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EXHIBIT 4.2
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT dated as of July 31, 1998, by and among MedCath
Holdings, Inc., a Delaware corporation (the "Company"), MedCath 1998 LLC ("KKR
Fund"), Welsh, Carson, Xxxxxxxx & Xxxxx VII, L.P. ("WCAS VII") and the several
other stockholders named in Schedule I hereto under the heading "WCAS
Stockholders" (WCAS VII and such other stockholders being hereinafter at times
referred to as the "WCAS Stockholders" and, together with KKR Fund, as the
"Stockholders").
WHEREAS, the Company and the Stockholders, among other parties, have
entered into a Contribution Agreement dated as of the date hereof (the
"Contribution Agreement");
WHEREAS, pursuant to the Contribution Agreement and on the terms and
subject to the conditions set forth therein, the Stockholders, certain members
of the management and related individuals and entities (the "Management
Contributors"; provided, that unless the context otherwise requires, Xxxxxxx X.
Xxxxxxx shall also be deemed a Management Contributor) of MedCath Incorporated
("MedCath") and certain physicians who are stockholders of MedCath are
contributing cash and/or shares of common stock, par value $.01 per share
("Common Stock"), of MedCath to the Company in exchange for shares of capital
stock of the Company.
WHEREAS, the Company and each of the Stockholders desire to make
certain arrangements among themselves with respect to the matters set forth
herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto hereby agree as
follows:
Section 1. Voting Agreement. From and after the Closing Date (as
defined in the Contribution Agreement), at each annual or special stockholders'
meeting called for the election of directors, and whenever the stockholders of
the Company act by written consent with respect to the election of directors,
each Stockholder, severally and not jointly, agrees to vote or otherwise give
such Stockholder's consent in respect of all shares of capital stock of the
Company (whether now or hereafter acquired) owned by such Stockholder, and the
Company shall take all necessary and desirable actions within its control, in
order to cause (unless otherwise agreed by the WCAS Stockholders, KKR Fund and
the Management Contributors then employed by the Company, except in the case of
the provisos in clauses (b)(i) and (b)(ii), which can be waived or modified by
agreement of the WCAS Stockholders and KKR Fund):
(a) the authorized number of directors on the Board of Directors
of the Company (the "Board") to be established at ten;
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(b) the election to the Board of:
(i) four directors designated by KKR Fund (each, a "KKR
Designee"); provided, however, that the number of KKR
Designees shall be reduced (x) by one to the extent
that KKR Fund sells or transfers (other than
Permitted Transfers pursuant to Section 3) at least
one-fourth (but less than one-half) of its original
number of shares of Common Stock, (y) by two to the
extent that KKR Fund sells or transfers (other than
Permitted Transfers pursuant to Section 3) at least
one-half (but less than three-quarters) of its
original number of shares of Common Stock and (z) by
three to the extent that KKR Fund sells or transfers
(other than Permitted Transfers pursuant to Section
3) at least three-fourths of its original number of
shares of Common Stock;
(ii) three directors designated by the WCAS Stockholders
(each, a "WCAS Designee"), it being understood that
the WCAS Designee shall be selected by the holders of
record of a majority of the Common Stock then held by
the WCAS Stockholders; provided, however, that the
number of WCAS Designees shall be reduced (x) by one
to the extent that the WCAS Stockholders sell or
transfer (other than Permitted Transfers pursuant to
Section 3) in the aggregate at least one-third (but
less than two-thirds) of their original number of
shares of Common Stock and (y) by two to the extent
that the WCAS Stockholders sell or transfer (other
than Permitted Transfers pursuant to Section 3) at
least two-thirds of their original number of shares
of Common Stock;
(iii) two directors designated by the Management
Contributors who are, at the time, full-time
employees of the Company (each, a "Management
Designee"), it being understood that the Management
Designee shall be selected by the holders of record
of a majority of the Common Stock then held by the
Management Contributors who are, at the time,
full-time employees of the Company and treating, for
this purpose, shares of Common Stock held of record
by (A) Page X. Xxxxxxx as if they were held of record
by Xxxxxxx X. Xxxxxxx and (B) P IV Limited
Partnership and P V Limited Partnership as if they
were held of record by Xxxxxxx X. Xxxxxxx; and
(iv) one independent director, who shall be an attorney
having expertise in regulatory matters affecting the
Company, designated by the other directors;
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all of which designees shall hold office, subject to their earlier removal in
accordance with clause (c) below, the Bylaws of the Company and applicable
corporate law, until their respective successors shall have been elected and
shall have qualified;
(c) the removal from the Board (with or without cause) of any
director upon the written request of the Stockholder that
designated such director (or, in the case of the director
designated pursuant to clause (b)(iv) above, by written action
of at least a majority of the other directors), but only upon
such written request; and
(d) upon any vacancy in the Board as a result of any individual
designated as provided in clause (b) above ceasing to be a
member of the Board, whether by resignation or otherwise, the
election to the Board of an individual designated by the
Stockholder that designated such individual.
Each Stockholder agrees to cooperate to have its designees to the Board be
reasonably acceptable to each other designating party. The Stockholders
acknowledge and agree that any KKR Fund executive is deemed to be an acceptable
designee. Each Stockholder agrees to use its reasonable best efforts to cause
its designees to the Board to vote or otherwise give such Director's consent to
the creation and maintenance of:
(a) an Executive Committee of the Board, consisting of three
directors, one of whom is a KKR Designee, one of whom is a
WCAS Designee and one of whom is a Management Designee, which
Executive Committee shall manage the day-to-day business of
the Company;
(b) a Compensation Committee of the Board, consisting of three
directors, one of whom is a KKR Designee, one of whom is a
WCAS Designee and one of whom is chosen by the Management
Designees, which Compensation Committee shall approve all
grants of stock options to employees of the Company, all
increases in compensation of officers of the Company, all
annual bonuses granted to officers of the Company and all
other employee benefits (including, without limitation,
vacation policy, benefit plans, company automobiles and
insurance) granted to officers of the Company; and
(c) an Audit Committee of the Board of Directors, consisting of
three directors, one of whom is a KKR Designee, one of whom is
a WCAS Designee and one of whom is chosen by the Management
Designees, which Audit Committee shall review and approve the
financial statements of the Company as audited by the
Company's independent certified public accountants.
The Company shall promptly reimburse all reasonable out-of-pocket
expenses incurred by any director of the Company in attending each meeting of
the Board or any committee thereof. In addition, the Company shall grant each
director (other than the
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Management Designee) 2,000 incentive stock options per annum to purchase Common
Stock of the Company as compensation for service on the Board. The Company shall
also pay the Stockholders monitoring fees in the aggregate amount of $300,000
per annum, subject to annual adjustment based on the Company's size, to be
allocated pro rata among the Stockholders based on their ownership of the
Company. Upon the closing of the transactions contemplated by the Contribution
Agreement and the consummation of the merger of MCTH Acquisition, Inc. with and
into MedCath, each of KKR Fund and WCA Management Corporation, the investment
adviser to WCAS VII, shall be entitled to a deal consummation fee in the amount
of $2,250,000 from the Company.
Section 2. Stockholder Voting Rights. (a) Without obtaining the
approval of each of (i) a majority of the shares held of record by KKR Fund and
its Affiliates (as defined below) and (ii) a majority of the shares held of
record by the WCAS Stockholders and their Affiliates (as defined), the Company
shall not and shall not permit any subsidiary of the Company to:
(i) appoint, dismiss or replace the Chief Executive
Officer of the Company;
(ii) enter into any agreement for obtaining credit or
financing from a third-party lender;
(iii) merge or consolidate with or into another
corporation;
(iv) sell, transfer or dispose of all or substantially all
of its assets;
(v) issue any securities or within four years after the
date hereof register common stock in an initial
public offering;
(vi) acquire, purchase or invest in any assets, other than
in the ordinary course of business, or dispose of any
assets, other than in the ordinary course of
business;
(vii) approve its annual operating budget (including its
expected capital expenditure budget);
(viii) settle any material claims or litigation;
(ix) enter into any agreements for the development,
operation or management of any new hospitals;
(x) engage in any transactions between the Company and
any Affiliate of the Company;
(xi) declare, pay or accrue any dividends on any class of
capital stock;
(xii) amend its certificate of incorporation or by-laws;
(xiii) enter into any material contracts; and
(xiv) appoint, create or maintain any committees of the
Board, other than as contemplated herein.
(b) Notwithstanding anything to the contrary herein, the approval
of KKR Fund or the WCAS Stockholders, as the case may be, pursuant to Section
2(a) shall not be required with respect to any actions by the Company (other
than to the extent required under applicable law) at any time after KKR Fund or
the WCAS Stockholders, as the case may be, together with their respective
Affiliates, own less than 15% of the shares of Common Stock held by such
Stockholders, as the case may be, as of the date hereof.
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Section 3. Transfer Restrictions. Each of the Stockholders agrees and
acknowledges that it will not during a period of four years from the date
hereof, directly or indirectly, offer, transfer, sell, assign, pledge,
hypothecate or otherwise dispose of (any such act being referred to herein as a
"transfer") any shares of the Common Stock unless such transfer complies with
this Agreement. Notwithstanding the foregoing, the Company acknowledges and
agrees that any of the following transfers are deemed to be in compliance with
the Securities Act of 1933, as amended, and the rules and regulations in effect
thereunder (the "Act") and this Agreement: (x) a transfer to an "affiliate" (as
defined under Rule 405 of the rules and regulations promulgated under the Act)
(an "Affiliate"); (y) a transfer made as part of a distribution by a Stockholder
to its respective general or limited partners following an initial public
offering of the Common Stock (together with transfers pursuant to clause (x),
"Permitted Transfers"); or (z) a transfer made in connection with an offering of
securities pursuant to the exercise of a Stockholder's registration rights;
provided, however, that no transfers shall be made under this Agreement when the
Company is "in registration" or for a period of 180 days after the closing of an
initial public offering. Any such transferee shall agree in writing with the
parties hereto to be bound by, and to comply with, all applicable provisions of
this Agreement and to be deemed to be a Stockholder for purposes of this
Agreement. Each Stockholder shall consult with the other Stockholders in good
faith in order to minimize the adverse effect on the market price of the
Company's stock resulting from the timing and size of any distributions or
secondary public offerings.
Section 4. Notice of Proposed Transfer. Prior to any proposed transfer
of any shares of Common Stock of the Company (other than under the circumstances
described in clause (x), (y) or (z) of Section 3), the holder thereof shall give
written notice to the Company of its intention to effect such transfer. Each
such notice shall describe the manner of the proposed transfer and, if requested
by the Company, shall be accompanied by an opinion of counsel reasonably
satisfactory to the Company (it being agreed that either Reboul, MacMurray,
Xxxxxx, Xxxxxxx & Kristol or Xxxxxxx Xxxxxxx & Xxxxxxxx shall be satisfactory)
to the effect that the proposed transfer of the shares of Common Stock may be
effected without registration under the Securities Act, whereupon, subject to
Section 3, the holder of such shares shall be entitled to transfer such shares
in accordance with the terms of its notice. Each certificate for shares
transferred as above provided shall bear a legend to the effect that such shares
are unregistered under the Securities Act and may not be transferred unless the
shares have been registered under the Securities Act or an exemption from
registration is available, unless (i) such transfer is in accordance with the
provisions of Rule 144 (or any other rule permitting public sale without
registration under the Securities Act) or (ii) the opinion of counsel referred
to above is to the further effect that the transferee and any subsequent
transferee (other than an affiliate of the Company) would be entitled to
transfer such securities in a public sale without registration under the
Securities Act.
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The foregoing restrictions on transferability of shares of Common Stock
of the Company shall terminate as to any particular shares when (i) such shares
shall have been effectively registered under the Securities Act and sold or
otherwise disposed of in accordance with the intended method of disposition by
the seller or sellers thereof set forth in the registration statement concerning
such shares or (ii) a holder of such shares is able to demonstrate to the
Company (and its counsel) that the provisions of Rule 144(k) (or other
equivalent rule) of the Securities Act are available to such holder without
limitation. In either case, such holder of shares of Common Stock shall be
entitled to receive from the Company, without expense, a new certificate not
bearing a restrictive legend.
Section 5. Right of First Refusal. Subject to transfers permitted under
Section 3, at any time/after the fourth anniversary of the Closing Date and
prior to a public offering of Common Stock, a Stockholder (a "Selling
Stockholder" for purposes of this Section 5) may sell for cash all or any
portion of the capital stock of the Company held by him or it (whether now or
hereafter acquired) at any time, pursuant to a bona fide offer from a third
party, subject to such Selling Stockholder's compliance with the following
provisions:
(a) The Selling Stockholder shall promptly deliver a notice of
intention to sell (a "Sale Notice") to (i) if the Selling
Stockholder is a WCAS Stockholder or any of its Affiliates,
KKR Fund or (ii) if the Selling Stockholder is KKR Fund or any
of its Affiliates, the WCAS Stockholders (the "Offeree
Stockholder") setting forth in reasonable detail the capital
stock of the Company to be sold (the "Subject Securities"),
the identity of the proposed purchaser and the proposed
purchase price and terms of sale (including a copy of any
written offer or indication of interest).
(b) Upon receipt of a Sale Notice from the Selling Stockholder,
the Offeree Stockholder shall have the first right and option
to elect to purchase at the price and on the terms stated in
the Sale Notice, all, but not less than all, of the Subject
Securities. In the event that such Stockholder shall elect to
purchase all or part of the Subject Securities, it shall so
notify the Selling Stockholder within 20 days (the "Option
Period") after the receipt by such Stockholder of the Sale
Notice. Any such election shall be made by written notice (a
"Notice of Election") to the Selling Stockholder.
(c) If the Notice of Election with respect to the Subject
Securities shall have been received as aforesaid by the
Selling Stockholder, the Selling Stockholder shall sell such
Subject Securities to the Offeree Stockholder at the price and
on the terms stated in the Sale Notice. The closing of such
sale of Subject Securities shall take place at the offices of
the Company, or such other location as the Stockholders may
mutually select, no later than 30 days following the
expiration of the Option Period (or upon the expiration of
such longer period if required by law), or such earlier date
as may be agreed by the Stockholders. At such closing the
Selling
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Stockholder shall deliver a certificate or certificates for
the Subject Securities to be sold, accompanied by stock powers
with signatures guaranteed and all necessary stock transfer
taxes paid and stamps affixed, against receipt of the purchase
price therefor by certified or official bank check in New York
Clearing House Funds or by wire transfer of immediately
available funds.
(d) Any Subject Securities not sold pursuant to the provisions of
this Section 5 may be sold (in compliance with Section 6
below) to the person identified in the related Sale Notice for
a period of 60 days following the expiration of the Option
Period or to any person or persons at a price not lower than
the price specified in the Sale Notice and on other terms not
materially more favorable to the purchaser than those
specified in the Sale Notice. Any Subject Securities not sold
by such 60th day shall again be subject to the restrictions
contained in this Agreement.
Section 6. Tag-Along Rights. (a) In the event that any Stockholder (for
purposes of this Section 6, a "Selling Stockholder") proposes to sell, exchange,
transfer or in any other manner dispose of shares of Common Stock held by such
Selling Stockholder, whether in one transaction or in a series of related
transactions (any of the foregoing, a "Sale"), then such Selling Stockholder
shall give written notice (a "Notice of Intention to Sell") to the Company
setting forth in reasonable detail the terms and conditions of such proposed
Sale. In the event that the terms and/or conditions set forth in the Notice of
Intention to Sell are thereafter amended in any respect, the Selling Stockholder
shall give written notice (an "Amended Notice") of the amended terms and
conditions of the proposed Sale to the Company. Within three business days after
its receipt of any Notice of Intention to Sell or any Amended Notice, the
Company shall forward copies thereof to each of the other Stockholders. The
Selling Stockholder shall provide additional information with respect to the
proposed Sale as reasonably requested by the Stockholders.
(b) Each Stockholder other than the Selling Stockholder shall have
the right, exercisable upon written notice to the Company within 20 days after
such Stockholder's receipt of any Notice of Intention to Sell, or, if later,
within 7 days of such Stockholder's receipt of the most recent Amended Notice,
to participate in the proposed Sale by the Selling Stockholder to the proposed
purchaser on the terms and conditions set forth in such Notice of Intention to
Sell or the most recent Amended Notice, as the case may be (such participation
rights being hereinafter referred to as "tag-along" rights). Each Stockholder
may participate with respect to the shares of Common Stock owned by such
Stockholder in an amount equal to the product obtained by multiplying (i) the
aggregate number of shares of Common Stock owned by such Stockholder by (ii) a
fraction, the numerator of which is equal to the number of shares of Common
Stock proposed to be sold or transferred by the Selling Stockholder and the
denominator of which is the aggregate number of shares of Common Stock owned by
the Selling Stockholder and any other participating Stockholders or other
holders who have been granted the same rights to participate in such proposed
Sale. Any Stockholders that have not notified the
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Company of their intent to exercise tag-along rights within 7 days of receipt of
an Amended Notice shall be deemed to have elected not to exercise such tag-along
rights with respect to the Sale contemplated by such Amended Notice (regardless
of their election pursuant to the Notice of Intention to Sell relating to such
Sale). If one or more Stockholders or other holders of shares of Common Stock
who have been granted the same rights to participate in such proposed Sale
granted to the Stockholders hereunder elect not to include the maximum number of
shares of Common Stock which such holders would have been permitted to include
in a proposed Sale, the Selling Stockholders, or such remaining holders of
shares of Common Stock, or any of them, may sell in the proposed Sale a number
of additional shares of Common Stock owned by any of them equal to their pro
rata portion of the number of shares of Common Stock eligible to be included in
the proposed Sale and not so elected to be included (the "Eligible Shares"),
based on the relative number of shares of Common Stock then held by each such
holder, and such additional shares of Common Stock which any such holder or
holders propose to sell shall not be included in any calculation made pursuant
to the second sentence of this Section 6(b) for the purpose of determining the
number of shares of Common Stock which the Stockholder will be permitted to
include in a proposed Sale. The Stockholders may sell in the proposed Sale
additional shares of Common Stock owned by them equal to any remaining Eligible
Shares which will not be included in the proposed Sale pursuant to the
foregoing.
(c) Each Stockholder participating in the proposed Sale shall
deliver to the Company, as agent for such participating Stockholder, for
transfer to the proposed acquiror one or more certificates, properly endorsed
for transfer or accompanied by stock transfer powers duly endorsed for transfer,
with all stock transfer taxes paid and stamps affixed, that represent the number
of shares of Common Stock that such Stockholder elects to dispose of pursuant to
Section 6(b). The consummation of such proposed Sale shall be subject to the
sole discretion of the Selling Stockholder, who shall have no liability or
obligation whatsoever to any other Stockholder participating therein other than
to obtain for such Stockholder the same terms and conditions as those set forth
in the Notice of Intention to Sell or any Amended Notice.
(d) A stock certificate or certificates representing the number of
shares of Common Stock to be disposed of by any Stockholder pursuant to Section
6(b) hereof shall be transferred by the Company to the purchaser upon the
consummation of the Sale pursuant to the terms and conditions specified in the
Notice of Intention to Sell or the Amended Notice and the Company shall promptly
thereafter remit to such Stockholder (i) that portion of the proceeds of the
Sale to which such Stockholder is entitled by reason of such participation and
(ii) a stock certificate representing any balance of shares of Common Stock that
were not so disposed of (or all shares of Common Stock, in the event the
proposed Sale is not consummated).
(e) Anything herein to the contrary notwithstanding, no tag-along
rights of any Stockholder shall apply hereunder with respect to (i) a transfer
by any other Stockholder to an Affiliate of such Stockholder; (ii) any
distributions or transfers by a Stockholder which is a partnership to its
partners (including any of its limited partners);
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(iii) in the case of a Stockholder who is an individual, transfer by such
Stockholder to the spouse or lineal descendants of such Stockholder, including,
without limitation, transfer by bequest or devise, or to a trust or trusts for
the benefit of such Stockholder or any of the foregoing; or (iv) transfers made
in connection with a public offering; provided that in cases (i), (ii) or (iii),
such transferee agrees to become a party to this Agreement.
Section 7. Covenant Not to Compete. In consideration of the Company
entering into this Agreement with the Stockholders, each of KKR Fund, WCAS VII
and their respective affiliated investment vehicles agrees effective as of the
date hereof, for so long as such Stockholder owns any shares of the Company and
for a period of one year thereafter (the "Noncompete Period"), such Stockholder
shall not, directly or indirectly, engage in any business which principally
engages in owning or managing cardiac care hospitals, centers or clinics in the
United States. For purposes of this Agreement, the phrase "directly or
indirectly engage in" shall include any direct or indirect ownership or profit
participation interest in such enterprise, whether as an owner, stockholder,
partner, joint venturer or otherwise (other than an ownership position of less
than 5% in any company whose shares of stock are publicly traded); provided,
however, that nothing in this Agreement shall prevent KKR Fund or WCAS VII or
any of their respective Affiliates from owning or having a financial interest in
any general acute care hospitals, centers or clinics.
Section 8. Legend on Stock Certificates. Each certificate representing
shares of Common Stock shall, conspicuously bear the following legend until such
time as the shares represented thereby are no longer subject to the provisions
hereof:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE
PROVISIONS OF THE STOCKHOLDERS' AGREEMENT DATED AS OF JULY
31, 1998 BETWEEN MEDCATH HOLDINGS, INC. (THE "COMPANY") AND
THE STOCKHOLDER NAMED ON THE FACE HEREOF, A COPY OF WHICH IS
ON FILE WITH THE SECRETARY OF THE COMPANY."
The Company covenants that it shall keep a copy of this Agreement on
file at the address listed in Section 16 for the purpose of furnishing copies to
the parties hereto.
Section 9. Duration of Agreement. This Agreement shall terminate upon
the earliest to occur of (i) the sale, lease or transfer, whether direct or
indirect, of all or substantially all of the assets of the Company and its
subsidiaries, taken as a whole, in one transaction or a series of related
transactions, to any person or persons, or (ii) with respect to any Stockholder,
the date on which such Stockholder no longer owns any shares of Common Stock;
provided, however, that the obligations of a Stockholder set forth in Section 7
hereof shall survive any termination of this Agreement pursuant to this Section
9.
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For purposes of this Section 9: (i) the term "person" shall have the
meaning set forth in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), whether or not applicable, (ii) the term
"beneficial owner" shall have the meaning set forth in Rules 13d-3 and 13d-5
under the Exchange Act, whether or not applicable, except that a person shall be
deemed to have "beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time or upon the occurrence of certain events and (iii) any
person will be deemed to beneficially own any voting stock of the Company so
long as such person beneficially owns, directly or indirectly, in the aggregate
a majority of the voting stock of a registered holder of the voting stock of the
Company.
Section 10. Management. Notwithstanding anything to the contrary in
Section 1 hereof, on and after the date hereof and for so long as it owns any
equity or debt securities of the Company, each of KKR Fund and WCAS VII shall
have the right to elect at least one member of the Board of Directors of the
Company and shall also have the right to substantially participate in and
substantially influence the conduct of the Company's management and its business
through such Stockholder's representation on the Company's Board of Directors.
Section 11. Nondisclosure of Confidential Information. (a) At any time
during or after the term of this Agreement, none of the Stockholders shall,
without the prior written consent of the Company, use, divulge, disclose or make
accessible to any other person, firm, partnership, corporation or other entity
any Confidential Information (as hereinafter defined) pertaining to the business
of the Company or any of its subsidiaries, except (i) while such Stockholder
owns shares of Common Stock, in the business of and for the benefit of the
Company, (ii) as determined in such Stockholder's sole discretion, to providers
or prospective providers of financing to the Stockholder, (iii) to any general
or limited partners or members (if applicable) of such Stockholder, or any of
their respective partners or members or (iv) when required to do so by a court
of competent jurisdiction, by ally governmental agency having supervisory
authority over the business of the Company, or by an administrative body or
legislative body (including a committee thereof) with jurisdiction to order such
Stockholder to divulge, disclose or make accessible such information; provided,
that notwithstanding the provisions of clause (iii) above, no Stockholder shall
divulge, disclose or make accessible to any limited partner of such Stockholder
or ally limited partner of any member of such Stockholder Confidential
Information regarding the markets in which the Company is considering or engaged
in market development activities or the identities of prospective joint venture
partners. For purposes of this Section 11(a), "Confidential Information" shall
mean non-public information concerning the financial data, strategic business
plan and other non-public, proprietary and confidential information of the
Company, its subsidiaries or their respective subsidiaries as in existence as of
the date of the termination of this Agreement that, in any case, is not
otherwise available to the public (other than by the Stockholder's breach of the
terms hereof).
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(b) Notwithstanding any other provision of this Agreement, the
Company shall be the only party entitled to enforce any rights or obligations
arising pursuant to Section 11(a).
Section 12. Representations and Warranties. Each Stockholder, severally
and not jointly, represents and warrants to the Company and the other
Stockholders as follows:
(a) The execution, delivery and performance of this Agreement by
such Stockholder will not violate any provision of applicable
law, any order of any court or other agency of government, or
any provision of any indenture, agreement or other instrument
to which such Stockholder or any of its or his properties or
assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other
instrument.
(b) This Agreement has been duly executed and delivered by such
Stockholder, and when executed by the other parties hereto
will constitute the legal, valid and binding obligation of
such Stockholder, enforceable in accordance with its terms.
Section 13. Headings. Headings of articles, sections and paragraphs of
this Agreement are inserted for convenience of reference only and shall not
affect the interpretation or be deemed to constitute a part hereof.
Section 14. Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein shall, for any reason, be held to be invalid, illegal or unenforceable,
such illegality, invalidity or unenforceability shall not affect any other
provisions of this Agreement.
Section 15. Benefits of Agreement. Nothing expressed by or mentioned in
this Agreement is intended or shall be construed to give any person other than
the parties hereto and their respective successors and permitted assigns any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any position herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective successors and permitted
assigns; provided, however, that the Management Contributors shall be entitled
to rights as third-party beneficiaries with respect to the provisions of Section
1 hereof (other than the provisos in clauses (b)(i) and (b)(ii) of Section 1).
Notwithstanding anything in this Section 15 to the contrary, subject to
compliance with the terms of this Agreement, each Stockholder shall have the
right to assign its interests hereunder to any transferee of the capital stock
of the Company held by such Stockholder in compliance with this Agreement;
provided, however, that the rights of a Stockholder to designate directors
pursuant to Section 1 are limited to the parties hereto and shall not be
assigned or transferred to any transferee; and provided, further, that any
transferee shall agree in writing with the parties hereto to be bound by, and to
comply with, all applicable provisions of this Agreement and to be deemed to be
a Stockholder for purposes of this
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Agreement. In addition, each Stockholder shall have the right, without the
consent of the other parties hereto, to assign its rights as an Offeree
Stockholder under Section 5 to any Affiliate of such Stockholder.
Section 16. Notices. Any notice or other communications required or
permitted hereunder shall be deemed to be sufficient and received if contained
in a written instrument delivered in person or by courier or duly sent by first
class certified mail, postage prepaid, or by facsimile addressed to such party
at the address or facsimile number set forth below:
(1) if to the Company, to it at:
MedCath Holdings, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxxx X. Post
Facsimile: 000-000-0000
(2) if to KKR Fund, to it at:
x/x Xxxxxxxx Xxxxxx Xxxxxxx & Co.
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile: 000-000-0000
(3) if to a WCAS Stockholder, to it at:
Welsh, Carson, Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx
Facsimile: 000-000-0000
or, in any case, at such other address or facsimile number as shall have been
furnished in writing by such party to the other parties hereto. All such
notices, requests, consents and other communications shall be deemed to have
been received (a) in the case of personal or courier delivery, on the date of
such delivery, (b) in the case of mailing, on the fifth business day following
the date of such mailing and (c) in the case of facsimile, when received.
Section 17. Modification. Neither this Agreement nor any provision
hereof may be modified, changed, discharged or terminated except by an
instrument in writing signed by the Stockholders; provided, however, that the
provisions of Sections 2 and 7 may be modified, changed, discharged or
terminated only by a written instrument signed by the Stockholders and the
Company, and, in the case of Section 7 only, following a good faith
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determination by the Board of Directors of the Company that any such
modification, change, discharge or termination of the provisions of Section 7
will not have a material adverse effect on the Company; and provided, further,
that the provisions of Section 1 (other than the provisos in clauses (b)(i) and
(b)(ii)) may not be modified, changed, discharged or terminated without the
written consent of the Management Contributors.
Section 18. Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
ENFORCEABLE UNDER, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO TRANSACTIONS TO BE PERFORMED WITHIN THAT STATE.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement is a sealed instrument, all as of the day and year first above
written.
MEDCATH HOLDINGS, INC.
By: /s/ MedCath Holdings, Inc.
--------------------------------------
Name:
Title:
XXXXXXX 0000 LLC
By: KKR 1996 FUND, L.P.,
a Member
By: KKR Associates 1996, L.P.,
its General Partner
By: KKR 1996 GP LLC,
its General Partner
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Member
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WELSH, CARSON, XXXXXXXX
& XXXXX VII, L.P.
By WCAS VII Partners, L.P.
General Partner
By: /s/ illegible signature
--------------------------------------
General Partner
WCAS HEALTHCARE PARTNERS, L.P.
By: WCAS HP PARTNERS
General Partner
By: /s/ illegible signature
--------------------------------------
General Partner
Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxx
Xxxxxx X. Xxxx
Xxxxxx X. XxXxxxxxx
Xxxxxx X. Xxxxxxxxx
Xxxxxxx X. xx Xxxxxx
Xxxx X. Xxxxxxx
By: /s/ illegible signature
-------------------------------------
Name:
Individually and as Attorney-in-Fact
/s/ Xxxxxxxx X. Xxxxxxx
-----------------------------------------
Xxxxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxx
/s/ D. Xxxxx Xxxxxxx
-----------------------------------------
D. Xxxxx Xxxxxxx
/s/ Xxxxx X. Xxxxx
-----------------------------------------
Xxxxx X. Xxxxx
