Exhibit
10.26
EXECUTIVE
RETENTION AGREEMENT
This
Executive Retention Agreement (the "Agreement") is effective as of February
21,
2007 (the "Effective Date"), by and between Todd M. Fruchterman (the
"Executive"), and Kinetic Concepts, Inc. ("KCI" or the "Company") (together
the
"Parties").
RECITALS
WHEREAS,
the Executive is presently employed by the Company as Sr. V.P. Research &
Development and has significant strategic and management responsibilities
necessary to the continued successful operation of the Company’s
business;
WHEREAS,
the Board of Directors of the Company (the "Board") has determined that it
is in
the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the
Executive;
WHEREAS,
the Board believes that it is imperative to provide the Executive with certain
severance benefits upon the Executive’s termination of employment under the
circumstances described herein that provide the Executive with the financial
incentive and encouragement necessary to remain with the Company on a long-term
basis.
NOW,
THEREFORE, in
consideration of the mutual covenants contained herein, the Parties agree
as
follows:
1. Term
of
Agreement. The Company and the Executive agree that this
Agreement will be in effect from the Effective Date until the termination
of the
Executive's employment with the Company as set forth in Section 2
herein.
2. At-Will
Employment. While this Agreement is in effect, the Executive's
employment with the Company shall continue to be at-will and, as such, may
be
terminated by the Executive or the Company at any time, for any reason and
with
or without advance notice, subject to the Company's severance obligations
set
forth herein.
3. Definition
of
Terms. The following terms referred to in this Agreement shall
have the following meanings:
(a) Change
in
Control. A Change in Control means the first to occur of any
one of the following events: (i) consummation of any sale, lease, exchange,
or
other disposition (in one transaction or a series of related transactions)
of
all or substantially all of the assets of the Company (together with the
assets
of the Company's direct and indirect subsidiaries) to any Person or group
of
related Persons, as that term is used in Section 13(d) of the Exchange Act
(a
"Group"), together with any affiliates thereof; or (ii) any Person or Group
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of Shares representing more than 50% of the
aggregate voting power of the issued and outstanding stock entitled to vote
in
the election of directors of the Company; or (iii) the shareholders of the
Company approve a plan of complete liquidation or dissolution of the
Company.
(b) Qualifying
Termination. A "Qualifying Termination" shall mean the
Executive's (i) termination of employment by the Company without "Cause;"
or
(ii) the Executive's resignation from employment for "Good Reason."
(c) Cause. "Cause"
shall mean conduct involving one or more of the following: (i) the
substantial and continuing failure of the Executive to render services to
the
Company or any subsidiary or affiliate in accordance with the Executive’s
obligations and position with the Company, subsidiary or affiliate; provided that the
Company or any subsidiary or affiliate provides the Executive with adequate
notice of such failure and, if such failure is capable of cure, the Executive
fails to cure such failure within 30 days of the notice; (ii) dishonesty,
gross
negligence, or breach of fiduciary duty; (iii) the Executive's indictment
of,
conviction of, or no contest plea to, an act of theft, fraud or embezzlement;
(iv) the commission of a felony; or (v) a material breach of the terms of
an
agreement between the Executive and the Company or any subsidiary or affiliate
on the other hand or a material breach of any Company policy.
(d) Good
Reason. "Good Reason" shall mean one or more of the
following: (i) the material reduction of Executive’s duties and/or
responsibilities, which is not cured within 30 days after the Executive provides
written notice to the Company; provided, however,
it
shall not be considered Good Reason if, upon or following a Change in Control,
the Executive's duties and responsibilities remain the same as those prior
to
the Change in Control but the Executive's title and/or reporting relationship
is
changed; (ii) the material reduction of Executive's base salary, other than
across-the-board decreases in base salary applicable to all executive officers
of the Company; or (iii) the relocation of the Executive to a business location
in excess of fifty (50) miles from the Company’s headquarters in San
Antonio.
(e) Disability. For
purposes of this Agreement, "Disability" shall mean that the Executive is
unable, with or without reasonable accommodation, to perform one or more
essential functions of his or her position as an employee of the Company
as the
result of his or her incapacity due to physical or mental impairment for
more
than 90 days (not necessarily consecutive) in any 180-day period.
4. Severance
Benefits Upon a
Qualifying Termination.
(a) Qualifying
Termination in
Connection with a Change in Control. If the Executive
experiences a Qualifying Termination upon or within 24 months following a
Change
of Control, then the Executive shall be entitled to receive the following
severance benefits, which shall be in addition to any salary earned and vacation
accrued up to and including the date of termination, as determined by the
Company: (i) a severance payment in the amount of two times the sum
of the Executive's annual base salary plus annual target bonus, payable as
a
lump sum payment within five business days of the date the Executive executes
and returns a full waiver and release of all claims in a form provided by
the
Company; and (ii) if the Executive timely elects COBRA health insurance
continuation coverage, reimbursement of COBRA premiums for up to 18 months
following the date of termination.
(b) Qualifying
Termination not
in Connection with a Change in Control. If the Executive
experiences a Qualifying Termination that is not in connection with a Change
of
Control as described in Section 4(a) herein, then the Executive shall be
entitled to receive the following severance benefits, which shall be in addition
to any salary earned and vacation accrued up to and including the date of
termination, as determined by the Company: (i) a severance payment in the
amount
of the Executive's annual base salary plus annual target bonus, payable as
a
lump sum payment within five business days of the date the Executive executes
and returns a full waiver and release of all claims in a form provided by
the
Company; and (ii) if the Executive timely elects COBRA health insurance
continuation coverage, reimbursement of COBRA premiums for up to 12 months
following the date of termination.
5. Termination
of Executive's
Employment Other than a Qualifying Termination
(a) Termination
on Account of
Executive's Disability or Death. If the Company terminates the
Executive’s employment as a result of the Executive’s Disability or due to the
death of the Executive, then the Executive shall not be entitled to receive
any
severance benefits and shall only be entitled to receive any salary earned
and
vacation accrued up to and including the date of termination; provided, however,
that this provision shall not have any effect upon any rights the Executive
or
his estate may have under the terms of any Company short or long-term disability
policy or life insurance policy.
(b) Termination
for Cause or
Resignation without Good Reason. If the Executive is
terminated for Cause or resigns from employment without Good Reason, then
the
Executive shall not be entitled to receive any severance benefits and shall
only
be entitled to receive any salary earned and vacation accrued up to and
including the date of termination
6. Conditions
to Severance
Benefits.
(a) No
severance benefits shall be made under Sections 4(a) and (b) unless and until
the Executive shall, in consideration of such benefits, execute a full waiver
and release of all claims in a form provided by the Company.
(b)
The Executive acknowledges and agrees that he or
she is not entitled to any severance or change in control benefits provided
under the terms of the 1997 KCI Severance Pay Plan or any similar agreement,
plan or arrangement, other than the Company's stock option plans.
(c) All
payment of severance benefits under this Agreement shall comply with section
409A of the Internal Revenue Code.
7. Successors.
(a) Company’s
Successors. Any successor (or parent thereof) to the Company
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) or to all or substantially all of
the
Company’s business and/or assets shall assume the obligations under this
Agreement and agree expressly to perform the obligations under this Agreement
in
the same manner and to the same extent as the Company would be required to
perform such obligations in the absence of a succession. For all
purposes under this Agreement, the term "Company" shall include any successor
(or parent thereof) to the Company’s business and/or assets.
(b) Executive’s
Successors. All rights of the Executive hereunder shall inure
to the benefit of, and be enforceable by, the Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. Executive shall have no right to assign any of
his obligations or duties under this Amended Agreement to any other person
or
entity.
8. Notice.
(a) General. Notices
and all other communications contemplated by this Agreement shall be in writing
and shall be deemed to have been duly given when personally delivered or
when
mailed by U.S. registered or certified mail, return receipt requested and
postage prepaid. In the case of the Executive, mailed notices shall
be addressed to him at the home address which he most recently communicated
to
the Company in writing. In the case of the Company, mailed notices
shall be addressed to its corporate headquarters, and all notices shall be
directed to the attention of its General Counsel.
(b) Notice
of
Termination. Any termination by the Company for Cause or by
the Executive for Good Reason shall be communicated by a written notice of
termination to the other party hereto. Such notice shall indicate the
specific termination provision in this Agreement relied upon and shall set
forth
in reasonable detail the facts and circumstances claimed to provide a basis
for
termination under the provision so indicated.
9. Arbitration. All
disputes relating to or arising out of this Agreement or otherwise in connection
with the Executive's employment with, or termination from, the Company, shall
be
settled by binding arbitration in accordance with the Company's standard
arbitration policy and procedures.
10. Miscellaneous
Provisions.
(a) Waiver. No
provision of this Agreement shall be amended, modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and
signed
by the Executive and by an authorized officer of the Company (other than
the
Executive). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other
party
shall be considered a waiver of any other condition or provision or of the
same
condition or provision at another time.
(b) Choice
of
Law. The validity, interpretation, construction and
performance of this Amended Agreement shall be governed by the laws of the
State
of Texas.
(c) Severability. The
invalidity or unenforceability of any provision or provisions of this Agreement
shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect.
(d) Employment
Taxes. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes and other
authorized deductions.
(e) No
Representations. Each party acknowledges that it is not
relying and has not relied on any promise, representation or statement made
by
or on behalf of the other party that is not set forth in this Amended
Agreement.
(f) Counterparts. This
Agreement may be executed in counterparts, each of which shall be deemed
an
original, but all of which together will constitute one and the same
instrument.
(g) Prior
Agreements. Except as specifically set forth on Exhibit A
hereto, this Agreement shall supersede all prior arrangements, whether written
or oral, and understandings regarding the subject matter of this
Agreement.
[Signatures
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IN
WITNESS WHEREOF, each of
the Parties has executed this Agreement, in the case of the Company by its
duly
authorized officer, as of the day and year first above written.
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COMPANY
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KINETIC
CONCEPTS,
INC.
By: /s/
Catherine M.
Burzik
Catherine
M. Burzik,
President
and Chief Executive Officer
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EXECUTIVE
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/s/
Todd M.
Fruchterman
Todd. M. Fruchterman
Address:
To the
address as last set forth in the
Company's
employment records
SSN:
On
File
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