STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of March 12, 1998 (this
"Agreement"), among MedCath Holdings, Inc., a Delaware corporation ("Parent"),
MCTH Acquisition, Inc., a North Carolina corporation and a wholly owned
subsidiary of Parent ("Sub"), and the several stockholders of MedCath
Incorporated, a North Carolina corporation ("MedCath"), that are parties hereto
(each, a "Stockholder" and, collectively, the "Stockholders").
RECITALS
Parent, Sub and MedCath propose to enter into an Agreement and
Plan of Merger dated as of the date hereof (as the same may be amended or
supplemented, the "Merger Agreement"; capitalized terms used but not defined
herein shall have the meanings set forth in the Merger Agreement as entered into
on the date hereof) providing for the merger of Sub with and into MedCath (the
"Merger"), upon the terms and subject to the conditions set forth in the Merger
Agreement.
As of the date hereof, each Stockholder is the record and
beneficial owner of the number of shares of MedCath Common Stock set forth on
the signature page hereof beneath such Stockholder's name (with respect to each
Stockholder, such Stockholder's "Existing Shares" and, together with any shares
of MedCath Common Stock acquired after the date hereof, whether upon the
exercise of warrants, options, conversion of convertible securities or
otherwise, such Stockholder's "Shares").
As an inducement and a condition to entering into the Merger
Agreement, Parent and Sub have required that the Stockholders agree, and the
Stockholders have agreed, to enter into this Agreement.
The Stockholders, Parent and Sub desire to set forth their
agreement with respect to the voting of the Shares in connection with the Merger
upon the terms and subject to the conditions set forth herein.
AGREEMENT
To implement the foregoing and in consideration of the mutual
agreements contained herein, the parties agree as follows:
1. Agreement to Vote. Each Stockholder, severally and not
jointly, hereby agrees that, from and after the date hereof and until this
Agreement shall have been terminated in accordance with Section 6, at any
meeting of the holders of MedCath Common Stock, however called, or in connection
with any written consent of the holders of MedCath Common Stock, such
Stockholder shall vote (or cause to be voted) such Stockholder's Shares (i) in
favor of adoption and approval of the Merger Agreement and the
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Merger and the approval of the terms thereof and each of the other actions
contemplated by the Merger Agreement and this Agreement and (ii) except as
otherwise agreed to in writing in advance by Parent, against the following
actions (other than the Merger and the transactions contemplated by the Merger
Agreement): (A) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving MedCath or its
subsidiaries; (B) a sale, lease or transfer of a material amount of assets of
MedCath or its subsidiaries, or a reorganization, recapitalization, dissolution
or liquidation of MedCath or its subsidiaries; (C) (1) any change in a majority
of the persons who constitute the Board of Directors of MedCath; (2) any
material amendment of MedCath's Articles of Incorporation or By-laws; or (3) any
other action involving MedCath or its subsidiaries which has the effect of
impeding, interfering with, delaying, postponing, or impairing (A) the ability
of MedCath to consummate the Merger or (B) the transactions contemplated by this
Agreement and the Merger Agreement. Such Stockholder shall not enter into any
agreement or understanding with any person or entity prior to the termination of
this Agreement to vote in any manner inconsistent herewith.
2. Representations and Warranties of Each Stockholder. Each
Stockholder hereby, severally and not jointly, represents and warrants to Parent
and Sub as of the date hereof in respect of itself as follows:
(a) Authorization; Validity of Agreement; Necessary Action.
Such Stockholder has full power and authority to execute and deliver
this Agreement, to perform such Stockholder's obligations hereunder and
to consummate the transactions contemplated hereby. This Agreement has
been duly executed and delivered by such Stockholder, and, assuming
this Agreement constitutes a valid and binding obligation of Parent and
Sub, constitutes a valid and binding obligation of such Stockholder,
enforceable against it in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting creditors'
rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) Consents and Approvals; No Violations. Neither the
execution, delivery or performance of this Agreement by such
Stockholder nor the consummation by it of the trans actions
contemplated hereby nor compliance by it with any of the provisions
hereof will (i) require any filing with, or permit, authorization,
consent or approval of, any Gov ernmental Entity (except where the
failure to obtain such permits, authorizations, consents or approvals
or to make such filings would not materially impair the ability of such
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Stockholder to consummate the transactions contemplated hereby), (ii)
result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right
of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, guarantee, other evidence of indebtedness, lease, license,
contract, agreement or other instrument or obligation to which such
Stockholder is a party or by which it or any of its properties or
assets may be bound or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to it or any of its
properties or assets, except in the case of clauses (ii) and (iii) for
violations, breaches or defaults, or rights of termination, amendment,
cancellation or acceleration, which would not materially impair the
ability of such Stockholder to consummate the transactions contemplated
hereby.
(c) Shares. Such Stockholder's Existing Shares are, and its
Shares at the Effective Time will be, owned beneficially and of record
by such Stockholder. Such Stockholder's Existing Shares constitute all
of the shares of MedCath Common Stock owned of record or beneficially
by such Stockholder. All of such Stockholder's Existing Shares are
issued and outstanding. Such Stockholder has sole voting power, sole
power of disposition, sole power to issue instructions with respect to
the matters set forth in Section 1 hereof, sole power of conversion,
sole power to demand appraisal rights and sole power to agree to all of
the matters set forth in this Agreement, in each case with respect to
all of such Stockholder's Existing Shares and will have sole voting
power, sole power of disposition, sole power to issue instructions with
respect to the matters set forth in Section 1, sole power of
conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, with respect
to all of such Stockholder's Shares on the Closing, with no
limitations, qualifications or restrictions on such rights, subject to
applicable federal securities laws and the terms of this Agreement.
Such Stockholder has good and valid title to its Existing Shares and at
all times during the term hereof and on the Closing Date will have good
and valid title to its Shares, free and clear of all liens, claims,
security interests or other charges or encumbrances.
(d) No Finder's Fees. Except as disclosed in the Merger
Agreement, no broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of
such Stockholder.
3. Representations and Warranties of Parent. Parent
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and Sub hereby represent and warrant to each Stockholder as of the date hereof
as follows:
(a) Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Corporate Authorization; Validity of Agreement; Necessary
Action. Each of Parent and Sub has full corporate power and authority
to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and
performance by Parent and Sub of this Agreement and the consummation by
Parent and Sub of the transactions contemplated hereby have been duly
and validly authorized by their respective boards of directors, and no
other corporate action or proceedings on the part of Parent or Sub are
necessary to authorize the execution and delivery by Parent or Sub of
this Agreement, and the consummation by Parent or Sub of the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by Parent and Sub, and, assuming this Agreement
constitutes a valid and binding obligation of the Stockholders,
constitutes valid and binding obligations of Parent and Sub,
enforceable against them in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting creditors'
rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(c) Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the HSR Act, any
applicable state takeover laws and applicable state insurance laws and
regulations, neither the execution, delivery or performance of this
Agreement by Parent or Sub nor the consummation by Parent or Sub of the
transactions contemplated hereby nor compliance by Parent or Sub with
any of the provisions hereof will (i) conflict with or result in any
breach of any provision of the certificate of incorporation or by-laws
of Parent or any of its Subsidiaries, (ii) require any filing with, or
permit, authorization, consent or approval of, any governmental entity,
(iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, guarantee, other evidence of indebtedness, lease,
license, contract, agreement or other instrument or obligation to which
Parent or Sub is a party or by which it
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or any of its properties or assets may be bound or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable
to Parent, any of its Subsidiaries or any of their properties or
assets.
4. Further Agreements of Stockholders. (a) Each Stockholder,
severally and not jointly, hereby agrees, while this Agreement is in effect, and
except as contemplated hereby, not to (i) sell, transfer, pledge, encumber,
assign or otherwise dispose of, enforce or permit the execution of the
provisions of any redemption agreement with MedCath or enter into any contract,
option or other arrangement or understanding with respect to or consent to the
offer for sale, sale, transfer, pledge, encumbrance, assignment or other
disposition of, any of its Existing Shares, or any Shares acquired after the
date hereof, or any interest in any of the foregoing, except to Parent; (ii)
grant any proxies or powers of attorney, deposit any Shares into a voting trust
or enter into a voting agreement with respect to any Shares, or any interest in
any of the foregoing, except to Parent or Sub; or (iii) take any action that
would make any representation or warranty of such Stockholder contained herein
untrue or incorrect or have the effect of preventing or disabling the
Stockholder from performing such Stockholder's obligations under this Agreement.
(b) Each Stockholder hereby irrevocably waives any rights of
appraisal or rights to dissent from the Merger that the Stockholder may have.
(c) Each Stockholder agrees with, and covenants to, Parent
that the Stockholder shall not request that MedCath register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of such Stockholder's Shares, unless such transfer is made in
compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in MedCath Common Stock by reason of any stock
dividend or distribution, or any change in MedCath Common Stock by reason of any
stock dividend, split-up, recapitalization, combination, exchange of shares or
the like, the term "Shares" shall be deemed to refer to and include the Shares
as well as all such stock dividends and distributions and any shares into which
or for which any or all of the Shares may be changed or exchanged. Each
Stockholder shall be entitled to receive any cash dividend paid by MedCath
during the term of this Agreement until the Shares are cancelled in the Merger.
(d) Each Stockholder, severally and not jointly, shall not,
nor shall it authorize or permit any investment banker, attorney or other
advisor or representative of, such Stockholder to, directly or indirectly,
except as expressly permitted pursuant to the Merger Agreement (a) take any
action to solicit, initiate or, knowingly encourage any Acquisition Proposal, or
(b) participate in any discussions or negotiations with or encourage any effort
or attempt by any other person or entity or take any
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other action to facilitate an Acquisition Proposal. Notwithstanding anything in
this Agreement to the contrary, from and after the date hereof, each
Stockholder, severally and jointly, shall promptly and within not more than 12
hours advise Parent orally and in writing of the receipt by it (or any of the
other entities or person referred to above) of any Acquisition Proposal, or any
inquiry which is likely to lead to any Acquisition Proposal, the material terms
and conditions of such Acquisition Proposal or inquiry, and the identity of the
person making any such Acquisition Proposal or inquiry. Each Stockholder will
keep Parent fully informed of the status and details of any such Acquisition
Proposal or inquiry.
5. Further Assurances. From time to time prior to the Closing,
at any other party's request and without further consideration, each party
hereto shall execute and deliver such additional documents and take all such
further lawful action as may be necessary or desirable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
6. Termination. This Agreement shall terminate, and no party
shall have any rights or obligations hereunder and this Agreement shall become
null and void and have no further effect upon the earliest of (a) the Effective
Time and (b) termination of the Merger Agreement pursuant to Article 7 thereof.
Nothing in this Section 6 shall relieve any party of liability for breach of
this Agreement.
7. Costs and Expenses. All costs and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses.
8. Amendment and Modification. This Agreement may be amended,
modified and supplemented in any and all respects only by written agreement of
the parties hereto.
9. Several Obligations. The representations,
warranties, covenants, agreements and conditions of this
Agreement applicable to the Stockholders are several and not
joint.
10. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
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(a) If to Parent or Sub:
x/x Xxxxxxxx Xxxxxx Xxxxxxx & Co.
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
and
x/x Xxxxx, Xxxxxx, Xxxxxxxx & Xxxxx XXX, X.X.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx X. Xxxxxxx
Facsimile No.:
with copies to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
and
Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxxxxx
Facsimile No.: (000) 000-0000
(b) if to the Stockholders, to:
c/o MedCath Incorporated
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
with copies to:
Xxxxxx, Xxxxxx & Pikering
0000 X. Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Facsimile No.: (000) 000-0000
11. Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
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limitation".
12. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
13. Entire Agreement; No Third Party Beneficiaries. This
Agreement constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, and is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
14. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby may be consummated as
originally contemplated to the fullest extent possible.
15. Specific Performance; Remedies Cumulative. (a) The parties
hereto agree that irreparable damage would occur in the event any provision of
this Agreement was not performed in accordance with the terms hereof and that
the parties shall be entitled to the remedy of specific performance of the terms
hereof, in addition to any other remedy at law or equity.
(b) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
16. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of North Carolina without
giving effect to the principles of conflicts of law thereof.
17. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other
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parties, except that Parent may assign, in its sole discretion, any or all of
its rights, interests and obligations hereunder to any direct or indirect wholly
owned subsidiary of Parent; provided, however, that no such assignment shall
relieve Parent from any of its obligations hereunder. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
18. Arbitration. (a) If any dispute, claim or difference
arises out of or relates to this Agreement (a "Dispute"), such Dispute shall be
finally settled by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") effective as of the
commencement of the arbitration (the "Rules"), except as such Rules may be
modified as provided herein. The arbitration shall be held in Charlotte, North
Carolina, unless the parties mutually agree to have the arbitration held
elsewhere, and judgment upon the award made therein may be entered by any court
having jurisdiction thereof. The arbitral tribunal shall be composed of three
arbitrators, who shall be experienced commercial litigators admitted to practice
law in the State of New York or the State of North Carolina. Parent, on the
other hand, and the Stockholders, on the other hand, shall each appoint one
arbitrator. If such parties fail to nominate an arbitrator in accordance with
the preceding sentence within thirty days from the date when the notice of
intention to arbitrate referred to in Rule 6 of the Rules (the "Commencement
Notice") has been received by the Respondent (as defined in the Rules) such
appointment shall, upon written request by either party to the AAA, be made in
accordance with Rule 14 of the Rules. The two arbitrators thus appointed shall
attempt to agree upon the third arbitrator to act as chairperson of the
arbitration tribunal. If said two arbitrators fail to appoint the chairperson
within thirty days from the date of appointment of the second arbitrator, upon
written request of either party to the AAA, such appointment shall be made in
accordance with Rule 15 of the Rules. The arbitrators shall have no power to
waive, alter, amend, revoke or suspend any of the provisions of this Agreement,
provided, however, that the arbitrators shall have the power to decide all
questions with respect to the interpretation and validity of this Section 18.
The arbitration shall be conducted, and the award shall be rendered, in the
English language. An arbitrator may not act as an advocate for the party
nominating him, and all three arbitrators shall be impartial and unbiased. A
majority vote by the three arbitrators shall be required on any decision made by
them. The arbitrators shall permit such discovery as they shall determine is
appropriate in the circumstances, taking into account the needs of the parties
and the desirability of making discovery expeditious and cost-effective. Any
such discovery shall be limited to information directly relevant to the
controversy or claim in arbitration and shall be concluded within
thirty days after the appointment of the arbitration panel. This agreement to
arbitrate shall be binding upon the heirs,
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successors and assigns and any trustee, receiver or executor of any party
hereto. Except to the extent required by law or court or administrative order,
no party, arbitrator, representative, counsel or witness shall disclose or
confirm to any person not present at the arbitration hearings any information
about the arbitration proceeding or hearings, including the names of the parties
and arbitrators, the nature and amount of the claims, the financial condition of
any party, the expected date of hearing or the award made.
(b) Subject to and not in any way limiting the preceding
Section 18(a), each of the parties hereto irrevocably consents and submits to
the jurisdiction in any action brought in connection with this Agreement in the
United States District Court for the Southern District of New York or for the
District of North Carolina, including, but not limited to, any action to enforce
an award rendered pursuant to the preceding Section 18(a). Parent hereby
appoints CT Corporation System as their agent for service of process in New
York.
IN WITNESS WHEREOF, Parent, Sub and each of the Stockholders
have caused this Agreement to be signed by their respective officers or other
authorized person thereunto duly authorized as of the date first written above.
MCTH ACQUISITION INC.,
a North Carolina corporation
By:
Name:
Title:
MEDCATH HOLDINGS, INC.,
a Delaware corporation
By:
Name:
Date:
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