such notice of guaranteed delivery. For Old Notes to be properly tendered pursuant to the guaranteed delivery procedure, the exchange agent must receive a notice of guaranteed delivery on or prior to the expiration date. As used herein, "eligible institution" means a firm or other entity which is identified as an "Eligible Guarantor Institution" in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, including a bank; a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; a credit union; a national securities exchange, registered securities association or clearing agency; or a savings association.

The method of delivery of certificates for the Old Notes, this letter of transmittal and all other required documents is at the election and sole risk of the tendering holder. If delivery is by mail, registered mail with return receipt requested, properly insured, or overnight delivery service is

8

recommended. In all cases, sufficient time should be allowed to ensure timely delivery. No letters of a transmittal or Old Notes should be sent to the Issuer or any Guarantor. Delivery is complete when the exchange agent actually receives the items to be delivered. Delivery of documents to DTC in accordance with DTC's procedures does not constitute delivery to the exchange agent.

        The Issuer will not accept any alternative, conditional or contingent tenders. Each tendering holder, by execution of a letter of transmittal or by causing the transmission of an agent's message, waives any right to receive any notice of the acceptance of such tender.

        2.    Guarantee of Signatures.    No signature guarantee on this letter of transmittal is required if:

a.

this letter of transmittal is signed by the registered holder (which term, for purposes of this document, shall include any participant in DTC whose name appears on a security position listing as the owner of the Old Notes) of Old Notes tendered herewith, unless such holder has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above; or



b.

such Old Notes are tendered for the account of a firm that is an eligible institution.

In all other cases, an eligible institution must guarantee the signature(s) on this letter of transmittal. See Instruction 7.

        3.    Inadequate Space.    If the space provided in the box captioned "Description of Old Notes" is inadequate, the certificate number(s) and/or the principal amount of Old Notes and any other required information should be listed on a separate, signed schedule which is attached to this letter of transmittal.

        4.    Partial Tenders (not applicable to holders who tender by book-entry transfer).    If less than all the Old Notes evidenced by any certificate submitted are to be tendered, fill in the principal amount of Old Notes which are to be tendered in the "Principal Amount Tendered" column of the box entitled "Description of Old Notes" on page 3 of this letter of transmittal. In such case, new certificate(s) for the remainder of the Old Notes that were evidenced by your old certificate(s) will be sent only to the holder of the Old Notes as promptly as practicable after the expiration date. All Old Notes represented by certificates delivered to the exchange agent will be deemed to have been tendered unless otherwise indicated. Tender of Old Notes will be accepted only in integral multiples of $1,000.

        5.    Withdrawal Rights.    Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time on or prior to the expiration date. In order for a withdrawal to be effective, a written notice of withdrawal must be timely received by the exchange agent at its address set forth above and in the Prospectus on or prior to the expiration date. Any such notice of withdrawal must specify the name of the person that tendered the Old Notes to be withdrawn; identify the Old Notes to be withdrawn, including the total principal amount of Old Notes to be withdrawn; and, where certificates for Old Notes are transmitted, the name of the registered holder of the Old Notes, if different from that of the person withdrawing such Old Notes. If certificates for the Old Notes have been delivered or otherwise identified to the exchange agent, then the tendering holder must submit the serial numbers of the Old Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an eligible institution, except in the case of Old Notes tendered for the account of an eligible institution. If Old Notes have been tendered pursuant to the procedures for book-entry transfer set forth in the Prospectus under "The Exchange Offer—Procedures for Tendering Old Notes," the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn Old Notes and the notice of withdrawal must be delivered to the exchange agent. Withdrawals of tenders of Old Notes may not be rescinded; however, Old Notes properly withdrawn may again be tendered at any time on or prior to the expiration date by following any of the procedures described in the Prospectus under "The Exchange Offer—Procedures for Tendering Old Notes."

9

        All questions regarding the validity, form and eligibility, including time of receipt, of withdrawal notices will be determined by the Issuer and the Guarantors, in their sole discretion, which determination of such questions as well as their interpretation of the terms and conditions of the exchange offer (including this letter of transmittal) will be final and binding on all parties. None of the Issuer and the Guarantors, any of their respective affiliates or assigns, the exchange agent or any other person is under any obligation to give notice of any irregularities in any notice of withdrawal, nor will any of them be liable for failing to give any such notice.

        Withdrawn Old Notes will be returned to the holder after withdrawal. Old Notes tendered by book-entry transfer through DTC that are withdrawn will be credited to an account maintained with DTC. The Old Notes will be returned or credited to the account maintained at DTC as promptly as practicable after withdrawal. Any Old Notes which have been tendered for exchange but which are withdrawn will be returned to the holder thereof without cost to such holder.

        6.    Return of Unexchanged Old Notes.    If any tendered Old Notes are not exchanged pursuant to the exchange offer for any reason, or if certificates are submitted for more Old Notes than are tendered or accepted for exchange, certificates for such nonexchanged or nontendered Old Notes will be returned, or, in the case of Old Notes tendered by book-entry transfer, such Old Notes will be credited to an account maintained at DTC, without expense to the tendering holder, as promptly as practicable following the expiration or termination of the exchange offer.

        7.    Signatures on Letter of Transmittal, Assignments and Endorsements.    If this letter of transmittal is signed by the registered holder(s) of the Old Notes tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) without any change whatsoever.

        If any Old Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this letter of transmittal.

        If any tendered Old Notes are registered in different name(s) on several certificates, it will be necessary to complete, sign and submit as many separate letters of transmittal or facsimiles hereof as there are different registrations of certificates.

        If this letter of transmittal or any certificates, endorsements, bond powers, powers of attorney or any other document required by this letter of transmittal are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and, unless waived by the Issuer, must submit proper evidence satisfactory to the Issuer, in its sole discretion, of each such person's authority so to act.

        When this letter of transmittal is signed by the registered owner(s) of the Old Notes listed and transmitted hereby, no endorsement(s) of certificate(s) or separate instruments of transfer or exchange are required unless New Notes are to be issued in the name of a person other than the registered holder(s). Signature(s) on such certificate(s) or instruments of transfer or exchange must be guaranteed by an eligible institution.

        If this letter of transmittal is signed by a person other than the registered owner(s) of the Old Notes listed, the certificates must be endorsed or accompanied by a written instrument or instruments of transfer or exchange, signed exactly as the name or names of the registered owner(s) appear(s) on the certificates, and also must be accompanied by such opinions of counsel, certifications and other information as the Issuer and the Guarantors or the trustee under the indenture for the Old Notes may require in accordance with the restrictions on transfer applicable to the Old Notes. Signatures on such certificates or bond powers must be guaranteed by an eligible institution.

10

        8.    Special Issuance and Delivery Instructions.    If New Notes are to be issued in the name of a person other than the signer of this letter of transmittal, or if New Notes are to be sent to someone other than the signer of this letter of transmittal or to an address other than that shown above, the appropriate boxes on this letter of transmittal should be completed. In the case of issuance in a different name, the U.S. taxpayer identification number of the person named must also be indicated. A holder of Old Notes tendering Old Notes by book-entry transfer may instruct that Old Notes not exchanged be credited to such account maintained at DTC as such holder may designate. If no such instructions are given, certificates for Old Notes not exchanged will be returned by mail to the address of the signer of this letter of transmittal or, if the Old Notes not exchanged were tendered by book-entry transfer, such Old Notes will be returned by crediting the account indicated on page 3 above maintained at DTC. See Instruction 6.

        9.    Irregularities.    All questions regarding the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Old Notes will be determined by the Issuer and the Guarantors, in their sole discretion, which determination of such questions as well as their interpretation of the terms and conditions of the exchange offer will be final and binding on all parties. The Issuer and the Guarantors reserve the absolute right, in their sole and absolute discretion, to reject any tenders determined to be in improper form or the acceptance of which, or exchange for which, may, in the view of counsel to the Issuer be unlawful. The Issuer and the Guarantors also reserve the absolute right, subject to applicable law, to waive any of the conditions of the exchange offer set forth in the Prospectus under "The Exchange Offer—Conditions to the Exchange Offer" or any condition or irregularity in any tender of Old Notes by any holder, whether or not the Issuer and the Guarantors waived similar conditions or irregularities in the case of other holders. A tender of Old Notes is invalid until all defects and irregularities have been cured or waived. None of the Issuer and the Guarantors, any of their respective affiliates or assigns, the exchange agent or any other person is under any obligation to give notice of any irregularities in any notice of withdrawal, nor will any of them be liable for failing to give any such notice.

        10.    Questions, Requests for Assistance and Additional Copies.    Questions regarding the procedure for tendering Old Notes and requests for assistance may be directed to the exchange agent at its address and telephone number set forth on the front of this letter of transmittal. Additional copies of the Prospectus, the letter of transmittal, the notice of guaranteed delivery and Forms W-8 (as defined in Instruction 11) may be obtained from the exchange agent at the address and telephone/ facsimile numbers indicated above, or from your broker, dealer, commercial bank, trust company or other nominee.

        11.    Backup Withholding; Substitute Form W-9; Forms W-8.    Under the United States federal income tax laws, interest paid to holders of New Notes received pursuant to the exchange offer may be subject to backup withholding. Generally, such payments will be subject to backup withholding unless the holder (i) is exempt from backup withholding or (ii) furnishes the payer with its correct taxpayer identification number ("TIN"), certifies that the number provided is correct and further certifies that such holder is a U.S. person (as defined for U.S. federal income tax purposes) and that such holder is not subject to backup withholding as a result of a failure to report all interest or dividend income. Each holder that wants to avoid backup withholding should provide the exchange agent with such holder's correct TIN (or certify that such holder is awaiting a TIN) and certify that such holder is not subject to backup withholding by completing Substitute Form W-9 below.

        Certain holders (including, among others, all corporations and certain foreign individuals) are exempt from these backup withholding and reporting requirements. In general, in order for a foreign individual to qualify as an exempt recipient, that holder must submit a statement, signed under the penalties of perjury, attesting to that individual's exempt status. Such statements may be obtained from the exchange agent. Exempt holders (other than foreign persons), while not required to file Substitute Form W-9, should file Substitute Form W-9 and write "exempt" on its face to avoid possible erroneous

11

backup withholding. Foreign persons not subject to backup withholding should complete and submit to the exchange agent a Form W-8BEN (Certificate of Foreign Status of Beneficial Owner For U.S. Withholding) and/or other applicable Form(s) W-8 (and any other required certifications) instead of the Substitute Form W-9. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions.

        If backup withholding applies, the Issuer may be required to withhold at the applicable rate on interest payments made to a holder of New Notes. Backup withholding is not an additional tax. Rather, the amount of backup withholding is treated as an advance payment of a tax liability, and a holder's U.S. federal income tax liability will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained.

Purpose of Substitute Form W-9

        To prevent backup withholding with respect to interest payments on the New Notes, a holder should notify the exchange agent of its correct TIN by completing the Substitute Form W-9 below and certifying on Substitute Form W-9 that the TIN provided is correct (or that the holder is awaiting a TIN). In addition, a holder is required to certify on Substitute Form W-9 that (i) it is exempt from backup withholding, or (ii) it is not subject to backup withholding due to prior underreporting of interest or dividend income, or (iii) the Internal Revenue Service (the "IRS") has notified the holder that the holder is no longer subject to backup withholding.

What Number to Give the Exchange Agent

        To avoid backup withholding with respect to interest payments on the New Notes, a holder is required to give the exchange agent the TIN of the registered holder of the New Notes. If such registered holder is an individual, the TIN is the taxpayer's social security number. For most other entities, the TIN is the employer identification number. If the New Notes are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidelines on what number to report. If the exchange agent is provided with an incorrect TIN, the holder may be subject to a $50 penalty imposed by the IRS.

        12.    Waiver of Conditions.    The Issuer and the Guarantors reserve the absolute right to waive satisfaction of any or all conditions, completely or partially, enumerated in the Prospectus.

        13.    No Conditional Tenders.    No alternative, conditional or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this letter of transmittal, shall waive any right to receive notice of the acceptance of Old Notes for exchange.

        None of the Issuer and the Guarantors, any of their respective affiliates or assigns, the exchange agent or any other person is under any obligation to give notice of any defect or irregularity with respect to any tender of Old Notes, nor will any of them incur any liability for failing to give any such notice.

        14.    Mutilated, Lost, Destroyed or Stolen Certificates.    If any certificate(s) representing Old Notes have been mutilated, lost, destroyed or stolen, the holder should promptly notify the exchange agent. The holder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This letter of transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen certificate(s) have been followed.

        15.    Security Transfer Taxes.    Except as provided below, holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, (i) New Notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Old Notes tendered or (ii) a transfer tax is imposed for any reason other than the

12

exchange of Old Notes in connection with the exchange offer, then the amount of any such transfer tax (whether imposed on the registered holder or any other persons) will be payable by the tendering holder or such other person. The exchange agent must receive satisfactory evidence of the payment of such taxes or exemption therefrom or the amount of such transfer taxes will be billed directly to the tendering holder.

        Except as provided in this Instruction 15, it is not necessary for transfer tax stamps to be affixed to the Old Notes specified in this letter of transmittal.

        16.    Incorporation of Letter of Transmittal.    This letter of transmittal shall be deemed to be incorporated in any tender of Old Notes by any DTC participant effected through procedures established by DTC and, by virtue of such tender, such participant shall be deemed to have acknowledged and accepted this letter of transmittal on behalf of itself and the beneficial owners of any Old Notes so tendered.

13

REQUESTER'S NAME: U.S. BANK, N.A.
SUBSTITUTE	Please fill in your name and address below:
Form W-9	Name
Department of the Treasury Internal Revenue Service	Address (number, street, city, state and zip code)
Payer's Request for Taxpayer Identification Number ("TIN")	Please check the appropriate box: o Individual Sole Proprietor    o Corporation    o Parternership o Other _____________
	Part 1—PLEASE PROVIDE YOUR TIN, OR, IF YOU DO NOT HAVE A TIN, WRITE "APPLIED FOR," IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW.		Social Security Number or Employer Identification Number
	Part 2—Certification—Under penalties of perjury, I certify that:
	(1)	the number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me); and
	(2)	I am not subject to backup withholding either because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding; and
	(3)	I am a U.S. person.
	Certification Instructions—You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of under reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2).
	SIGNATURE ________________________________    DATE ________________ , 2003

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING ON ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION.

YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" ON SUBSTITUTE FORM W-9.

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

            I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Officer or (b) I intend to mail or deliver an application in the near future. I understand that until I provide a taxpayer identification number all reportable payments made to me will be subject to backup withholding, but will be refunded if I provide a certified taxpayer identification number within 60 days.

Signature Date , 2003

14

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

        Guidelines for Determining the Proper Identification Number for the Payee (You) to Give the Payer. Social security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employee identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer. All "Section" references are to the Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue Service.

For this type of account:			Give the name and social security number of—	For this type of account:		Give the name and employer identification number of—
1.	Individual		The individual	6.	Sole proprietorship	The owner(3)
2.	Two or more individuals (joint account)		The actual owner of the account or, if combined funds, the first individual on the account(1)	7.	A valid trust, estate, or pension trust	The legal entity(4)
3.	Custodian account of a minor (Uniform Gift to Minors Act)		The minor(2)	8.	Corporate	The Corporation
4.	a.	The usual revocable savings trust account (grantor is also trustee)	The grantor-trustee(1)	9.	Association, club, religious, charitable, educational or other tax-exempt organization	The organization
	b.	So-called trust account that is not a legal or valid trust under state law	The actual owner(1)	10.	Partnership	The partnership
5.	Sole proprietorship		The owner(3)	11.	A broker or registered nominee	The broker or nominee
				12.	Account with the Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments.	The public entity

(1)

List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person's number must be furnished.

(2)

Circle the minor's name and furnish the minor's social security number.

(3)

You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number of your employer identification number (if you have one).

(4)

List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)

NOTE:    If no name is circled when there is more than one name, the number will be considered to be that of the first name listed

15

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
(continued)

Obtaining a Number

        If you do not have a taxpayer identification number or you do not know your number, obtain Form SS-5 Application for a Social Security Card at the local Social Administration office, or Form XX-4, Application for Employer Identification Number, by calling 1 (800) TAX FORM or visiting the IRS's Internet website at www.irs.gov, and apply for a number.

        If you do not have a taxpayer identification number, write "Applied For" in the space for the taxpayer identification number, sign and date the form, and return it to the payer. For interest and dividend payments and certain payments made with respect to readily tradable instruments, you will generally have 60 days to get a taxpayer identification number and give it to the payer before you are subject to backup withholding. Other payments are subject to backup withholding without regard to the 60-day rule until you provide your taxpayer identification number.

        NOTE: Writing "Applied For" means that you have already applied for a taxpayer identification number or that you intend to apply for one soon.

Payees Exempt from Backup Withholding

Payees specifically exempted from withholding include:

•

An organization exempt from tax under Section 501(a), an individual retirement account (IRA), or a custodial account under Section 403(b)(7), if the account satisfies the requirements of Section 401(f)(2).



•

The United States or a state thereof, the District of Columbia, a possession of the United States, or a political subdivision or instrumentality of any one or more of the foregoing.



•

An international organization or any agency or instrumentality thereof.



•

A foreign government or any political subdivision, agency or instrumentality thereof.

Payees that may be exempt from backup withholding include:

•

A corporation



•

A financial institution



•

A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States.



•

A real estate investment trust.



•

A common trust fund operated by a bank under Section 584(a).



•

Any entity registered at all times during the tax year under the Investment Company Act of 1940.



•

A middleman known in the investment community as a nominee or custodian.



•

A futures commission merchant registered with the Commodity Futures Trading Commission.



•

A foreign central bank of issue.



•

A trust exempt from tax under Section 664 or described in Section 4947.

Payments of dividends and patronage dividends generally exempt from backup withholding include:

•

Payments to nonresident aliens subject to withholding under Section 1441.



•

Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner.



•

Payments of patronage dividends not paid in money.



•

Payments made by certain foreign organizations.



•

Section 404(k) payments made by an ESOP.

Payments of interest generally exempt from backup withholding include:

•

Payments of interest on obligations issued by individuals. Note: You will be subject to information reporting if this interest is $600 or more and may be subject to backup withholding if you have not provided your correct taxpayer identification number to the payer.



•

Payment of tax-exempt interest (including exempt-interest dividends under Section 852).



•

Payments described in Section 6049(b)(5) to nonresident aliens.



•

Payments on tax-free covenant bonds under Section 1451.



•

Payments made by certain foreign organizations.



•

Mortgage or student loan interest paid to you.

        Certain payments, other than payments of interest, dividends, and patronage dividends, that are exempt from information reporting are also exempt from backup withholding. For details, see the regulations under Sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N.

Exempt payees described above must provide Form W-9 or a substitute From W-9 to avoid possible erroneous backup withholding. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART 2 OF THE FORM, SIGN AND DATE THE FORM, AND RETURN IT TO THE PAYER.

Privacy Act Notice—Section 6109 requires you to provide your correct taxpayer identification number to the payer, who must report the payments to the IRS. The IRS uses the numbers for identification purposes and may also provide this information to various government agencies for tax enforcement or litigation purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold a percentage of taxable interest, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties also apply.

Penalties

(1)

Failure to Furnish Taxpayer Identification Number.—If you fail to furnish your taxpayer identification number to the payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not a willful neglect.

(2)

Civil Penalty for False Information With Respect to Withholding.—If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty.

(3)

Criminal Penalty for Falsifying Information.—Willfully falsifying certification or affirmations may subject you to criminal penalties including fines and/or imprisonment.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT
OR THE INTERNAL REVENUE SERVICE

16

QuickLinks

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
TO BE COMPLETED BY ALL TENDERING HOLDERS (See Instructions 2 and 7)
GUARANTEE OF SIGNATURE(S) (See Instruction 2)
INSTRUCTIONS Forming Part of the Terms and Conditions of the Exchange Offer
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 (continued)

EX-99.2

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 99.2

NOTICE OF GUARANTEED DELIVERY
KINETIC CONCEPTS, INC.

offer for all outstanding
Series A 7³/8% Senior Subordinated Notes due 2013
and the related guarantees
in exchange for
Series B 7³/8% Senior Subordinated Notes due 2013
and the related guarantees
which have been registered under
the Securities Act of 1933, as amended,
pursuant to the prospectus dated            , 2003

        This notice of guaranteed delivery, or one substantially equivalent to this form, must be used to accept the above-referenced exchange offer (the "Exchange Offer") pursuant to the prospectus of Kinetic Concepts, Inc., a Texas corporation (the "Issuer") and certain subsidiaries of the Issuer (collectively, the"Guarantors"), dated                    , 2003, as the same may be amended or supplemented from time to time (the "Prospectus") and the accompanying letter of transmittal (the "Letter of Transmittal"), if (i) certificates for the Issuer's Series A 7³/8% Senior Subordinated Notes due 2013 (the "Old Notes") are not immediately available or all required documents are unlikely to reach the exchange agent, U.S. Bank, N.A., on or prior to the Expiration Date, as defined below; or (ii) a book-entry transfer cannot be completed on a timely basis. This notice of guaranteed delivery may be delivered by hand, facsimile, mail or overnight delivery service to the exchange agent. See "The Exchange Offer—Procedures for Tendering Old Notes" in the Prospectus. In addition, in order to utilize the guaranteed delivery procedure to tender Old Notes pursuant to the Exchange Offer, (a) such tender must be made by or through an eligible institution, (b) a properly completed and duly executed notice of guaranteed delivery must be received by the exchange agent on or prior to the Expiration Date and (c) the certificates for the Old Notes, or a book-entry confirmation, together with a properly completed and duly executed Letter of Transmittal, or an agent's message in lieu thereof, with any required signature guarantees and any other documents required by the Letter of Transmittal, must be received by the exchange agent within three (3) New York Stock Exchange trading days after the date of execution of such notice of guaranteed delivery for all such tendered Old Notes. Unless indicated otherwise, capitalized terms used but not defined herein shall have the same meaning given to them in the Prospectus or the Letter of Transmittal, as the case may be.

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON                , 2003, UNLESS EXTENDED (SUCH TIME AND DATE,
AS SO EXTENDED, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE.

The exchange agent for the exchange offer is:
U.S. Bank, N.A.
For all forms of delivery:
U.S. Bank, N.A.
60 Livingston Avenue
St. Paul, Minnesota 55197
Attention: Corporate Trust Department

Facsimile (for eligible institutions only):
(651) 495-8097
For confirmation call
(651) 495-3913

        Delivery of this notice of guaranteed delivery to an address other than as set forth above or transmission of this notice of guaranteed delivery via facsimile to a number other than as set forth above will not constitute a valid delivery.

        This notice of guaranteed delivery is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an "eligible institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal.

Ladies and Gentlemen:

        The undersigned hereby tenders to the Issuer, upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal, and which together constitute the Exchange Offer, receipt of which is hereby acknowledged, the aggregate principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer—Guaranteed Delivery Procedures."

Aggregate Principal Amount	Name(s) of Registered
Tendered: $ *	Holder(s):
Certificate No(s). (if available):
$
(Total Principal Amount Represented by Old Note Certificate(s))

If Old Notes will be tendered by book-entry transfer, provide the following information:

DTC Account Number: 

Date: 

*

Must be in integral multiples of $1,000.

        All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.

PLEASE SIGN HERE

X
X
Signature(s) of Owner(s) or Authorized Signatory	Date

Telephone Number:

        Must be signed by the holder(s) of the Old Notes as their name(s) appear(s) on certificates for the Old Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this notice of guaranteed delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below and, unless waived by the Issuer, provide proper evidence satisfactory to the Issuer, in its sole discretion, of such person's authority to so act.

Name(s)

Capacity

Address(es)

GUARANTEE OF DELIVERY

(Not to be used for signature guarantee)

        The undersigned, a firm or other entity which is identified as an "Eligible Guarantor Institution" in Rule 17Ad-15 under the Securities and Exchange Act of 1934, as amended, including: a bank; a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; a credit union; a national securities exchange, registered securities association or clearing agency; or a savings association, each of the foregoing being referred to as an "eligible institution," hereby guarantees to deliver to the exchange agent, at the address set forth herein, either the Old Notes tendered hereby in proper form for transfer, or confirmation of the book-entry transfer of such Old Notes to the exchange agent's account at DTC, pursuant to the procedures for book-entry transfer set forth in the Prospectus, in either case together with a properly completed and duly executed Letter of Transmittal, or an agent's message in lieu thereof, and any other required documents within three (3) New York Stock Exchange trading days after the date of execution of this notice of guaranteed delivery.

        The undersigned acknowledges that it must deliver to the exchange agent the Letter of Transmittal, or an agent's message in lieu thereof, and the Old Notes tendered hereby in proper form for transfer or confirmation of the book-entry transfer of such Old Notes to the exchange agent's account at DTC within the time period set forth above and that failure to do so could result in a financial loss to the undersigned.

Name of Firm	Authorized Signature
Address	Title
Zip Code	(Please Type or Print)

Telephone Number:
Date:

NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR OLD NOTES SHOULD ONLY BE SENT WITH THE PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL.

QuickLinks

GUARANTEE OF DELIVERY (Not to be used for signature guarantee)

EX-99.3

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 99.3

KINETIC CONCEPTS, INC.
offer for all outstanding
Series A 7³/₈% Senior Subordinated Notes due 2013
and the related guarantees
in exchange for
Series B 7³/₈% Senior Subordinated Notes due 2013
and the related guarantees
which have been registered under
the Securities Act of 1933, as amended,
pursuant to the prospectus dated                        , 2003

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2003, UNLESS EXTENDED (SUCH TIME AND DATE, AS SO EXTENDED, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE.

        To Our Clients:

        Enclosed for your consideration is a prospectus dated            , 2003 and the related letter of transmittal and instructions thereto in connection with the offer, referred to as the exchange offer, of Kinetic Concepts, Inc., a Texas corporation (the "Issuer") and certain subsidiaries of the Issuer (collectively, the "Guarantors"), to exchange an aggregate principal amount of up to $205,000,000 of the Issuer's Series B 7³/8% Senior Subordinated Notes due 2013, together with the guarantees thereof by the Guarantors, which have been registered under the Securities Act of 1933, as amended, (the "New Notes"), for a like principal amount of the Issuer's outstanding Series A 7³/8% Senior Subordinated Notes due 2013, together with the guarantees thereof by the Guarantors, (the "Old Notes"), upon the terms and subject to the conditions set forth in the prospectus and the letter of transmittal. Consummation of the exchange offer is subject to certain conditions described in the prospectus. Unless indicated otherwise, capitalized terms used but not defined herein shall have the same meaning given to them in the prospectus or the letter of transmittal, as the case may be.

        WE ARE THE REGISTERED HOLDER OF OLD NOTES HELD BY US FOR YOUR ACCOUNT. A TENDER OF ANY SUCH OLD NOTES CAN BE MADE ONLY BY US AS THE REGISTERED HOLDER AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER OLD NOTES HELD BY US FOR YOUR ACCOUNT.

        Accordingly, we request instructions as to whether you wish us to tender any or all such Old Notes held by us for your account pursuant to the terms and conditions set forth in the prospectus and the letter of transmittal. WE URGE YOU TO READ THE PROSPECTUS AND THE LETTER OF TRANSMITTAL CAREFULLY BEFORE INSTRUCTING US TO TENDER YOUR OLD NOTES.

        Your instructions to us should be forwarded as promptly as possible in order to permit us to tender Old Notes on your behalf in accordance with the provisions of the exchange offer. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON            , 2003, UNLESS EXTENDED. Old Notes tendered pursuant to the exchange offer may be withdrawn only under the circumstances described in the prospectus and the letter of transmittal.

        Your attention is directed to the following:

        1.     The exchange offer is for the entire aggregate principal amount of outstanding Old Notes.

        2.     Consummation of the exchange offer is conditioned upon the terms and conditions set forth in the prospectus under "The Exchange Offer."

        3.     Tendering holders may withdraw their tender at any time prior to the Expiration Date.

        4.     Any transfer taxes incident to the transfer of Old Notes from the tendering holder to the Issuer will be paid by the Issuer, except as provided in the prospectus and the instructions to the letter of transmittal.

        5.     The exchange offer is not being made to, nor will the surrender of Old Notes for exchange be accepted from or on behalf of, holders of Old Notes in any jurisdiction in which the exchange offer or acceptance thereof would not be in compliance with the securities or blue sky laws of such jurisdiction.

        6.     The acceptance for exchange of Old Notes validly tendered and not withdrawn will be effected as soon as practicable after the Expiration Date and the issuance of New Notes will be made as promptly as practicable thereafter.

        7.     The Issuer and the Guarantors expressly reserve the right, in their reasonable discretion and in accordance with applicable law, (i) to extend the Expiration Date, (ii) to delay the acceptance of any Old Notes, (iii) to terminate the exchange offer and not accept any Old Notes for exchange if the Issuer and the Guarantors determine that any of the conditions to the exchange offer, as set forth in the prospectus, have not occurred or have not been satisfied and (iv) to amend the terms of the exchange offer in any manner. In the event of any extension, delay, non-acceptance, termination or amendment, the Issuer and the Guarantors will as promptly as practicable give oral or written notice of the action to the exchange agent and make a public announcement of such action. In the case of an extension, the announcement will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date.

        8.     Consummation of the exchange offer may have adverse consequences to non-tendering Old Note holders, including that the reduced amount of outstanding Old Notes as a result of the exchange offer may adversely affect the trading market, liquidity and market price of the Old Notes.

        If you wish to have us tender any or all of the Old Notes held by us for your account, please so instruct us by completing, executing and returning to us the instruction form that follows:

KINETIC CONCEPTS, INC.

INSTRUCTIONS REGARDING THE EXCHANGE OFFER
WITH RESPECT TO THE
$205,000,000 OF 7³/₈% SENIOR SUBORDINATED NOTES DUE 2013
AND THE RELATED GUARANTEES

        THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF YOUR LETTER AND THE ENCLOSED DOCUMENTS REFERRED TO THEREIN RELATING TO THE EXCHANGE OFFER OF THE ISSUER AND THE GUARANTORS WITH RESPECT TO THE OLD NOTES.

        THIS WILL INSTRUCT YOU WHETHER TO TENDER THE PRINCIPAL AMOUNT OF OLD NOTES INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OF THE UNDERSIGNED PURSUANT TO THE TERMS OF AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL.

Box 1            Please tender the Old Notes held by you for my account, as indicated below.

Box 2            Please do not tender any Old Notes held by you for my account.

Date , 2003

			Signature(s)
Principal Amount of Old Notes to be Tendered:
$		*
	(must be the principal amount of $1,000 or an integral multiple thereof)
			Please print Name(s)
			Please type or Print Address
			Area Code and Telephone Number
			Taxpayer Identification or Social Security Number
			My Account Number with You

*

UNLESS OTHERWISE INDICATED, SIGNATURE(S) HEREON BY BENEFICIAL OWNERS(S) SHALL CONSTITUTE AN INSTRUCTION TO THE NOMINEE TO TENDER ALL OLD NOTES OF SUCH BENEFICIAL OWNER(S).

QuickLinks

KINETIC CONCEPTS, INC. offer for all outstanding Series A 7³/₈% Senior Subordinated Notes due 2013 and the related guarantees in exchange for Series B 7³/₈% Senior Subordinated Notes due 2013 and the related guarantees which have been registered under the Securities Act of 1933, as amended, pursuant to the prospectus dated , 2003
KINETIC CONCEPTS, INC. INSTRUCTIONS REGARDING THE EXCHANGE OFFER WITH RESPECT TO THE $205,000,000 OF 7³/₈% SENIOR SUBORDINATED NOTES DUE 2013 AND THE RELATED GUARANTEES

EX-99.4

Exhibit 99.4

KINETIC CONCEPTS, INC.

offer for all outstanding
Series A 7³/8% Senior Subordinated Notes due 2013
and the related guarantees
in exchange for
Series B 7³/8% Senior Subordinated Notes due 2013
and the related guarantees
which have been registered under
the Securities Act of 1933, as amended,
pursuant to the prospectus dated            , 2003

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON                  , 2003, UNLESS EXTENDED (SUCH TIME AND DATE, AS SO EXTENDED, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE.

To Brokers, Dealers, Commercial Banks,
Trust Companies and other Nominees:

        Kinetic Concepts, Inc., a Texas corporation (the "Issuer") and certain subsidiaries of the Issuer (collectively, the "Guarantors") are making an offer, referred to as the exchange offer, to exchange an aggregate principal amount of up to $205,000,000 of the Issuer's Series B 7³/8% Senior Subordinated Notes due 2013, including the guarantees thereof by the Guarantors, which have been registered under the Securities Act of 1933, as amended (the "New Notes"), for a like principal amount of the Issuer's outstanding Series A 7³/8% Senior Subordinated Notes due 2013, including the guarantees thereof by the Guarantors (the "Old Notes"), upon the terms and subject to the conditions set forth in the prospectus dated             , 2003 and in the related letter of transmittal. Unless indicated otherwise, capitalized terms used but not defined herein shall have the same meaning given to them in the prospectus or the letter of transmittal, as the case may be.

        Enclosed herewith are copies of the following documents:

1.

the prospectus;



2.

the letter of transmittal for your use and for the information of your clients, including a substitute Internal Revenue Service Form W-9 for collection of information relating to backup United States federal income tax withholding;



3.

a notice of guaranteed delivery to be used to accept the exchange offer with respect to Old Notes in certificated form or Old Notes accepted for clearance through the facilities of The Depository Trust Company if (i) certificates for the Old Notes are not immediately available or all required documents are unlikely to reach the exchange agent on or prior to the expiration date or (ii) a book-entry transfer cannot be completed on a timely basis;



4.

a form of letter which may be sent to your clients for whose account you hold Old Notes in your name or in the name of a nominee, with space provided for obtaining such clients' instructions with regard to the exchange offer; and



5.

return envelopes addressed to U.S. Bank, N.A., the exchange agent for the exchange offer.

        PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON            , 2003, UNLESS EXTENDED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.

        The Issuer has not retained any dealer-manager in connection with the exchange offer and will not pay any fee or commission to any broker, dealer, nominee or other person, other than the exchange

agent, for soliciting tenders of Old Notes pursuant to the exchange offer. You will be reimbursed by the Issuer for customary mailing and handling expenses incurred by you in forwarding the enclosed materials to your clients and for handling or tendering for your clients.

        Additional copies of the enclosed materials may be obtained by contacting the exchange agent as provided in the enclosed letter of transmittal.

Very truly yours,

Kinetic Concepts, Inc.

        NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF THE ISSUER, ANY OF THE GUARANTORS OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER NOT CONTAINED IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.