SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
MedCath Incorporated
_________________________________________________________________
(Name of Issuer)
Common Stock, $.01 par value
_________________________________________________________________
(Title of Class of Securities)
0005840501
_________________________________________________________________
(CUSIP Number)
Paul B. Queally Karen C. Wiedemann, Esq.
Welsh, Carson, Anderson Reboul, MacMurray, Hewitt,
& Stowe Maynard & Kristol
320 Park Avenue 45 Rockefeller Plaza
New York, NY 10022 New York, NY 10111
Tel. (212) 893-9500 Tel. (212) 841-5700
_________________________________________________________________
(Persons Authorized to Receive Notices and Communications)
March 12, 1998
_________________________________________________________________
_ (Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule 13d-
1(b)(3) or (4), check the following: [ ].
<PAGE>
_________________________________________________________________
1) Name of Reporting Person Welsh, Carson,
S.S. or I.R.S. Identification Anderson & Stowe
No. of Above Person V, L.P.
_________________________________________________________________
2) Check the Appropriate Box (a) [ ]
if a Member of a Group (b) [ ]
_________________________________________________________________
3) SEC Use Only
_________________________________________________________________
4) Source of Funds Not Applicable
_________________________________________________________________
5) Check if Disclosure of Not Applicable
Legal Proceedings is
Required Pursuant to
Item 2(d) or 2(e)
_________________________________________________________________
6) Citizenship or Place Delaware
of Organization
_________________________________________________________________
Number of 7) Sole Voting 884,829 shares of
Shares Beneficially Power Common Stock, $.01
Owned by Each par value ("Common
Reporting Person Stock")
With:
8) Shared Voting
Power -0-
________________________________________
9) Sole Disposi- 884,829 shares of
tive Power Common Stock
________________________________________
10) Shared Dis-
positive Power -0-
________________________________________
11) Aggregate Amount Beneficially 884,829 shares of
Owned by Each Reporting Person Common Stock
_________________________________________________________________
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
_________________________________________________________________
13) Percent of Class
Represented by 7.6%
Amount in Row (11)
_________________________________________________________________
14) Type of Reporting
Person PN
<PAGE>
_________________________________________________________________
1) Name of Reporting Person WCAS V Partners
S.S. or I.R.S. Identification
No. of Above Person
_________________________________________________________________
2) Check the Appropriate Box (a) [ ]
if a Member of a Group (b) [ ]
_________________________________________________________________
3) SEC Use Only
_________________________________________________________________
4) Source of Funds Not Applicable
_________________________________________________________________
5) Check if Disclosure of Not Applicable
Legal Proceedings is
Required Pursuant to
Item 2(d) or 2(e)
_________________________________________________________________
6) Citizenship or Place New Jersey
of Organization
_________________________________________________________________
Number of 7) Sole Voting 884,829 shares of
Shares Beneficially Power Common Stock
Owned by Each
Reporting Person
With: ________________________________________
8) Shared Voting
Power -0-
_______________________________________
9) Sole Disposi- 884,829 shares of
tive Power Common Stock
________________________________________
10) Shared Dis-
positive Power -0-
________________________________________
11) Aggregate Amount Beneficially 884,829 shares of
Owned by Each Reporting Person Common Stock
_________________________________________________________________
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
_________________________________________________________________
13) Percent of Class
Represented by 7.6%
Amount in Row (11)
_________________________________________________________________
14) Type of Reporting
Person PN
<PAGE>
______________________________________________________________________
1) Name of Reporting Person Welsh, Carson,
S.S. or I.R.S. Identification Anderson &
No. of Above Person Stowe VII, L.P.
_________________________________________________________________
2) Check the Appropriate Box (a) [ ]
if a Member of a Group (b) [ ]
_________________________________________________________________
3) SEC Use Only
_________________________________________________________________
4) Source of Funds Not Applicable
_________________________________________________________________
5) Check if Disclosure of Not Applicable
Legal Proceedings is
Required Pursuant to
Item 2(d) or 2(e)
_________________________________________________________________
6) Citizenship or Place Delaware
of Organization
_________________________________________________________________
Number of 7) Sole Voting -0-
Shares Beneficially Power
Owned by Each
Reporting Person ________________________________________
With: 8) Shared Voting
Power -0-
________________________________________
9) Sole Disposi- -0-
tive Power
________________________________________
10) Shared Dis-
positive Power -0-
________________________________________
11) Aggregate Amount Beneficially -0-
Owned by Each Reporting Person
_________________________________________________________________
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
_________________________________________________________________
13) Percent of Class
Represented by -0-
Amount in Row (11)
_________________________________________________________________
14) Type of Reporting
Person PN
<PAGE>
_________________________________________________________________
_ 1) Name of Reporting Person WCAS VII
Partners, S.S. or I.R.S. Identification L.P.
No. of Above Person
_________________________________________________________________
2) Check the Appropriate Box (a) [ ]
if a Member of a Group (b) [ ]
_________________________________________________________________
3) SEC Use Only
_________________________________________________________________
4) Source of Funds Not Applicable
_________________________________________________________________
5) Check if Disclosure of Not Applicable
Legal Proceedings is
Required Pursuant to
Item 2(d) or 2(e)
_________________________________________________________________
6) Citizenship or Place Delaware
of Organization
_________________________________________________________________
Number of 7) Sole Voting -0-
Shares Beneficially Power
Owned by Each
Reporting Person ________________________________________
With: 8) Shared Voting
Power -0-
________________________________________
9) Sole Disposi- -0-
tive Power
________________________________________
10) Shared Dis-
positive Power -0-
________________________________________
11) Aggregate Amount Beneficially -0-
Owned by Each Reporting Person
_________________________________________________________________
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
_________________________________________________________________
13) Percent of Class
Represented by -0-
Amount in Row (11)
_________________________________________________________________
14) Type of Reporting
Person PN
<PAGE>
_________________________________________________________________
1) Name of Reporting Person WCAS Capital
S.S. or I.R.S. Identification Partners II, L.P.
No. of Above Person
_________________________________________________________________
2) Check the Appropriate Box (a) [ ]
if a Member of a Group (b) [ ]
_________________________________________________________________
3) SEC Use Only
_________________________________________________________________
4) Source of Funds Not Applicable
_________________________________________________________________
5) Check if Disclosure of Not Applicable
Legal Proceedings is
Required Pursuant to
Item 2(d) or 2(e)
_________________________________________________________________
6) Citizenship or Place Delaware
of Organization
_________________________________________________________________
Number of Shares 7) Sole Voting -0-
Beneficially Power
Owned by Each
Reporting Person
With: ________________________________________
8) Shared Voting
Power -0-
________________________________________
9) Sole Disposi- -0-
tive Power
________________________________________
10) Shared Dis-
positive Power -0-
________________________________________
11) Aggregate Amount Beneficially -0-
Owned by Each Reporting Person
_________________________________________________________________
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
_________________________________________________________________
13) Percent of Class
Represented by -0-
Amount in Row (11)
_________________________________________________________________
14) Type of Reporting
Person PN
<PAGE>
_________________________________________________________________
1) Name of Reporting Person WCAS CP II
S.S. or I.R.S. Identification Partners
No. of Above Person
_________________________________________________________________
2) Check the Appropriate Box (a) [ ]
if a Member of a Group (b) [ ]
_________________________________________________________________
3) SEC Use Only
_________________________________________________________________
4) Source of Funds Not Applicable
_________________________________________________________________
5) Check if Disclosure of Not Applicable
Legal Proceedings is
Required Pursuant to
Item 2(d) or 2(e)
_________________________________________________________________
6) Citizenship or Place New Jersey
of Organization
_________________________________________________________________
Number of Shares 7) Sole Voting -0-
Beneficially Power
Owned by Each
Reporting Person
With: ________________________________________
8) Shared Voting
Power -0-
________________________________________
9) Sole Disposi- -0-
tive Power
________________________________________
10) Shared Dis-
positive Power -0-
________________________________________
11) Aggregate Amount Beneficially -0-
Owned by Each Reporting Person
_________________________________________________________________
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
_________________________________________________________________
13) Percent of Class
Represented by -0-
Amount in Row (11)
_________________________________________________________________
14) Type of Reporting
Person PN
<PAGE>
_________________________________________________________________
1) Name of Reporting Person WCAS Healthcare
S.S. or I.R.S. Identification Partners, L.P.
No. of Above Person
_________________________________________________________________
2) Check the Appropriate Box (a) [ ]
if a Member of a Group (b) [ ]
_________________________________________________________________
3) SEC Use Only
_________________________________________________________________
4) Source of Funds Not Applicable
_________________________________________________________________
5) Check if Disclosure of Not Applicable
Legal Proceedings is
Required Pursuant to
Item 2(d) or 2(e)
_________________________________________________________________
6) Citizenship or Place Delaware
of Organization
_________________________________________________________________
Number of Shares 7) Sole Voting -0-
Beneficially Power
Owned by Each
Reporting Person
With:
________________________________________
8) Shared Voting
Power -0-
________________________________________
9) Sole Disposi- -0-
tive Power
________________________________________
10) Shared Dis-
positive Power -0-
________________________________________
11) Aggregate Amount Beneficially -0-
Owned by Each Reporting Person
_________________________________________________________________
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
_________________________________________________________________
13) Percent of Class
Represented by -0-
Amount in Row (11)
_________________________________________________________________
14) Type of Reporting
Person PN
<PAGE>
_________________________________________________________________
1) Name of Reporting Person WCAS HP Partners
S.S. or I.R.S. Identification
No. of Above Person
_________________________________________________________________
2) Check the Appropriate Box (a) [ ]
if a Member of a Group (b) [ ]
_________________________________________________________________
3) SEC Use Only
_________________________________________________________________
4) Source of Funds Not Applicable
_________________________________________________________________
5) Check if Disclosure of Not Applicable
Legal Proceedings is
Required Pursuant to
Item 2(d) or 2(e)
_________________________________________________________________
6) Citizenship or Place Delaware
of Organization
_________________________________________________________________
Number of Shares 7) Sole Voting -0-
Beneficially Power
Owned by Each
Reporting Person
With:
________________________________________
8) Shared Voting
Power -0-
________________________________________
9) Sole Disposi- -0-
tive Power
________________________________________
10) Shared Dis-
positive Power -0-
________________________________________
11) Aggregate Amount Beneficially -0-
Owned by Each Reporting Person
_________________________________________________________________
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
_________________________________________________________________
13) Percent of Class
Represented by -0-
Amount in Row (11)
_________________________________________________________________
14) Type of Reporting
Person PN
<PAGE>
_________________________________________________________________
1) Name of Reporting Person KKR 1996 Fund L.P.
S.S. or I.R.S. Identification
No. of Above Person
_________________________________________________________________
2) Check the Appropriate Box (a) [ ]
if a Member of a Group (b) [ ]
_________________________________________________________________
3) SEC Use Only
_________________________________________________________________
4) Source of Funds Not Applicable
_________________________________________________________________
5) Check if Disclosure of Not Applicable
Legal Proceedings is
Required Pursuant to
Item 2(d) or 2(e)
_________________________________________________________________
6) Citizenship or Place Delaware
of Organization
_________________________________________________________________
Number of Shares 7) Sole Voting -0-
Beneficially Power
Owned by Each
Reporting Person
With:
________________________________________
8) Shared Voting
Power -0-
________________________________________
9) Sole Disposi- -0-
tive Power
________________________________________
10) Shared Dis-
positive Power -0-
________________________________________
11) Aggregate Amount Beneficially -0-
Owned by Each Reporting Person
_________________________________________________________________
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
_________________________________________________________________
13) Percent of Class
Represented by -0-
Amount in Row (11)
_________________________________________________________________
14) Type of Reporting
Person PN
<PAGE>
_________________________________________________________________
1) Name of Reporting Person KKR Associates
S.S. or I.R.S. Identification 1996 L.P.
No. of Above Person
_________________________________________________________________
2) Check the Appropriate Box (a) [ ]
if a Member of a Group (b) [ ]
_________________________________________________________________
3) SEC Use Only
_________________________________________________________________
4) Source of Funds Not Applicable
_________________________________________________________________
5) Check if Disclosure of Not Applicable
Legal Proceedings is
Required Pursuant to
Item 2(d) or 2(e)
_________________________________________________________________
6) Citizenship or Place Delaware
of Organization
_________________________________________________________________
Number of Shares 7) Sole Voting -0-
Beneficially Power
Owned by Each
Reporting Person
With:
________________________________________
8) Shared Voting
Power -0-
________________________________________
9) Sole Disposi- -0-
tive Power
________________________________________
10) Shared Dis-
positive Power -0-
________________________________________
11) Aggregate Amount Beneficially -0-
Owned by Each Reporting Person
_________________________________________________________________
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
_________________________________________________________________
13) Percent of Class
Represented by -0-
Amount in Row (11)
_________________________________________________________________
14) Type of Reporting
Person PN
<PAGE>
_________________________________________________________________
1) Name of Reporting Person KKR 1996 GP LLC
S.S. or I.R.S. Identification
No. of Above Person
_________________________________________________________________
2) Check the Appropriate Box (a) [ ]
if a Member of a Group (b) [ ]
_________________________________________________________________
3) SEC Use Only
_________________________________________________________________
4) Source of Funds Not Applicable
_________________________________________________________________
5) Check if Disclosure of Not Applicable
Legal Proceedings is
Required Pursuant to
Item 2(d) or 2(e)
_________________________________________________________________
6) Citizenship or Place Delaware
of Organization
_________________________________________________________________
Number of Shares 7) Sole Voting -0-
Beneficially Power
Owned by Each
Reporting Person
With:
________________________________________
8) Shared Voting
Power -0-
________________________________________
9) Sole Disposi- -0-
tive Power
________________________________________
10) Shared Dis-
positive Power -0-
________________________________________
11) Aggregate Amount Beneficially -0-
Owned by Each Reporting Person
_________________________________________________________________
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
_________________________________________________________________
13) Percent of Class
Represented by -0-
Amount in Row (11)
_________________________________________________________________
14) Type of Reporting
Person OO
<PAGE>
Schedule 13D
____________
Item 1. Security and Issuer.
___________________.
This statement relates to the Common Stock, $.01 par
value (the "Common Stock"), of MedCath Incorporated, a North
Carolina corporation (the "Issuer"). The principal executive
offices of the Issuer are located at 7621 Little Avenue, Suite
106, Charlotte, North Carolina 28226.
Item 2. Identity and Background.
_______________________
(a) Pursuant to Rule 13d-1(f)(1)-(2) of Regulation
13D-G of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Act"), the undersigned
hereby file this statement on Schedule 13D on behalf of Welsh,
Carson, Anderson & Stowe V, L.P., a Delaware limited partnership
("WCAS V"), WCAS V Partners, a New Jersey general partnership ("V
Partners"), Welsh, Carson, Anderson & Stowe VII, L.P., a Delaware
limited partnership ("WCAS VII"), WCAS VII Partners, L.P., a
Delaware limited partnership ("VII Partners"), WCAS Capital
Partners II, L.P., a Delaware limited partnership ("WCAS CP II"),
WCAS CP II Partners, a New Jersey general partnership ("CP II
Partners"), WCAS Healthcare Partners, L.P., a Delaware limited
partnership ("WCAS HP"), WCAS HP Partners, a Delaware general
partnership ("HP Partners"), KKR 1996 Fund L.P., a Delaware
limited partnership ("KKR 1996"), KKR Associates 1996 L.P., a
Delaware limited partnership ("KKR Associates"), and KKR 1996 GP
LLC, a Delaware limited liability company ("KKR LLC")
(hereinafter collectively referred to as the "Reporting
Persons").
The Reporting Persons are making this single, joint
filing because they may be deemed to constitute a "group" within
the meaning of Section 13(d)(3) of the Act. The Agreement among
the Reporting Persons to file as a group (the "Group Agreement")
is attached hereto as Exhibit A. Each Reporting Person disclaims
beneficial ownership of all shares of Common Stock other than
those reported herein as being owned by it.
WCAS V and V Partners
_____________________
(b)-(c) The principal business of WCAS V is that of a
private investment partnership. WCAS V's principal business and
principal office address is 320 Park Avenue, Suite 2500, New
York, New York 10022. The sole general partner of WCAS V is
WCAS V Partners, a New Jersey general partnership ("V Partners").
The principal business of V Partners is that of acting as the
general partner of WCAS V. V Partners' principal business and
principal office address is 320 Park Avenue, Suite 2500, New
York, New York 10022. The general partners of V Partners are
citizens of the United States, and their respective principal
business addresses and principal occupations are set forth below.
WCAS VII and VII Partners
_________________________
(b)-(c) The principal business of WCAS VII is that of
a private investment partnership. WCAS VII's principal business
and principal office address is 320 Park Avenue, Suite 2500, New
York, New York 10022. The sole general partner of WCAS VII is
VII Partners. The principal business of VII Partners is that of
acting as the general partner of WCAS VII. VII Partners'
principal business and principal office address is 320 Park
Avenue, Suite 2500, New York, New York 10022. The general
partners of VII Partners are citizens of the United States, and
their respective principal business addresses and principal
occupations are set forth below.
WCAS CP II and CP II Partners
_____________________________
(b)-(c) The principal business of WCAS CP II is that
of a private investment partnership. WCAS CP II's principal
business and principal office address is 320 Park Avenue, Suite
2500, New York, New York 10022. The sole general partner of
WCAS CP II is CP II Partners. The principal business of CP II
Partners is that of acting as the general partner of WCAS CP II.
CP II Partners' principal business and principal office address
is 320 Park Avenue, Suite 2500, New York, New York 10022. The
general partners of CP II Partners are citizens of the United
States, and their respective principal business addresses and
principal occupations are set forth below.
WCAS HP and HP Partners
_______________________
(b)-(c) WCAS HP is a Delaware limited partnership.
The principal business of WCAS HP is that of a private investment
partnership. WCAS HP's principal business and principal office
address is 320 Park Avenue, Suite 2500, New York, New York
10022. The sole general partner of WCAS HP is HP Partners. The
principal business of HP Partners is that of acting as the
general partner of WCAS HP. HP Partners' principal business and
principal office address is 320 Park Avenue, Suite 2500, New
York, New York 10022. The general partners of HP Partners are
citizens of the United States, and their respective principal
business addresses and principal occupations are set forth below.
<PAGE>
General Partners Address Occupation
________________ _______ __________
Patrick J. Welsh Welsh, Carson, Ander- General Partner,
son & Stowe V Partners, VII
320 Park Avenue Partners, CP II
Suite 2500 Partners, and
New York, NY 10022 HP Partners
Russell L. Carson Welsh, Carson, Ander- General Partner,
son & Stowe V Partners, VII
320 Park Avenue Partners, CP II
Suite 2500 Partners, and
New York, NY 10022 HP Partners
Bruce K. Anderson Welsh, Carson, Ander- General Partner,
son & Stowe V Partners, VII
320 Park Avenue Partners, CP II
Suite 2500 Partners
New York, NY 10022
Richard H. Stowe Welsh, Carson, Ander- General Partner,
son & Stowe V Partners, VII
320 Park Avenue Partners, CP II
Suite 2500 Partners
New York, NY 10022
Charles G. Moore, III Welsh, Carson, Ander- General Partner,
son & Stowe V Partners and
320 Park Avenue CP II Partners
Suite 2500
New York, NY 10022
Andrew M. Paul Welsh, Carson, Ander- General Partner,
son & Stowe V Partners, VII
320 Park Avenue Partners, CP II
Suite 2500 Partners
New York, NY 10022
Thomas E. McInerney Welsh, Carson, Ander- General Partner,
son & Stowe V Partners, VII
320 Park Avenue Partners, CP II
Suite 2500 Partners
New York, NY 10022
<PAGE>
Laura VanBuren Welsh, Carson, Ander- General Partner,
son & Stowe V Partners, VII
320 Park Avenue Partners, CP II
Suite 2500 Partners
New York, NY 10022
James B. Hoover Welsh, Carson, Ander- General Partner,
son & Stowe V Partners, VII
320 Park Avenue Partners, CP II
Suite 2500 Partners
New York, NY 10022
Robert A. Minicucci Welsh, Carson, Ander- General Partner,
son & Stowe V Partners, VII
320 Park Avenue Partners, CP II
Suite 2500 Partners
New York, NY 10022
Anthony J. deNicola Welsh, Carson, Ander- General Partner,
son & Stowe VII Partners
320 Park Avenue and CP II
Suite 2500 Partners
New York, NY 10022
Paul B. Queally Welsh, Carson, Ander- General Partner,
son & Stowe VII Partners
320 Park Avenue
Suite 2500
New York, NY 10022
KKR 1996, KKR Associates and KKR LLC
____________________________________
(b)-(c) KKR 1996 is principally engaged in the business
of investing in other companies. KKR 1996's principal business
and principal office address is 9 West 57th Street, New York, New
York 10019. The sole general partner of KKR 1996 is KKR
Associates. KKR Associates is principally engaged in the
business of investing through partnerships in other companies.
KKR Associates' principal business and principal office address
is 9 West 57th Street, New York, New York 10019. The sole
general partner of KKR Associates is KKR LLC. KKR LLC is
principally engaged in the business of investing through
partnerships in other companies. KKR LLC's principal business
and principal office address is 9 West 57th Street, New York, New
York 10019. The managing members of KKR LLC are Messrs. Henry
R. Kravis and George R. Roberts. The other members of KKR LLC
are Messrs. Robert I. MacDonnell, Paul E. Raether, Michael W.
Michelson, James H. Greene, Jr., Michael T. Tokarz, Perry Golkin,
Clifton S. Robbins, Scott M. Stuart and Edward A. Gilhuly. Each
such individual is a citizen of the United States, and the
principal occupation of each is as a managing member or member of
KKR & Co. L.L.C., which is the general partner of Kohlberg Kravis
Roberts & Co. L.P. ("KKR"), a private investment firm. The
principal business address of each of Messrs. Kravis, Raether,
Golkin, Tokarz, Robbins and Stuart is 9 West 57th Street, New
York, New York 10019. The principal business address of each of
Messrs. Roberts, MacDonnell, Michelson, Greene and Gilhuly is
2800 Sand Hill Road, Suite 200, Menlo Park, California 94025.
(d) None of the entities or persons identified in this
Item 2 has, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) None of the entities or persons identified in this
Item 2 has, during the last five years, been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to
such laws.
Item 3. Source and Amount of Funds and Other Consideration.
__________________________________________________
As previously reported in filings with the Securities
and Exchange Commission by WCAS V and WCAS CP II, WCAS V
currently beneficially owns 884,829 shares of Common Stock, as
further described in Item 5 below, which shares were purchased
from the Issuer with the working capital of WCAS V. No
additional shares of Common Stock have been acquired by any of
the Reporting Persons in connection with the Merger Agreement, as
defined and further described in Item 6 below.
Item 4. Purpose of Transaction.
______________________
The Reporting Persons have, through entities organized
specifically for such purpose, entered into the transactions
described herein for the purpose of accomplishing the Merger, as
defined and further described in Item 6 below,
Item 5. Interest in Securities of the Issuer.
____________________________________
The following information is based on a total of
11,669,359 shares of Common Stock outstanding as of February 10,
1998, as reported in the Issuer's Quarterly Report on Form 10-Q
for the period ended December 31, 1997, which was filed on
February 11, 1998:
<PAGE>
(a)
WCAS V and V Partners
_____________________
WCAS VI owns 884,829 shares of Common Stock, or
approximately 7.6% of the Common Stock outstanding. V
Partners, as the general partner of WCAS V, may be deemed to
beneficially own the securities owned by WCAS V.
WCAS VII and VII Partners
_________________________
WCAS VII and VII Partners own no shares of Common
Stock.
WCAS CP II and CP II Partners
_____________________________
WCAS CP II and CP II Partners own no shares of Common
Stock.
WCAS HP and HP Partners
_______________________
WCAS HP and HP Partners own no shares of Common Stock.
General Partners of V Partners, VII Partners, CP
II Partners and HP Partners
_________________________________________________
(i) Patrick J. Welsh owns 81,348 shares of Common
Stock, or approximately 0.7% of the Common Stock
outstanding.
(ii) Russell L. Carson owns 81,171 shares of Common
Stock, or approximately 0.7% of the Common Stock
outstanding.
(iii) Bruce K. Anderson owns 81,171 shares of Common
Stock, or approximately 0.7% of the Common Stock
outstanding.
(iv) Richard H. Stowe owns 22,317 shares of Common
Stock, or approximately 0.2% of the Common Stock
outstanding.
(v) Charles G. Moore, III owns 13,459 shares of Common
Stock, or less than 0.1% of the Common Stock outstanding.
(vi) Andrew M. Paul beneficially owns an aggregate
23,438 shares of Common Stock (including 1,088 shares held
in trust accounts for the benefit of his minor children), or
approximately 0.2% of the Common Stock outstanding.
(vii) Thomas E. McInerney owns 20,275 shares of Common
Stock, or approximately 0.2% of the Common Stock
outstanding.
(viii) Laura VanBuren owns 1,889 shares of Common
Stock, or less than 0.1% of the Common Stock outstanding.
(ix) James B. Hoover owns 13,873 shares of Common
Stock, or less than 0.1% of the Common Stock outstanding.
(x) Robert A. Minicucci owns 8,618 shares of Common
Stock, or less than 0.1% of the Common Stock outstanding.
(xi) Anthony J. deNicola owns 1,227 shares of Common
Stock, or less than 0.1% of the Common Stock outstanding.
KKR 1996, KKR Associates and KKR LLC
____________________________________
KKR 1996, KKR Associates and KKR LLC own no shares of
Common Stock.
(b) The general partners of V Partners may be deemed
to share the power to vote or direct the voting of and to dispose
or direct the disposition of the shares owned by WCAS V. Each of
the general partners of V Partners disclaim beneficial ownership
of all shares other than the shares he or she owns directly or by
virtue of his or her indirect pro rata interest, as a partner of
V Partners in the shares owned by WCAS V.
(c) Except as described in this statement, none of the
entities or persons named in Item 2 has effected any transaction
in the Issuer's securities in the past 60 days.
(d) Except as described in this statement, no person
has the power to direct the receipt of dividends on or the
proceeds of sales of the shares of Common Stock owned by WCAS V.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities
of the Issuer.
__________________________________________
WCAS VII, WCAS CP II, WCAS HP and KKR 1996 have entered
into an understanding pursuant to which they have made a joint
committment to fund MedCath Holdings, Inc., a newly-formed
Delaware corporation ("Parent"). The Issuer has entered into an
Agreement and Plan of Merger dated as of March 12, 1998 by and
among the Issuer, Parent and MCTH Acquisition Inc., a North
Carolina Corporation ("Acquiror") (the "Merger Agreement").
The Merger Agreement is attached hereto Exhibit B, and any
description thereof is qualified in its entirety by reference
thereto. Parent is the sole shareholder of Acquiror. The Merger
Agreement provides for, among other things, the merger of Aquiror
with and into the Issuer (the "Merger"). Pursuant to the terms
of the Merger Agreement, each issued and outstanding share of the
Issuer's Common Stock will be cancelled, extinguished and
converted automatically into the right to receive $19.00 in cash,
payable by Parent or Acquiror to the holder thereof. Upon
effectiveness of the Merger the separate corporate existence of
Acquiror will cease, and the Issuer is to be its successor and
the surviving corporation.
Item 7. Material to Be Filed as Exhibits.
________________________________
Exhibit A - Group Agreement (Appears at Page 23)
Exhibit B - Merger Agreement (Appears at Page 25)
<PAGE>
Signature:
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth in
this statement is true, complete and correct.
WELSH, CARSON, ANDERSON & STOWE V, L.P.
By: WCAS V Partners, General Partner
By___/s/_Laura_VanBuren_________________
General Partner
WCAS V PARTNERS
By___/s/_Laura_VanBuren_________________
General Partner
WELSH, CARSON, ANDERSON & STOWE VII, L.P.
By: WCAS VII Partners, L.P., General Partner
By___/s/_Laura_VanBuren_________________
General Partner
WCAS VII PARTNERS, L.P.
By___/s/_Laura_VanBuren_________________
General Partner
WCAS CAPITAL PARTNERS II, L.P.
By: WCAS CP II Partners, General Partner
By____/s/_Laura_VanBuren_______________
General Partner
WCAS CP II PARTNERS
By____/s/_Laura_VanBuren_______________
General Partner
WCAS HEALTHCARE PARTNERS, L.P.
By: WCAS HP Partners, General Partner
By_____/s/_Laura_VanBuren______________
Attorney-in-Fact
WCAS HP PARTNERS
By_____/s/_Laura_VanBuren______________
Attorney-in-Fact<PAGE>
KKR 1996 FUND L.P.
By: KKR Associates 1996 L.P., General Partner
By: KKR 1996 GP LLC, General Partner
By____/s/_Edward_A._Gilhuly___________________
Member
KKR Associates 1996 L.P.
By: KKR 1996 GP LLC, General Partner
By___/s/_Edward_A._Gilhuly____________________
Member
KKR 1996 GP LLC
By___/s/_Edward_A._Gilhuly____________________
Member
Dated: March 20, 1998
<PAGE>
EXHIBIT A
JOINT FILING AGREEMENT
The undersigned hereby agree that the statement on Schedule
13D to which this Agreement is annexed as Exhibit A is filed on behalf
of each of them in accordance with the provisions of Rule 13d-1(f)
under the Securities Exchange Act of 1934, as amended.
WELSH, CARSON, ANDERSON & STOWE V, L.P.
By: WCAS V Partners, General Partner
By___/s/_Laura_VanBuren__________________
__ General Partner
WCAS V PARTNERS
By___/s/_Laura_VanBuren__________________
General Partner
WELSH, CARSON, ANDERSON & STOWE VII, L.P.
By: WCAS VII Partners, L.P., General Partner
By___/s/_Laura_VanBuren_________________
General Partner
WCAS VII PARTNERS, L.P.
By___/s/_Laura_VanBuren_________________
General Partner
WCAS CAPITAL PARTNERS II, L.P.
By: WCAS CP II Partners, General Partner
By____/s/_Laura_VanBuren_______________
General Partner
WCAS CP II PARTNERS
By____/s/_Laura_VanBuren_______________
General Partner
WCAS HEALTHCARE PARTNERS, L.P.
By: WCAS HP Partners, General Partner
By_____/s/_Laura_VanBuren______________
Attorney-in-Fact
WCAS HP PARTNERS
By_____/s/_Laura_VanBuren______________
Attorney-in-Fact
KKR 1996 FUND L.P.
By: KKR Associates 1996 L.P., General Partner
By: KKR 1996 GP LLC, General Partner
By___/s/_Edward_A._Gilhuly____________________
Member
KKR Associates 1996 L.P.
By: KKR 1996 GP LLC, General Partner
By___/s/_Edward_A._Gilhuly____________________
Member
KKR 1996 GP LLC
By___/s/_Edward_A._Gilhuly____________________
Member
Dated: March 20, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of
March 12, 1998 by and among MEDCATH INCORPORATED, a North Carolina
corporation ("MedCath"), MCTH ACQUISITION INC., a North Carolina
corporation ("Acquiror"), and MEDCATH HOLDINGS, INC., a Delaware
corporation (the "Parent"), which is the sole shareholder of Acquiror.
RECITALS
The board of directors of MedCath and Acquiror deem it
advisable for the mutual benefit of MedCath and Acquiror and their
respective shareholders, respectively, that Acquiror be merged with and
into MedCath (the "Merger") upon the terms and subject to the
conditions set forth in the Plan of Merger (the "Plan of Merger"),
which is set forth in the Articles of Merger in substantially the form
attached hereto as Exhibit A (the "Articles of Merger"), and in
accordance with the North Carolina Business Corporation Act ("North
Carolina Law").
The boards of directors of the Parent and Acquiror have
approved and adopted this Agreement. The board of directors and
Strategic Options Committee of MedCath have adopted this Agreement and
have resolved, subject to the terms of this Agreement, to recommend to
the shareholders of MedCath to vote to approve this Agreement in
conjunction with their approval of the Plan of Merger.
In consideration of the mutual covenants, agreements,
representations and warranties contained herein, and for the purpose of
setting forth certain terms and conditions of the Merger, and the mode
of carrying the same into effect, MedCath, the Parent and Acquiror
hereby agree as follows:
ARTICLE 1
Merger and Organization
Section 1.1 The Merger.
Acquiror shall be merged with and into MedCath at the
Effective Time (as defined below), upon the terms and subject to the
conditions hereinafter set forth, as permitted by and in accordance
with North Carolina Law. Acquiror and MedCath are herein sometimes
referred to as the "Constituent Corporations", and MedCath, which shall
be the surviving corporation following the effectiveness of the Merger,
is sometimes referred to herein as the "Surviving Corporation".
Section 1.2 Effective Time.
If this Agreement is not terminated pursuant to Article 8
hereof, as soon as practicable after all conditions to the Merger set
forth in Article 7 hereof shall have been satisfied or waived, MedCath
and Acquiror shall cause the Articles of Merger to be executed,
acknowledged and filed with the Secretary of State of the State of
North Carolina as provided in North Carolina Law. The Merger shall be
consummated and the closing of the transactions contemplated by this
Agreement (the "Closing") shall occur immediately upon the filing of
the Articles of Merger with the Secretary of State of the State of
North Carolina (the date and time of such filing and Closing being
referred to herein as the "Effective Time"). The Closing shall take
place at Simpson Thacher & Bartlett, 425 Lexington Avenue, New York,
New York 10017, or at such other place as the parties may mutually
agree.
Section 1.3 Effect of Merger.
The parties agree to the following provisions with respect
to the Merger:
(a) The name of the Surviving Corporation shall from and
after the Effective Time be and continue to be "MedCath Incorporated"
until changed in accordance with applicable law.
(b) The articles of incorporation of MedCath shall be
amended and restated to conform to the articles of incorporation of
Acquiror as in effect immediately prior to the Effective Time;
provided, however, that, at the Effective Time, Article I of the
articles of incorporation of the Surviving Corporation shall be amended
to read as follows: "The name of the corporation is MedCath
Incorporated" and Article II shall be amended to provide that the
number of authorized shares of common stock of the corporation shall be
100.
(c) The bylaws of Acquiror, as in effect immediately prior
to the Effective Time, shall be the bylaws of the Surviving Corporation
until thereafter amended in accordance with law, the articles of
incorporation of the Surviving Corporation and such bylaws.
(d) At the Effective Time, the separate corporate existence
of Acquiror shall cease, and MedCath as the surviving corporation and
successor shall succeed to Acquiror as set forth in Section 55-11-06 of
the North Carolina Law.
(e) The directors of Acquiror immediately prior to the
Effective Time will be the initial directors of the Surviving
Corporation, and the officers of MedCath immediately prior to the
Effective Time will be the initial officers of the Surviving
Corporation, in each case until their successors are elected and
qualified.
(f) If at any time after the Effective Time the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments or assurances or any other acts or things are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest
in, to or under any of the rights, properties or assets of the
Constituent Corporations acquired or to be acquired as a result of the
Merger, or (ii) otherwise to carry out the purposes of this Agreement,
the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name
and on behalf of the Constituent Corporations, all such deeds, bills of
sale, assignments and assurances and do, in the name and on behalf of
the Constituent Corporations, all other acts and things necessary,
desirable or proper to vest, perfect or confirm its right, title or
interest in, to or under any of the rights, properties or assets of the
Constituent Corporations acquired or to be acquired as a result of the
Merger and otherwise to carry out the purposes of this Agreement.
ARTICLE 2
Conversion of Securities at the Effective Time
Section 2.1 Conversion of Securities of MedCath and
Acquiror.
At the Effective Time, pursuant to this Agreement and by
virtue of the Merger and without any action on the part of MedCath,
Acquiror or the holders of any of the following securities:
(a) Each share of common stock, par value $.01 per share,
of MedCath ("MedCath Common Stock") (shares of MedCath Common Stock
being hereinafter collectively referred to as "MedCath Shares" and
individually as a "MedCath Share") issued and outstanding immediately
prior to the Effective Time (other than any MedCath Shares to be
cancelled pursuant to Section 2.1(b) and any Dissenting Shares (as
defined in Section 2.1(d)) shall be cancelled, extinguished and shall
be converted automatically into the right to receive an amount equal to
$19.00 in cash, without interest (the "Cash Merger Consideration"),
payable to the holder thereof, as provided in Section 2.2, upon
surrender of the certificate formerly representing the MedCath Shares
being converted into the right to receive the Cash Merger
Consideration, less any required withholding taxes;
(b) Each MedCath Share held in the treasury of MedCath and
each MedCath Share owned by Acquiror (including MedCath Shares
contributed to the Parent by agreement with the Parent which are in
turn contributed by Parent to Acquiror), if any, immediately prior to
the Effective Time shall be cancelled without any conversion thereof
and no payment or distribution shall be made with respect thereto;
(c) Each share of Acquiror's common stock, $.01 par value
("Acquiror Common Stock"), that is issued and outstanding immediately
prior to the Effective Time shall be converted into one newly issued,
fully paid and nonassessable share of common stock of the Surviving
Corporation;
(d) Notwithstanding anything in this Agreement to the
contrary, shares of MedCath Common Stock issued and outstanding
immediately prior to the Effective Time held by a holder who has the
right, if any, under North Carolina Law, to demand payment for an
appraisal of such shares in accordance with Article 13 of the North
Carolina Law (or any successor provision) ("Dissenting Shares") shall
not be converted into a right to receive the Cash Merger Consideration
(but shall have the rights set forth in Article 13 of the North
Carolina Law (or any successor provision), if applicable) unless such
holder fails to perfect or otherwise loses such holder's right to such
payment or appraisal, if any, pursuant to Article 13 of the North
Carolina Law. If, after the Effective Time, such holder fails to
perfect or loses any such right to appraisal, each such share of such
holder shall be treated as a share that had been converted as of the
Effective Time into the right to receive the Cash Merger Consideration
in accordance with this Section 2.1. MedCath shall give prompt notice
to Acquiror of any notices of dissent, demands for payment of fair
value or other communications or actions received by MedCath with
respect to shares of MedCath Common Stock, and Acquiror shall have the
right to participate in and approve all negotiations and proceedings
with respect thereto. MedCath shall not, except with the prior written
consent of Acquiror, make any payment with respect to, or settle or
offer to settle, any such demands.
Section 2.2 Payment of Cash for MedCath Common Stock.
(a) At the Effective Time, the Parent or Acquiror shall
irrevocably deposit or cause to be deposited with a bank or trust
company to be designated by Acquiror and reasonably satisfactory to
MedCath which is organized and doing business under the laws of the
United States or any state thereof and has a combined capital and
surplus of at least $100,000,000 (the "Disbursing Agent"), as agent for
the holders of shares of MedCath Common Stock, cash in the aggregate
amount required to effect conversion of shares of MedCath Common Stock
into the Cash Merger Consideration at the Effective Time pursuant to
Section 2.1(a) hereof. Pending distribution pursuant to Section 2.2(b)
hereof of the cash deposited with the Disbursing Agent, such cash shall
be held in trust for the benefit of the holders of MedCath Common Stock
and the fund shall not be used for any other purposes, and Acquiror and
Surviving Corporation may direct the Disbursing Agent to invest such
cash, provided that such investments (i) shall be obligations of or
guaranteed by the United States of America, commercial paper
obligations receiving the highest rating from either Moody's Investors
Services, Inc. or Standard & Poor's Corporation, or certificates of
deposit, bank repurchase agreements or bankers acceptances of domestic
commercial banks with capital exceeding $250,000,000 (collectively
"Permitted Investments") or money market funds which are invested
solely in Permitted Investments and (ii) shall have maturities that
will not prevent or delay payments to be made pursuant to Section
2.2(b) hereof. Each holder of a certificate or certificates
representing shares of MedCath Common Stock cancelled on the Effective
Time pursuant to Section 2.1(a) hereof may thereafter surrender such
certificate or certificates to the Disbursing Agent, as agent for such
holder of shares of MedCath Common Stock, which shall effect the
exchange of such certificate or certificates on such holder's behalf
for a period ending six months after the Effective Time. Any interest
and other income resulting from such investments shall be paid to
Acquiror.
(b) After surrender to the Disbursing Agent of any
certificate which prior to the Effective Time shall have represented
any shares of MedCath Common Stock, the Disbursing Agent shall promptly
distribute to the person in whose name such certificate shall have been
registered a check representing the amount of cash into which such
shares of MedCath Common Stock shall have been converted at the
Effective Time pursuant to Section 2.1(a) hereof. Until so surrendered
and exchanged, each such certificate shall, after the Effective Time,
be deemed to represent only the right to receive such cash, and until
such surrender and exchange, no cash shall be paid to the holder of
such outstanding certificate in respect thereof. The Surviving
Corporation shall promptly after the Effective Time cause to be
distributed to such holders appropriate materials to facilitate such
surrender.
(c) If any cash deposited with the Disbursing Agent for
purposes of payment in exchange for shares of MedCath Common Stock
remains unclaimed following the expiration of six (6) months after the
Effective Time, such cash shall be delivered to the Surviving
Corporation by the Disbursing Agent, and thereafter the Disbursing
Agent shall not be liable to any persons claiming any amount of such
cash, and the surrender and exchange shall be effected directly with
the Surviving Corporation (subject to applicable abandoned property,
escheat and similar laws). No interest shall accrue or be payable with
respect to any amounts which any such holder shall be so entitled to
receive. The Surviving Corporation or the Disbursing Agent shall be
authorized to pay the cash attributable to any certificate theretofore
issued which has been lost or destroyed, upon receipt of satisfactory
evidence of ownership of the shares of MedCath Common Stock represented
thereby and of appropriate indemnification.
(d) None of Acquiror, the Surviving Corporation or the
Disbursing Agent shall be liable to any person in respect of any shares
of retained MedCath Common Stock (or dividends or distributions with
respect thereto) or cash delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any
certificates representing shares of MedCath Common Stock shall not have
been surrendered prior to two years after the Effective Time (or
immediately prior to such earlier date on which any cash, if any, in
lieu of fractional shares of retained MedCath Common Stock or any
dividends or distributions with respect to retained MedCath Common
Stock in respect of such certificate would otherwise escheat to or
become the property of any governmental entity), any such cash,
dividends or distributions in respect of such certificate shall, to the
extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any
person previously entitled thereto.
(e) If payment is to be made to a person other than the
person in whose name a surrendered certificate, which prior to the
Effective Time shall have represented any shares of MedCath Common
Stock, is registered, it shall be a condition to such payment that the
certificate so surrendered shall be endorsed or shall otherwise be in
proper form for transfer, and that the person requesting such payment
shall have paid any transfer and other taxes required by reason of such
payment in a name other than that of the registered holder of the
certificate surrendered or shall have established to the satisfaction
of the Surviving Corporation or the Disbursing Agent that such tax
either has been paid or is not payable.
(f) From and after the Effective Time, the holders of
shares of MedCath Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such
shares of MedCath Common Stock except as otherwise provided herein or
by law.
(g) After the Effective Time, there shall be no transfers
on the stock transfer books of the Surviving Corporation of any shares
of MedCath Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates for shares
of MedCath Common Stock are presented to the Surviving Corporation,
they shall be cancelled and promptly exchanged for Cash Merger
Consideration except as provided in Section 2.2(d).
Section 2.3 Exchange of Acquiror Common Stock Certificate.
Immediately after the Effective Time, upon surrender by the
record holder of the certificate, duly endorsed in blank, representing
the shares of Acquiror Common Stock outstanding immediately prior to
the Effective Time, the Surviving Corporation shall deliver to such
record holder a share certificate, registered in such holder's name,
representing the number of shares of common stock of the Surviving
Corporation to which such record holder is so entitled by virtue of
Section 2.1(c). Such certificate will bear a legend restricting the
transferability of such shares of the Surviving Corporation except in
accordance with applicable federal and state securities laws.
ARTICLE 3
Additional Agreements in Connection With the Merger
Section 3.1 Shareholders' Approval.
MedCath shall take all actions reasonably necessary in
accordance with applicable law and its articles of incorporation and
bylaws to convene a meeting of its shareholders as soon as reasonably
practicable for the purpose of considering and approving this Agreement
and the Merger (the "Special Meeting"). In connection with the Special
Meeting, the board of directors of MedCath shall recommend that the
shareholders of MedCath vote to approve this Agreement and the Merger
unless the Strategic Options Committee of such board of directors (the
"Strategic Options Committee") has determined at any time prior to the
Special Meeting in good faith, after consultation with and based upon
the reasonably concluded written advice of counsel to the Strategic
Options Committee, that making such recommendation would violate the
fiduciary duties of the board of directors under applicable law.
Section 3.2 Proxy Materials and Schedule 13E-3.
(a) In connection with the Special Meeting, MedCath shall
prepare and file a preliminary proxy statement relating to the
transactions contemplated by this Agreement and the Merger (the
"Preliminary Proxy Statement") with the United States Securities and
Exchange Commission (the "SEC") and shall use its reasonable best
efforts to respond to the comments of the SEC and to cause a definitive
proxy statement to be mailed to MedCath's shareholders (the "Definitive
Proxy Statement") all as soon as reasonably practicable; provided, that
prior to the filing of each of the Preliminary Proxy Statement and the
Definitive Proxy Statement, MedCath shall consult with Acquiror with
respect to such filings and shall afford Acquiror reasonable
opportunity to comment thereon. Acquiror shall provide MedCath with
any information for inclusion in the Preliminary Proxy Statement and
the Definitive Proxy Statement which may be required under applicable
law and which is reasonably requested by MedCath.
(b) MedCath and any Person that may be deemed to be an
affiliate of MedCath shall prepare and file concurrently with the
filing of the Preliminary Proxy Statement a Statement on Schedule 13E-3
("Schedule 13E-3") with the SEC. If at any time prior to the Special
Meeting any event should occur which is required by applicable law to
be set forth in an amendment of, or supplement to, the Schedule 13E-3,
MedCath and such Person shall file such amendments or supplements.
Section 3.3 Termination of MedCath Stock Option Plans.
Except as disclosed in Item 3.3 of the Disclosure Schedules,
all outstanding stock options issued by MedCath (collectively, the
"Stock Options"), including without limitation those issued under the
MedCath Incorporated Omnibus Stock Plan, the 1992 Incentive Stock
Option Plan and the Outside Director's Stock Option Plan shall
terminate upon the Merger. With respect to each Stock Option not
otherwise terminated by its terms upon the effectiveness of the Merger,
MedCath shall obtain at the earliest practicable date and prior to the
Effective Time the written consent of each holder to the cancellation
of such holders' Stock Options (irrespective of their exercise price
and whether or not then currently exercisable) to take effect on the
Effective Time or shall take appropriate action to amend the relevant
plans to provide for such cancellation. At the Effective Time, the
Surviving Corporation shall pay each holder of Stock Options, to the
extent such Stock Options have not been previously exercised or
cancelled, (x) cash in an amount equal to the product of (i) the
difference between $19.00 and the exercise price of such Stock Options
(but in no event less than 0), multiplied by (ii) the number of shares
of MedCath Common Stock subject to such Stock Options, less (y) the
amount of all applicable withholding taxes; provided, that those
holders of Stock Options that have agreed in writing with Acquiror to
accept options to purchase common stock of the Parent shall not receive
any cash payment with respect to cancelled Stock Options.
Section 3.4 Reasonable Best Efforts; Consents; Other
Filings.
Upon the terms and subject to the conditions herein
provided, and subject to the duties of the board of directors of
MedCath under applicable law, as it or the Strategic Options Committee
may be advised in writing by counsel, each party hereto shall use its
reasonable best efforts to take, or cause to be taken, all reasonable
action and to do, or cause to be done and to assist and cooperate with
the other parties hereto in doing, all things necessary, proper or
advisable under applicable laws and regulations and their respective
articles or certificates of incorporation and bylaws to consummate and
make effective, as soon as reasonably practicable, the transactions
contemplated by this Agreement, subject, however, to the requisite vote
of shareholders of MedCath. Such actions shall include, without
limitation, using its reasonable best efforts to (i) defend any
lawsuits or other legal proceedings, whether judicial or administrative
and whether brought derivatively or on behalf of third parties
(including governmental agencies or officials), challenging this
Agreement, or the consummation of the transactions contemplated thereby
or hereby and (ii) effect all necessary registrations and filings,
including but not limited to any filings required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder (the "HSR Act"), and
submissions of information requested by governmental authorities. Upon
the terms and subject to the conditions hereof, and subject to the
duties of the board of directors of MedCath under applicable law, as
it, or the Strategic Options Committee, may be advised in writing by
counsel, each of the parties hereto shall use its reasonable best
efforts to take, or cause to be taken, all reasonable actions and to
do, or cause to be done, all things necessary to satisfy the other
conditions of Closing set forth herein and to cooperate with all
reasonable requests made by the other party. Without limiting the
generality of the foregoing, and notwithstanding anything in this
Agreement to the contrary, MedCath shall, except with respect to the
agreements as set forth on Item 3.4 of the Disclosure Schedules, obtain
all consents, amendments to or waivers from other parties under the
terms of all leases and other agreements between MedCath and such
parties required as a result of the transactions contemplated by this
Agreement (including the agreements listed in Item 3.8 of the
Disclosure Schedules) the failure of which to obtain would have a
Material Adverse Effect and obtain all necessary consents, approvals
and authorizations as are required to be obtained under any federal or
state law or regulation.
Section 3.5 Financing.
MedCath shall use its reasonable best efforts to cooperate
and assist Acquiror with respect to the Financing (as defined in
Section 6.7).
Section 3.6 Conduct of Business by MedCath Pending the
Merger.
MedCath covenants and agrees that, prior to the Effective
Time or earlier termination of this Agreement as provided herein,
unless Acquiror shall otherwise agree in writing and except as
contemplated by this Agreement:
(a) MedCath shall, and shall cause its subsidiaries to, act
and carry on their respective businesses in the ordinary course of
business substantially consistent with past practice and use its and
their respective reasonable best efforts to preserve substantially
intact their current material business organizations, keep available
the services of their current officers and employees (except for
terminations of employees in the ordinary course of business) and
preserve their material relationships with others having significant
business dealings with them;
(b) MedCath shall not (i) amend its articles of
incorporation or bylaws, or (ii) declare, set aside or pay any dividend
or other distribution or payment in cash, stock or property in respect
of any of its shares of capital stock;
(c) Neither MedCath nor any of its subsidiaries shall (i)
except as set forth in Item 3.6(c) of the Disclosure Schedules, issue,
grant, sell, pledge or transfer or agree or propose to issue, grant,
sell, pledge or transfer any shares of capital stock, stock options,
warrants, securities or rights of any kind or rights to acquire any
such shares, securities or rights of MedCath, any of its subsidiaries
or any successor thereto, (ii) acquire directly or indirectly by
redemption or otherwise any shares of the capital stock of MedCath of
any class or any options, warrants or other rights to purchase any such
shares except as otherwise provided in this Agreement, or (iii) enter
into or modify any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(d) Except as disclosed in Item 3.6(d) of the Disclosure
Schedules, neither MedCath nor any of its subsidiaries shall (i) incur
any indebtedness for borrowed money or guarantee any such indebtedness
of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of MedCath or any of its
subsidiaries, guarantee any debt securities of another person, enter
into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business
consistent with past practice under existing indebtedness agreements,
or (ii) make any loans, advances or capital contributions to, or
investments in, any other person, other than to MedCath or any direct
or indirect wholly-owned subsidiary of MedCath;
(e) Each of MedCath and its subsidiaries shall use its
reasonable best efforts to keep in place its current insurance policies
which are material (either individually or in the aggregate) to the
conduct of their business; and notwithstanding such efforts, if any
such policy is cancelled, MedCath shall use its reasonable best efforts
to replace such policy or policies;
(f) Neither MedCath nor any of its subsidiaries shall make
any material tax election, file any amended Tax Returns or settle or
compromise any material federal, state, local or foreign income tax
liability;
(g) Neither MedCath nor any of its subsidiaries shall make
any material change in its accounting principles or methods except
insofar as may be required by a change in generally accepted accounting
principles;
(h) Neither MedCath nor any of its subsidiaries shall
split, combine or reclassify any capital stock of MedCath or any
subsidiary or issue or authorize the issuance of any other securities
in respect of, in lieu of or substitution for shares of capital stock
of MedCath or any subsidiary;
(i) Neither MedCath nor any of its subsidiaries shall
acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the stock or assets of, or by any
other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof
having a value in excess of $250,000;
(j) Neither MedCath nor any of its subsidiaries shall agree
to any development deals, except to the extent such deals would require
an investment of less than $100,000 individually and $250,000 in the
aggregate;
(k) Except as set forth in Item 3.6(k) of the Disclosure
Schedules, neither MedCath nor any of its subsidiaries shall sell,
lease, license, mortgage or otherwise encumber or subject to any lien
or otherwise dispose of any of its properties or assets other than any
such properties or assets the value of which do not exceed $250,000
individually and $1,000,000 in the aggregate, except sales of inventory
and receivables in the ordinary course of business consistent with past
practice;
(l) Neither MedCath nor any of its subsidiaries shall
acquire or agree to acquire any assets, other than inventory in the
ordinary course of business consistent with past practice, that are
material, individually or in the aggregate, to MedCath and its
subsidiaries taken as a whole, or make or agree to make any capital
expenditures except capital expenditures which, individually or in the
aggregate and taken together with any capital expenditure made between
October 1, 1997 and the date hereof (inclusive), do not exceed the
amount budgeted therefor in MedCath's annual capital expenditures
budget for 1998 previously provided to Acquiror;
(m) Neither MedCath nor any of its subsidiaries shall (x)
pay, discharge or satisfy any material claims (including claims of
stockholders), liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), except for the payment,
discharge or satisfaction of (i) liabilities or obligations in the
ordinary course of business consistent with past practice or in
accordance with their terms as in effect on the date hereof including
without limitation all liabilities disclosed in Item 3.6(d) of the
Disclosure Schedules or (ii) claims settled or compromised to the
extent permitted by Section 3.6(p), or (y) waive, release, grant, or
transfer any rights of material value or modify or change in any
material respect any existing material license, lease, contract or
other document, other than in the ordinary course of business
consistent with past practice;
(n) Neither MedCath nor any of its subsidiaries shall adopt
a plan of complete or partial liquidation or resolutions providing for
or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(o) Neither MedCath nor any of its subsidiaries shall enter
into any new collective bargaining agreement or any successor
collective bargaining agreement to any collective bargaining agreement;
(p) Neither MedCath nor any of its subsidiaries shall
settle or compromise any litigation (whether or not commenced prior to
the date of this Agreement) other than settlements or compromises of
litigation where the settlement is limited solely to monetary payment
and the release of claims and the amount paid (after giving effect to
insurance proceeds actually received) in settlement or compromise does
not exceed $250,000, provided that the aggregate amount paid in
connection with the settlement or compromise of all such litigation
matters shall not exceed $350,000;
(q) Neither MedCath nor any of its subsidiaries shall
engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any of
MedCath's affiliates, including, without limitation, any transactions,
agreements, arrangements or understandings with any affiliate or other
Person covered under Item 404 of SEC Regulation S-K that would be
required to be disclosed under such Item 404 other than such
transactions of the same general nature, scope and magnitude as are
disclosed in documents filed by MedCath with the SEC as described in
Section 4.6;
(r) Neither MedCath nor any of its subsidiaries shall adopt
or amend (except as may be required by law) any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or
other arrangement for the benefit or welfare of any employee, director
or former director or employee or, other than increases for individuals
and arrangements for new employees (other than, in each case, officers
and directors) in the ordinary course of business consistent with past
practice, increase the compensation or fringe benefits of or loan or
advance money or other property to any director, employee or former
director or employee or pay any benefit not required by any existing
plan, arrangement or agreement;
(s) Neither MedCath nor any of its subsidiaries shall grant
to employees any new or modified severance (except for increases in
severance granted to employees other than officers in the ordinary
course of business which are immaterial individually and in the
aggregate) or termination arrangement or increase or accelerate any
benefits payable under its severance or termination pay policies in
effect on the date hereof;
(t) Neither MedCath nor any of its subsidiaries shall
effectuate a "plant closing" or "mass layoff", as those terms are
defined in the Worker Adjustment and Retraining Notification Act of
1988 ("WARN"), affecting in whole or in part any site of employment,
facility, operating unit or employee of MedCath or any subsidiary,
without notifying Acquiror or its affiliates in advance and without
complying with the notice requirements and other provisions of WARN;
and
(u) Neither MedCath nor any of its subsidiaries shall
authorize any, or commit or agree to do any of the things described in
clauses (a) through (t) or anything which would make any representation
or warranty of MedCath in this Agreement untrue or incorrect in any
material respect as of the date hereof and as of the Effective Time, as
if made on such date, except to the extent such representations and
warranties expressly relate to a specific date (in which case such
representations and warranties shall be true and correct as of such
date).
Section 3.7 MedCath's Notification of Certain Matters.
MedCath shall, promptly upon obtaining knowledge of any of
the following occurring subsequent to the date of this Agreement and
prior to the Effective Time, notify Acquiror of: (a) any material
claims, actions, proceedings, tax audits or investigations commenced
or, to its knowledge, threatened in writing, involving or affecting
MedCath or any of its subsidiaries or any of their properties or
assets, which if adversely resolved would have a Material Adverse
Effect or which could reasonably be expected to prevent, hinder or
materially delay the ability of MedCath to consummate the Merger or the
transactions contemplated by this Agreement, (b) any notice of, or
other communication relating to, a default or event which, with notice
or lapse of time or both, would become a default, received by MedCath
or any of its subsidiaries, under any agreement, lease, indenture or
instrument to which MedCath or any of its subsidiaries is a party or is
subject where such a default would have a Material Adverse Effect on
MedCath or (c) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement.
Section 3.8 Access to MedCath's Books and Records.
Upon reasonable notice, MedCath shall afford Acquiror and
its representatives and representatives of all prospective sources of
Financing reasonable access during normal business hours to the
properties, books, records and personnel of MedCath and its
subsidiaries and such additional information concerning the business
and properties of MedCath and its subsidiaries as Acquiror and its
representatives may reasonably request. Unless and until MedCath
otherwise agrees, Acquiror will obtain appropriate undertakings from
the representatives of all prospective sources of Financing to hold in
confidence all confidential information and not use any confidential
information except in connection with the transactions contemplated
hereby and the Financing, all in accordance with that certain letter
agreement dated October 1, 1997 by and between Kohlberg Kravis Roberts
& Co., L.P. and MedCath, the terms of which are incorporated herein by
reference (the "Confidentiality Agreement"). The parties acknowledge
that the Confidentiality Agreement shall remain in full force and
effect until the Closing.
Section 3.9 Acquisition Proposals.
Any offer or proposal by any corporation, partnership,
person or other entity or group concerning any tender or exchange
offer, proposal for a merger, share exchange, recapitalization,
consolidation or other business combination involving MedCath or any of
its subsidiaries or divisions, or any proposal or offer to acquire in
any manner, directly or indirectly, a significant equity interest in,
or a substantial portion of the assets of, MedCath or any of its
subsidiaries, other than pursuant to the transactions contemplated by
this Agreement, is hereby defined as an "Acquisition Proposal".
MedCath shall not, nor shall it permit any of its officers, directors,
affiliates, representatives or agents to, directly or indirectly, (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 other action to facilitate an Acquisition
Proposal. From and after the date hereof, MedCath, its subsidiaries
and all officers, directors, employees of, and all investment bankers,
attorneys and other advisors and representatives of, MedCath and its
subsidiaries shall cease doing any of the foregoing. Notwithstanding
the foregoing, MedCath or any such persons may, directly or indirectly,
subject to a confidentiality agreement substantially no less favorable
taken as a whole to MedCath than the Confidentiality Agreement, furnish
to any party information and access in response to a request for
information or access made incident to an Acquisition Proposal made
after the date hereof and may participate in discussions and negotiate
with such party concerning any written Acquisition Proposal made after
the date hereof (provided neither MedCath nor any such Person, after
the date hereof, solicited, initiated or encouraged such Acquisition
Proposal), if the board of directors of MedCath, or in the event of an
Acquisition Proposal in which a member of such Board of Directors or
any affiliate thereof has an interest which would be adverse to MedCath
(an "Interested Party Proposal"), then the Strategic Options Committee,
shall have determined in good faith based upon the reasonably concluded
written advice of outside counsel to MedCath or counsel to the
Strategic Options Committee, as the case may be, that failing to take
such action would violate MedCath's board of directors' fiduciary duty
under applicable law. During the term of this Agreement, the board of
directors of MedCath shall notify Acquiror immediately if any
Acquisition Proposal is made and shall in such notice indicate in
reasonable detail the identity of the offeror and the terms and
conditions of such Acquisition Proposal and shall keep Acquiror
promptly advised of all material developments which could reasonably be
expected to culminate in the board of directors withdrawing, modifying
or amending its recommendation of the Merger and the other transactions
contemplated by this Agreement. During the term of this Agreement,
MedCath shall not waive or modify any provisions contained in any
confidentiality agreement entered into relating to a possible acquisi-
tion (whether by merger, stock purchase, asset purchase or otherwise)
or recapitalization of MedCath.
Section 3.10Director and Officer Protection.
The Surviving Corporation shall indemnify, defend and hold
harmless the present and former directors, officers, employees and
agents of MedCath and its subsidiaries (each an "Indemnified Party")
against all costs and expenses (including reasonable attorney's fees),
judgments, fines, losses, claims, damages, liabilities and settlement
amounts relating to actions or omissions arising out of the Indemnified
Party's being a director, officer, fiduciary, employee or agent of
MedCath at or prior to the Effective Time (including the transactions
contemplated by this Agreement) to the fullest extent permitted under
applicable law, whether or not the Surviving Corporation is insured
against any such matter (and shall pay any expenses in advance of the
final disposition of such action or proceeding to each Indemnified
Party as such expenses are incurred to the fullest extent permitted
under applicable law, provided MedCath or the Surviving Party, as the
case may be, receives from the Indemnified Party to whom expenses are
advanced an undertaking to repay such advances required under
applicable law). Without limiting the foregoing, in any case in which
approval by the Surviving Corporation is required to effectuate any
indemnification, the Surviving Corporation shall direct, at the
election of the Indemnified Party, that the determination of any such
approval shall be made by independent counsel mutually agreed to by the
Surviving Corporation and the Indemnified Party. The Surviving
Corporation shall maintain in effect for a period of six years after
the Effective Time directors' and officers' liability insurance with
respect to matters occurring prior to the Effective Time which
insurance shall contain terms and conditions no less advantageous than
are contained in MedCath's current directors' and officers' liability
insurance policy; provided, the Surviving Corporation shall not be
required to pay an annual premium for such insurance in excess of two
times the current annual premium. In the event MedCath or the
Surviving Corporation or any of their respective successors or assigns
(i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers all or substantially all of its properties
and assets to any person, then, and in each case, proper provision
shall be made so that the successors and assigns of MedCath or the
Surviving Corporation, as the case may be, or, at the Parent's option,
the Parent shall assume the obligations set forth in this Section 3.10.
ARTICLE 4
Representations and Warranties of MedCath
MedCath represents and warrants to Acquiror and Parent as
follows:
Section 4.1 Organization and Good Standing.
Each of MedCath and its subsidiaries is a duly organized and
validly existing corporation in good standing under the laws of the
state of its incorporation with all requisite power and authority
(corporate and other) to own, lease and operate its properties and
conduct its business and is duly qualified and in good standing as a
foreign corporation authorized to do business in each of the
jurisdictions in which the character of the properties owned or held
under lease by it or the nature of the business transacted by it makes
such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect on MedCath and its
subsidiaries, taken as a whole. MedCath has heretofore delivered to
Acquiror accurate and complete copies of its and its subsidiaries'
certificates or articles of incorporation and bylaws, as currently in
effect. For the purposes of this Agreement "Material Adverse Change"
or "Material Adverse Effect" means any change or effect that either
individually or in the aggregate is materially adverse to the business,
assets, operations, properties, financial condition or results of
operations of MedCath and its subsidiaries taken as a whole and is
exclusive of any claims or litigation involving MedCath and its
subsidiaries relating to the absence of the consents, waivers or
approvals relating to the Merger with respect to the agreements set
forth in Item 3.4 of the schedules provided by MedCath to Acquiror and
Parent ("Disclosure Schedules"); provided that for the purposes of this
Agreement, "Material Adverse Effect" shall exclude the effect on the
business, assets, operations, properties, financial condition or
results in operations (i) from the delay until July 1, 1998 in the
opening of the heart hospital in Phoenix, to the extent such delay was
caused by the flood that occurred on January 18, 1998 and (ii) from the
financial performance of the heart hospital in Tucson, other than
changes in financial performance from and after the date hereof when
compared to the financial performance prior to the date hereof;
provided that nothing in the immediately prior proviso shall be
interpreted to mean that delays in the opening of the heart hospital in
Phoenix beyond July 1, 1998 or further changes in the financial
performance of the Tucson heart hospital are per se Material Adverse
Changes or Material Adverse Effects.
Section 4.2 Authorization; Binding Agreement.
MedCath has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
and validly authorized by MedCath's board of directors and, except for
the approval of this Agreement and the Merger by the shareholders of
MedCath in accordance with the North Carolina Law and the articles of
incorporation and bylaws of MedCath, no other corporate proceedings on
the part of MedCath are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by MedCath, and subject to the requisite
approval of the shareholders of MedCath, constitutes the legal, valid
and binding agreement of MedCath, enforceable against MedCath in
accordance with its terms, except as such enforceability may be limited
by (a) bankruptcy, insolvency, reorganization, moratorium or other
laws, now or hereafter in effect, relating to or limiting creditors'
rights generally, and (b) general principles of equity (whether
considered in an action in equity or at law) which provide, among other
things, that the remedies of specific performance and injunctive and
other forms of equitable relief are subject to equitable defenses and
to the discretion of the court before which any proceedings therefor
may be brought.
Section 4.3 Capitalization.
The authorized capital stock of MedCath consists of
20,000,000 shares of MedCath Common Stock, and 2,348,167 shares of
Preferred Stock, 300,000 of which have been designated as Series A
Preferred Stock, 200,000 of which have been designated as Series A
Junior Participating Preferred Stock, 20,000 of which have been
designated as Series B Preferred Shares and 28,167 of which have been
designated as Series C Preferred Shares "North Carolina Preferred
Stock"). As of March 12, 1998, 11,669,359 shares of MedCath Common
Stock and no shares of North Carolina Preferred Stock were outstanding.
As of the date hereof, 1,506,569 shares of MedCath Common Stock were
reserved for issuance upon exercise of outstanding Stock Options. All
of the outstanding shares of capital stock of MedCath and the
subsidiaries of MedCath have been duly authorized and validly issued
and are fully paid and nonassessable. All issued and outstanding
shares of capital stock of the subsidiaries of MedCath are owned by
MedCath or a subsidiary of MedCath free and clear of all liens,
charges, encumbrances, claims and options of any nature. Except as
contemplated by this Agreement and the Rights Agreement of MedCath
dated as of October 15, 1996 (the "Rights Agreement") and except for
the Stock Options and as set forth on Item 3.6(c) of the Disclosure
Schedules, neither MedCath nor any subsidiary of MedCath has or as of
the Effective Time will have granted any outstanding security, call,
option, warrant, subscription or other right, or entered into any
agreement or commitment which either (a) obligates MedCath or any of
its subsidiaries to issue, sell or transfer or cause to be issued,
delivered or sold any shares of the capital stock of MedCath or any
subsidiary of MedCath or (b) restricts the transfer of, or otherwise
encumbers, shares of MedCath Common Stock.
Section 4.4 Financial Statements.
All consolidated financial statements of MedCath and its
subsidiaries (including the notes to such financial statements)
included in MedCath's Annual Report on Form 10-K for the year ended
September 30, 1997 (the "Year End Financial Statements") filed pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (a) are in accordance with the books and records of MedCath and
its subsidiaries in all material respects, (b) present fairly in all
material respects the consolidated financial position, results of
operations, changes in shareholders' equity and cash flow (as
applicable) of MedCath and its subsidiaries as of the respective dates
and for the respective periods indicated and (c) have been prepared in
conformity with generally accepted accounting principles applied in all
material respects on a consistent basis through all the periods
involved. MedCath has no material liabilities that are required by
generally accepted accounting principles to be disclosed on a balance
sheet other than (i) those disclosed in the Year End Financial
Statements, and (ii) those arising in the ordinary course of business
since September 30, 1997 or as disclosed in Items 3.6(c) and (d) of the
Disclosure Schedules.
Section 4.5 Absence of Certain Changes or Events.
Since September 30, 1997, (a) there has not been any
Material Adverse Change, (b) there has not been any damage, destruction
or loss, whether covered by insurance or not, having a Material Adverse
Effect, (c) there has not been any condition, event or occurrence
which, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect or give rise to a Material Adverse
Change, (d) MedCath and its subsidiaries have conducted their
respective businesses only in the ordinary course, taken as a whole,
(e) MedCath has not changed its accounting principles or methods in any
material respect except insofar as may be required by a change in
generally accepted accounting principles, (f) there has been no
condition, event or occurrence which could reasonably be expected to
prevent, materially hinder or materially delay the ability of MedCath
to consummate the Merger or the transactions contemplated by this
Agreement, (g) there has not been any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock
or property) with respect to the equity interests of MedCath or any of
its subsidiaries, other than dividends paid by wholly-owned
subsidiaries and (h) MedCath and its subsidiaries have not (i)
increased the compensation or fringe benefits of any present or former
director, officer or employee of MedCath or its subsidiaries (except
for increases in salary or wages in the ordinary course of business
consistent with past practice), (ii) granted any severance or
termination pay to any present or former director or officer of MedCath
or its subsidiaries or, other than in the ordinary course of business,
to any other employee of MedCath or its subsidiaries; (iii) loaned or
advanced money or other property by MedCath or its subsidiaries to any
of their present or former directors, officer or employees or (iv)
established, adopted, entered into, amended or terminated any Company
Benefit Plan.
Section 4.6 SEC Reports and other Documents.
Since January 1, 1995, MedCath has filed all reports
required to be filed by it with the SEC and all such reports complied
as to form in all material respects with the applicable requirements of
law. Each report required to be filed by MedCath with the SEC since
January 1, 1995 did not on the date of filing of such reports and,
except to the extent revised or superseded by a subsequent filing with
the SEC prior to the date hereof does not, contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 4.7 Governmental and Other Consents and Approvals.
Except as set forth in Item 4.7 of the Disclosure Schedules,
subject to the approval of this Agreement and the Merger by the
shareholders of MedCath, no consent, waiver, approval, license or
authorization of or designation, declaration or filing with any
governmental agency or authority or other public persons or entities in
the United States is required in connection with the execution or
delivery by MedCath of this Agreement or the consummation by MedCath of
the transactions contemplated hereby, other than (a) filing in the
State of North Carolina articles of merger in accordance with the North
Carolina Law, (b) filings required under the HSR Act, (c) filings
required under the Exchange Act and (d) such other consents, waivers,
approvals, licenses or authorizations, the failure of which to be
obtained will not have a Material Adverse Effect or will not materially
and adversely affect the ability of MedCath to consummate the
transactions contemplated hereby.
Section 4.8 No Violation.
Except as set forth in Item 4.8 of the Disclosure Schedules,
the execution and delivery of this Agreement, the filing by MedCath of
articles of merger in connection with the Merger in the State of North
Carolina in accordance with the North Carolina Law, the consummation by
MedCath of the transactions contemplated hereby, or compliance by
MedCath with any of the provisions hereof, will not:
(a) violate any provision of the articles of incorporation
or bylaws of MedCath or any comparable charter or organizational
documents of its subsidiaries;
(b) cause MedCath or any of its subsidiaries to violate in
any material respect (i) any statute or law or any judgment, decree,
order, regulation or rule of any court or governmental authority
applicable to MedCath or any of its subsidiaries or any of their
respective properties or (ii) the award of any arbitrator or panel of
arbitrators;
(c) cause the acceleration of the maturity of any debt or
obligation which is material to MedCath and its subsidiaries, taken as
a whole; or
(d) with or without notice or lapse of time, or both,
violate, or be in conflict with, or constitute a material default
under, or permit the termination of, or give rise to a right of
termination, cancellation or acceleration of or "put" right with
respect to any obligation or to loss of a material benefit under, or,
except as contemplated by this Agreement, require the consent of any
person under, or result in the creation of any material lien upon any
property of MedCath or any of its subsidiaries under, any agreement,
indenture, lease, instrument, permit, concession, franchise, or license
applicable to MedCath or any of its subsidiaries or to which MedCath or
any of its subsidiaries is a party or by which MedCath or any of its
subsidiaries (or their respective properties) may be bound, which
individually or in the aggregate would have a Material Adverse Effect.
Section 4.9 Litigation.
Except as set forth in Item 4.9 of the Disclosure Schedules,
there is no legal action, suit, arbitration or other legal,
administrative or other governmental investigation, inquiry or
proceeding (whether federal, state, local or foreign) pending or, to
the knowledge of MedCath, threatened against or affecting MedCath, any
of its subsidiaries or any of their respective properties, assets,
business, franchises or governmental approvals before any court or
governmental department, commission, board, bureau, agency,
instrumentality or arbitrator, which, individually or in the aggregate,
could reasonably be expected (a) to have a Material Adverse Effect, or
(b) to materially and adversely affect the ability of MedCath to carry
out, or prevent or make unduly burdensome, the Merger or the transac-
tions contemplated by this Agreement nor is there any judgment, decree,
injunction, rule or order of any governmental entity or arbitrator out-
standing against MedCath or any of its subsidiaries having, or which in
the future could have, any such effect.
Section 4.10 Governmental Approvals; Compliance with Law.
MedCath and its subsidiaries possess from the appropriate
agency, commission, board or governmental authority, whether federal,
state or local, all licenses, permits, authorizations, approvals,
franchises and rights ("Government Approvals") that are necessary for
MedCath and its subsidiaries to engage in the business currently
conducted by them, except in those instances in which failure to
possess Government Approvals, individually or in the aggregate, would
not have a Material Adverse Effect. MedCath and its subsidiaries have
been, are and as of the Effective Time will be in compliance with all
applicable federal, state and local laws, statutes, ordinances, rules
and regulations except where the failure to so comply would not
constitute a material violation of law compliance with which is
material to MedCath and its subsidiaries, taken as a whole.
Section 4.11 Brokers and Finders.
Except for Goldman, Sachs & Co. ("Goldman Sachs"), which has
been engaged, pursuant to an engagement letter dated August 8, 1997, a
true and complete copy of which has been delivered to Acquiror, to
provide financial advisory services to the Strategic Options Committee
of MedCath and, as requested by the Strategic Options Committee, to
provide advice to the board of directors of MedCath with respect to
whether the consideration to be received by the holders of MedCath
Common Stock is fair to them, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or in connection with any transaction
involving MedCath based upon arrangements made by or on behalf of
MedCath.
Section 4.12 Fairness Opinions and Approval by Strategic
Options Committee.
On or prior to the date hereof, the Strategic Options
Committee approved the terms of this Agreement and received an opinion
from Goldman Sachs as of such date, which opinion shall be confirmed in
writing substantially to the effect that, from a financial point of
view, the consideration to be received by the holders of MedCath Common
Stock pursuant to the Merger is fair to them (which opinion shall be
updated in writing to the date of the Definitive Proxy Statement), a
true and complete copy of which written opinion has been or will
promptly be delivered to Acquiror following its receipt by the
Strategic Options Committee.
Section 4.13 Taxes.
(a) All Returns (as hereinafter defined) required to be
filed by or with respect to MedCath and Tax Affiliates (as hereinafter
defined) have been filed on a timely basis, except where the failure to
file such Returns would not have a Material Adverse Effect. All such
Returns were correct and complete in all material respects. There are
no deficiencies for Taxes that have been proposed, asserted or assessed
against MedCath or Tax Affiliates that remain unpaid. MedCath and its
Tax Affiliates have paid or made adequate provision in all material
respects in the Financial Statements (other than reserves for deferred
income Taxes established to reflect differences between book basis and
Tax basis of assets and liabilities) for the payment of all Taxes,
whether or not shown on any Return. As used in this Section 4.13, the
term "Tax" or "Taxes" means all federal, state, local, foreign and
other net income, gross income, gross receipts, franchise, sales, use,
withholding, employment, property alternative or add-on minimum,
environmental (including Taxes under Section 59A of the Internal
Revenue Code of 1986, as amended (the "Code")) or other taxes, fees,
assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts with
respect thereto; the term "Returns" means all returns, declarations,
reports, statements and other documents required to be filed in respect
of Taxes, including any schedule or attachment thereto, and including
any amendment thereof; and the term "Tax Affiliate" means any
subsidiaries of MedCath and any individual or entity for whose Taxes
MedCath or any of its subsidiaries is or could be held liable, whether
by reason of being a member of an affiliated, consolidated, combined,
unitary, or other similar group for Tax purposes, by reason of being a
successor, member or general partner, by agreement, or otherwise (but
only with respect to the Taxes and taxable periods(s) or portions
thereof with respect to which MedCath or such subsidiaries is or could
be held liable for such Taxes).
(b) Item 4.13 of the Disclosure Schedules lists all Returns
that have been audited, and indicates all Returns that are currently
the subject of audit. Neither MedCath nor any Tax Affiliate has
granted any extension or waiver of the statute of limitations period on
the assessment of any material Taxes, which period (after giving effect
to such extension or waiver) has not expired. Neither MedCath nor any
Tax Affiliate has granted a power of attorney with respect to any
matter relating to any material Tax. No claim has been made by an
authority in a jurisdiction where MedCath or any Tax Affiliate does not
file Returns that it is or may be subject to Tax in that jurisdiction.
(c) MedCath and each Tax Affiliate has withheld and paid
all Taxes required to have been paid in connection with amounts paid or
owing to any employee, independent contractor, stockholder, partner, or
other third party.
(d) Neither MedCath nor any Tax Affiliate is a party to any
Tax allocation, sharing, or similar agreement. Neither MedCath nor any
Tax Affiliate has been a member of an affiliated group filing a
consolidated federal income tax Return (other than a group the common
parent of which was MedCath).
(e) Except as disclosed to Acquiror prior to the date of
this Agreement, neither MedCath nor any Tax Affiliate has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Code Section 280G or
would constitute compensation in excess of the limitation set forth in
Section 162(m) of the Code.
(f) No consent under Section 341(f) of the Code has been
filed with respect to MedCath or any Tax Affiliates.
(g) Neither MedCath nor any Tax Affiliate has been a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(h) No material claim for unpaid Taxes has become a lien or
encumbrance of any kind against the property of MedCath or any Tax
Affiliates.
Section 4.14 Employee Benefits.
(a) A list of all employee benefit plans, programs,
arrangements, funds, policies, practices, or contracts and samples of
representative employment agreements with respect to which, through
which, or under which the MedCath or any of MedCath's subsidiaries has
any liability to provide benefits or compensation to or on behalf of
employees, former employees, or independent contractors of MedCath or
any of MedCath's subsidiaries, whether formal or informal, whether or
not written, including but not limited to any employee benefit plan
(within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), any multiemployer plan (as
defined in Section 3(37) and Section 4001(a)(3) of ERISA), stock
purchase, stock option, severance, employment, change in control,
fringe benefit, collective bargaining, bonus, incentive, and deferred
compensation arrangement (collectively, the "Company Benefit Plans"),
have been disclosed in writing to Acquiror. MedCath has made available
to Acquiror a true and complete copy of the following documents, if
applicable, with respect to each Company Benefit Plan: (i) all docu-
ments setting forth the terms of the Company Benefit Plan, or if there
are no such documents evidencing the Company Benefit Plan, a full
description of the Company Benefit Plan, (ii) the ERISA summary plan
description and any other written summary of plan provisions provided
to participants or beneficiaries for each such Company Benefit Plan,
(iii) the annual report (Form 5500 series), required under ERISA or the
Code, filed for the most recent plan year and most recent financial
statements or periodic accounting of related plan assets with respect
to each Company Benefit Plan, and (iv) the most recent favorable
determination letter, opinion, or ruling from the Internal Revenue
Service for each Company Benefit Plan, the assets of which are held in
trust, to the effect that such trust is exempt from federal income tax.
(b) Each Company Benefit Plan has at all times been
maintained, by its terms and in operation, in accordance with the Code,
ERISA, and other applicable laws, except where the failure to so comply
is not reasonably likely to have a Material Adverse Effect. Each
Company Benefit Plan that is intended to be qualified under Section
401(a) of the Code, and related trust that is intended to be tax-exempt
under Section 501(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service to the effect
that such plan is qualified under the Code and such trust is
tax-exempt, and any such determination letter remains in effect and has
not been revoked. All contributions required to be made prior Closing
under the terms of each Company Benefit Plan, the Code, ERISA, or other
applicable law have been or will be timely made, and adequate reserves
have been provided for by MedCath with respect to all accrued benefits
attributable to service on or prior to the Closing. No Company Benefit
Plan provides for an increase in benefits on or after the Closing.
(c) Each Company Benefit Plan may be amended or terminated
at any time without any obligation or liability other than for benefits
accrued prior to such amendment or termination, or as required to be
vested pursuant to applicable law as a result of such amendment or
termination. There are no actions, audits, suits, or claims which are
pending or threatened, to the knowledge of MedCath against any Company
Benefit Plan, except claims for benefits made in the ordinary course of
the operation of such plans. MedCath will promptly notify Acquiror in
writing of any such actions, audits, suits, or claims arising between
the date hereof and the Closing. Neither MedCath nor any of its
subsidiaries is subject to any material liability, tax, or penalty
whatsoever to any person whomsoever as a result of MedCath or any of
its subsidiaries engaging in a prohibited transaction under ERISA or
the Code. To the knowledge of MedCath, no event has occurred and no
condition exists that would subject MedCath, either directly or by
reason of its affiliation with any trade or business (whether or not
incorporated) which together with the Company is treated as a single
employer under Section 414(b), (c), (m), or (o) of the Code ("Company
ERISA Affiliate"), to any material liability, tax, or penalty imposed
by ERISA, the Code, or other applicable law.
(d) Neither MedCath nor any Company ERISA Affiliate
maintains, nor has at any time established or maintained, nor has at
any time been obligated to make, or made, contributions to or under any
plan subject to Title IV of ERISA.
Section 4.15 Environmental Matters.
Except for such items of non-compliance that could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect:
(i) MedCath and its subsidiaries, taken as a whole, hold
and formerly held, and, to the knowledge of MedCath, are and have
been in compliance with, all Environmental Permits, and MedCath
and its subsidiaries are and have been, otherwise in compliance
with all applicable Environmental Laws and there are no
circumstances that might prevent or interfere with such compliance
in the future;
(ii) None of MedCath or its subsidiaries has received any
Environmental Claim, and none of MedCath or its subsidiaries is
aware after reasonably inquiry of any threatened material
Environmental Claim or of any circumstances, conditions or events
that could reasonably be expected to give rise to an Environmental
Claim that could result in a Material Adverse Effect;
(iii) None of MedCath or its subsidiaries has entered into
or agreed to any consent decree, order or agreement under any
Environmental Law, and none of MedCath or its subsidiaries is
subject to any material judgment, decree, order or other material
requirement relating to compliance with any Environmental Law or
to investigation, cleanup, remediation or removal of regulated
substances under any Environmental Law;
(iv) To the knowledge of MedCath, there are no (a) under-
ground storage tanks, (B) polychlorinated biphenyls, (C) asbestos
or asbestos-containing materials, (D) urea-formaldehyde
insulation, (E) sumps, (F) surface impoundments, (G) landfills,
(H) sewers or septic systems or (I) Hazardous Materials present at
any facility currently or formerly owned, leased, operated or
otherwise used by MedCath or any of its subsidiaries that could
reasonably be expected to give rise to a Material Adverse Effect;
(v) There are no past (including, without limitation, with
respect to assets or businesses formerly owned, leased or operated
by MedCath or any of its subsidiaries) or present actions,
activities, events, conditions or circumstances, with respect to
or against MedCath or its subsidiaries including without
limitation the release, threatened release, emission, discharge,
generation, treatment, storage or disposal of Hazardous Materials,
that could reasonably be expected to give rise to a Material
Adverse Effect under any Environmental Laws or any contract or
agreement;
(vi) No modifications, revocation, reissuance, alteration,
transfer, or amendment of the Environmental permits, or any review
by, or approval of, any third party of the Environmental Permits
is required in connection with the execution or delivery of this
Agreement or the consummation of the transactions contemplated
hereby or the continuation of the business of MedCath or its
subsidiaries following such consummation;
(vii) Hazardous Materials have not been generated,
transported, treated, stored, disposed of, released or threatened
to be released at, on, from or under any of the properties or
facilities currently or formerly owned, leased or otherwise used
by MedCath or any of its subsidiaries, in violation of, or in a
manner or to a location that could give rise to a Material Adverse
Effect, under any Environmental Laws;
(viii) For purposes of this Agreement, the following terms
shall have the following meanings:
"Environmental Claim" means any written or oral
notice, claim, demand, action, suit, complaint, proceeding or other
communication by any person alleging liability or potential liability
(including without limitation liability or potential liability for
investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damage, personal injury, fines or
penalties) arising out of, relating to, based on or resulting from (i)
the presence, discharge, emission, release or threatened release of any
Hazardous Materials at any location, either owned, leased or operated
by MedCath or any of its subsidiaries or (ii) circumstances forming the
basis of any violation or alleged violation of any Environmental Law or
Environmental Permit or (iii) otherwise relating to obligations or
liabilities under any Environmental Laws.
"Environmental Permits" means all permits, licenses,
registrations and other governmental authorizations required for
MedCath and the operations of MedCath's and its subsidiaries'
facilities and otherwise to conduct its business under Environmental
Laws.
"Environmental Laws" means all applicable federal,
state and local statutes, rules, regulations, ordinances, orders,
decrees and common law in effect as of the date hereof relating in any
manner to contamination, pollution or protection of human health or the
environment, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, the Solid Waste
Disposal Act, the Clean Air Act, the Toxic Substances Control Act, the
Occupational Safety and Health Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water Act, all as
amended, and similar state laws.
"Hazardous Materials" means all hazardous or toxic
substances, wastes, materials or chemicals, petroleum (including crude
oil or any fraction thereof) and petroleum products, asbestos and
asbestos-containing materials, pollutants, contaminants and all other
materials, substances and forces, including but not limited to
electromagnetic fields, regulated pursuant to, or that could form the
basis of liability under, any Environmental Law.
Section 4.16 Board Recommendation.
The board of directors of MedCath, at a meeting duly called
and held, has by unanimous vote of those directors present (who
constituted 100% of the directors then in office exclusive of directors
who recused themselves from such vote because of their interest in the
Parent or Acquiror) (i) determined that this Agreement and the
transactions contemplated hereby are fair to and in the best interests
of the shareholders of MedCath and (ii) resolved to recommend that the
holders of the shares of MedCath Common Stock approve this Agreement
and the transactions contemplated herein, including the Merger.
Section 4.17 Required Company Vote.
The affirmative vote of a majority of the shares of MedCath
Common Stock is the only vote of the holders of any class or series of
MedCath's securities necessary to approve this Agreement and the Merger
under the North Carolina Law.
Section 4.18 State Takeover Statutes.
No state takeover statute or similar statute or regulation
of the State of North Carolina (and, to the knowledge of MedCath after
due inquiry, of any other state or jurisdiction) applies or purports to
apply to this Agreement, the Merger, or any of the other transactions
contemplated hereby. No provision of the articles of organization,
by-laws or other governing instruments of MedCath or any of its
subsidiaries would, directly or indirectly, restrict or impair the
ability of Acquiror or its affiliates to vote, or otherwise to exercise
the rights of a shareholder with respect to, securities of MedCath and
its subsidiaries that may be acquired or controlled by Acquiror or its
affiliates or permit any shareholder to acquire securities of MedCath
on a basis not available to Acquiror in the event that Acquiror were to
acquire securities of MedCath, and neither MedCath nor any of its
subsidiaries has any rights plan (except the Rights Agreement),
preferred stock or similar arrangement which have any of the
aforementioned consequences. The board of directors of MedCath has
duly and validly approved and taken all corporate action required to be
taken by the board of directors for the consummation of the
transactions contemplated by this Agreement.
Section 4.19 Material Contract Defaults.
Neither MedCath nor any of its subsidiaries is, or has
received any notice or has any knowledge that any other party is, in
default in any respect under any material contract, agreement,
commitment, arrangement, lease, policy or other instrument to which it
or any of its subsidiaries is a party or by which it or any such
subsidiary is bound ("Material Contracts"), except for those defaults
which could not reasonably be expected, either individually or in the
aggregate, to have a Material Adverse Effect; and there has not
occurred any event that with the lapse of time or the giving of notice
or both would constitute such a material default.
Section 4.20 Information in Proxy Statement.
The Definitive Proxy Statement (or any amendment thereof or
supplement thereto), at the date mailed to MedCath shareholders and at
the time of the Special Meeting, will not contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading,
provided, however, that no representation is made by MedCath with
respect to statements made therein based on information supplied by the
Parent or Acquiror for inclusion in the Definitive Proxy Statement.
The Definitive Proxy Statement will comply in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder.
Section 4.21 Rights Agreement.
The Rights Agreement has been amended so as to provide that
neither the Parent nor Acquiror will become an "Acquiring Person" or an
"Adverse Person" and that no "Triggering Event", "Stock Acquisition
Date" or "Distribution Date" (as such terms are defined in the Rights
Agreement) will occur as a result of the approval, execution or
delivery of this Agreement or the consummation of the Merger.
Section 4.22 Properties.
(a) Except with respect to liens securing indebtedness evi-
denced by the agreements listed on Item 3.6(d) of the Disclosure
Schedules or reflected in the Year End Financial Statements of MedCath,
each of MedCath and its subsidiaries have good and sufficient, valid
and marketable title to its owned real property free and clear of all
liens and other encumbrances that, individually or in the aggregate,
would have a Material Adverse Effect. Except as set forth in Item 4.22
of the Disclosure Schedules, there are no outstanding contracts for the
purchase of any real property.
(b) MedCath and its subsidiaries hold good and valid
leasehold title to leased real property they occupy, free of all liens
except for liens which, individually or in the aggregate, would not
have a Material Adverse Effect or liens securing indebtedness evidenced
by the agreements listed on Item 3.6(d) of the Disclosure Schedules or
reflected in the Year End Financial Statements of Medcath. Other than
such exceptions which as would not have a Material Adverse Effect, all
real property leases are in full force and effect and grant in all
respects the leasehold estates or rights of occupancy or use they
purport to grant. There are no existing defaults (either on the part
of MedCath or any of its subsidiaries or, to the knowledge of MedCath,
any other party thereto) under any real property lease and no event has
occurred which, with notice or the lapse of time, or both, would
constitute a default (either on the part of MedCath or any of its
subsidiaries or, to the knowledge of MedCath, any other party thereto)
under any of the real property leases, except for any of the foregoing
which, individually or in the aggregate, would not have a Material
Adverse Effect. The consummation of the Merger will not result in the
occurrence of a default under any of the real property leases (whether
pursuant to a "change in control" provision in the real property leases
or otherwise).
Section 4.23 Billing and Coding.
MedCath and its subsidiaries have, whether directly or
indirectly through contractual arrangements with others, billed third
party payers (including, but not limited to, Medicare, Medicaid,
CHAMPUS, and private payers) for health care services rendered by
MedCath, its subsidiaries, or any of its or their employees,
professional staff, or other persons or entities on behalf of whom or
for which MedCath or any of its subsidiaries is authorized to bill for
health care services, in accordance in all material respects with all
federal, state, and local laws, rules, and regulations, and all
agreements, applicable with respect thereto. Without limiting the
generality of the foregoing, for said purposes all such services have
been properly documented and coded all except to the extent the failure
to so comply or to do so would not be material individually or in the
aggregate.
Section 4.24 Other Confidentiality Agreements.
MedCath has entered into a confidentiality agreement not
substantially less favorable taken as a whole to it than the
Confidentiality Agreement with each Person (as defined in Section 8.6)
that, since January 1, 1997, has been provided confidential information
with respect to MedCath and its subsidiaries with a view to a possible
acquisition (whether by merger, stock purchase, asset purchase or
otherwise) or recapitalization of MedCath. Each such agreement is in
full force and effect, MedCath has not modified or waived or agreed to
modify or waive any provisions of any such agreement and, to the
knowledge of MedCath none of the other parties thereto is in default
thereunder.
ARTICLE 5
[Intentionally Omitted]
ARTICLE 6
Representations and Warranties of Acquiror and Parent
Acquiror and Parent hereby represent and warrant to MedCath
as follows:
Section 6.1 Organization and Good Standing.
Each of Acquiror and Parent is a duly organized and validly
existing corporation in good standing under the laws of the state of
its incorporation. Each of Acquiror and Parent has heretofore
delivered to MedCath accurate and complete copies of its articles or
certificate of incorporation and bylaws as currently in effect.
Neither Acquiror nor Parent has any subsidiary (other than Acquiror, in
the case of Parent) or owns or holds any capital stock, security or
investment in any other Person other than bank accounts, certificates
of deposit, money market or similar short-term investments.
Section 6.2 Authorization; Binding Agreement.
Parent and Acquiror have all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
Merger and the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the Merger and the
transactions contemplated hereby have been duly and validly authorized
by its respective board of directors, and this Agreement has been
adopted by the shareholders of Acquiror in accordance with North
Carolina Law and its articles or certificate of incorporation and
bylaws. No other corporate proceedings on the part of Acquiror or
Parent are necessary to authorize this Agreement, the Merger and the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Parent and Acquiror and constitutes a
legal, valid and binding agreement of Acquiror and Parent, enforceable
against Parent and Acquiror in accordance with its terms except as such
enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in
effect, relating to or limiting creditors, rights generally, and (b)
general principles of equity (whether considered in an action in equity
or at law) which provide, among other things, that the remedies of
specific performance and injunctive and other forms of equitable relief
are subject to equitable defenses and to the discretion of the court
before which any proceedings therefor may be brought.
Section 6.3 Capitalization.
The authorized capital stock of Acquiror consists of a
single class of 20,000,000 shares of common stock, par value $.01 per
share, (which class of stock is herein called "Acquiror Common Stock"),
of which 100 are issued and outstanding on the date hereof and are
beneficially owned by the Parent. All of the shares of Acquiror Common
Stock outstanding at the Effective Time (i) will have been duly
authorized, validly issued, fully paid and nonassessable and free of
preemptive rights, and (ii) will be beneficially owned by Parent.
Acquiror has not granted any outstanding option, warrant, subscription
or other right, or entered into any agreement or commitment which
either (a) obligates Acquiror to issue, sell, repurchase or transfer
any shares of the capital stock of Acquiror or (b) restricts the
transfer of, or otherwise encumbers, shares of Acquiror Common Stock.
Acquiror has no treasury stock.
Section 6.4 No Violation.
Neither the execution and delivery of this Agreement, the
filing of the Articles of Merger nor the consummation by Acquiror and
Parent of the transactions contemplated hereby, nor compliance by
Acquiror with any of the provisions hereof, will:
(a) violate any provision of the charter documents or
bylaws of Acquiror or Parent;
(b) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or governmental authority
applicable to Acquiror or Parent or any of their properties;
(c) cause the acceleration of the maturity of any debt or
obligation of Acquiror or Parent; or
(d) with or without notice or lapse of time, or both,
violate, or be in conflict with, or constitute a default under, or
permit the termination of, or give rise to a right of termination,
cancellation or acceleration of or "put" right with respect to any
obligation or to loss of a material benefit under, or except as
contemplated by this Agreement, require the consent of any person
under, or result in the creation of any lien upon any property of
Acquiror or the Parent under, any agreement, indenture, lease or
instrument, permit, concession, franchise, or license applicable to
Acquiror or Parent to which Acquiror or Parent is a party or by which
Acquiror or the Parent (or its properties) may be bound, which in the
aggregate would have a material adverse effect on Acquiror or Parent.
Section 6.5 Governmental and Other Consents and Approvals.
Except as provided in Item 4.7 in the Disclosure Schedules,
no consent, waiver, approval, license or authorization of or
designation, declaration or filing with any governmental agency or
authority or other public persons or entities in the United States is
required in connection with the execution or delivery by Acquiror of
this Agreement or the consummation by Parent or Acquiror of the Merger
or the transactions contemplated hereby, other than (a) filings in the
State of North Carolina in accordance with the North Carolina Law, (b)
filings required under the HSR Act, (c) filings required under the
Exchange Act and (d) such other consents, waivers, approvals, licenses
or authorizations, the failure of which to be obtained will not have a
material adverse effect on Parent or Acquiror or on the ability of
Parent or Acquiror to consummate the transactions contemplated hereby.
Section 6.6 Proxy and Schedule 13E-3 Information.
The information furnished to MedCath by Acquiror and Parent
specifically for inclusion in the Definitive Proxy Statement and the
Schedule 13E-3, or any amendment or supplement thereto, or specifically
for inclusion in any other documents filed with the SEC by MedCath in
connection with the Merger, shall, with respect to the Definitive Proxy
Statement at the time the Definitive Proxy Statement is mailed and at
the time of the Special Meeting, and, with respect to the Schedule
13E-3 and such other documents, at the time of filing with the SEC and
at the time of such Special Meeting, not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 6.7 Financing.
Acquiror has obtained commitments for equity and debt
financing necessary or appropriate to consummate the Merger in an
amount no less than the Cash Merger Consideration plus the expenses
related to the Merger and obtaining the financing therefor (the
"Financing"). A true and correct copy of the letters or other
documents evidencing such commitments (the "Financing Letters") have
been delivered to the Strategic Options Committee.
Section 6.8 Brokers and Finders.
Except for Kohlberg Kravis Roberts & Co., L.P. and Welsh,
Carson, Anderson & Stowe VII, L.P., the fees and expenses of which
shall be paid by Acquiror, Acquiror has not engaged any broker, finder
or investment banker which engagement would require the payment of any
brokerage, finder's or other fees by MedCath in connection with the
transaction contemplated hereby.
Section 6.9 No Prior Activities.
Acquiror and Parent have not incurred, and will not incur,
directly or through any subsidiary, any liabilities or obligations,
except those incurred in connection with its organization or with the
negotiation of this Agreement and the Financing. Except as
contemplated by this Agreement and the Financing Letters, Acquiror and
Parent have not engaged in any business activities of any type or kind
whatsoever, or entered into any agreements or arrangements with any
person or entity, or become subject to or bound by any obligation or
undertaking.
Section 6.10 Litigation.
There is no legal action, suit, arbitration or other legal,
administrative or other governmental investigation, inquiry or
proceeding (whether federal, state, local or foreign) pending or, to
the knowledge of Acquiror or Parent, threatened against or affecting
Acquiror or Parent or any of its properties, assets, business,
franchises or governmental approvals before any court or governmental
department, commission, board, bureau, agency, instrumentality or
arbitrator, which, individually or in the aggregate, could reasonably
be expected (a) to have a material adverse effect upon Acquiror or
Parent or (b) to materially and adversely affect the ability of
Acquiror or Parent to carry out, or prevent or make unduly burdensome,
the Merger or the transactions contemplated by this Agreement.
ARTICLE 7
Conditions
Section 7.1 Conditions to Each Party's Obligation to Effect
the Merger.
The respective obligations of each party to effect the
Merger shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions unless waived in accordance
with Section 8.4:
(a) This Agreement and the Merger shall have been approved
at or prior to the Effective Time by the holders of a majority of the
outstanding shares of MedCath Common Stock entitled to vote thereon;
(b) No action, suit or proceeding shall be pending before
any court or governmental body in which an unfavorable judgment or
decree would prevent or substantially delay the consummation of the
Merger, cause the Merger to be rescinded or, with respect to any
litigation in connection with the Merger, result in an award of damages
that would have a Material Adverse Effect; and
(c) Any applicable waiting period under the HSR Act shall
have expired or early termination shall have been granted.
Section 7.2 Conditions to Obligation of MedCath to Effect
the Merger.
The obligations of MedCath to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the
following additional conditions, unless waived by MedCath:
(a) The representations and warranties of Acquiror and the
Parent set forth in Article 6 hereof shall be true and correct in all
material respects (except that any such representation and warranty
that is qualified as to materiality by reference to "Material Adverse
Effect" or any similar term shall be true and correct) as of the date
of this Agreement and as of the Effective Time as though made on and as
of the Effective Time, and MedCath shall have received a certificate
from each of Acquiror and Parent signed by its President and a Vice
President, respectively, to that effect, provided that such signatories
shall not have any personal liability in connection therewith; and
(b) Acquiror and Parent shall have performed in all
material respects all obligations required to be performed by them
under this Agreement prior to the Effective Time, and MedCath shall
have received a certificate from each of Acquiror and the Parent signed
by its President and a Vice President, respectively, to that effect,
provided that such signatories shall not have any personal liability in
connection therewith.
Section 7.3 Conditions to Obligations of Acquiror to Effect
the Merger.
The obligations of Acquiror and the Parent to effect the
Merger shall be subject to the satisfaction at or prior to the
Effective Time of the following additional conditions, unless waived by
Acquiror or the Parent:
(a) The representations and warranties of MedCath set forth
in Article 4 hereof shall be true and correct in all material respects
(except that any such representation and warranty that is qualified as
to materiality by reference to "Material Adverse Effect" or any similar
term shall be true and correct) as of the date of this Agreement and as
of the Effective Time as though all of such representations were made
on and as of the Effective Time by MedCath, and Acquiror shall have
received a certificate of MedCath signed by the President, the Chief
Financial Officer or a Vice President of MedCath to that effect,
provided that such signatories shall not have any personal liability in
connection therewith;
(b) MedCath shall have performed in all material respects
all obligations required to be performed by it under this Agreement
prior to the Effective Time and Acquiror shall have received a
certificate of MedCath signed by the President, the Chief Financial
Officer or a Vice President of MedCath to that effect, provided that
such signatories shall not have any personal liability in connection
therewith;
(c) Acquiror shall have obtained financing necessary to
satisfy its obligations to pay the Cash Merger Consideration pursuant
to Section 2.1 hereof on terms and conditions satisfactory to Acquiror
in its sole discretion. Acquiror acknowledges that its obtaining
financing from parties satisfactory to it and on substantially the same
terms and conditions as set forth in the Financing Letters shall
satisfy this condition.
(d) MedCath and Acquiror shall have been furnished with
evidence satisfactory to them of the timely consent or approval of, or
notice to, each governmental authority or other person or entity whose
consent or approval, or to whom notice, is required in connection with
the execution or delivery by MedCath or Acquiror of this Agreement or
consummation of the transactions contemplated hereby or the absence of
which would result in a default or acceleration under or right to
terminate any contract or agreement, except with respect to consents,
waivers or approvals relating to the Merger with respect to agreements
set forth in Item 3.4 of the Disclosure Schedules;
(e) The persons named in Item 7.3 of the Disclosure
Schedules will have invested in Parent an amount equal to at least 50%
of the value of the MedCath Common Stock and the spread on the Stock
Options (assuming a value of $19.00 per share) held by such persons,
which investment will be made substantially on the terms of the letter
agreement of even date herewith between Acquiror and such persons;
(f) The directors of MedCath shall have, other than those
who are also directors of Acquiror, tendered to MedCath their resigna-
tions effective as of the Effective Time; and
(g) To MedCath's knowledge, neither it nor any of its
subsidiaries shall be under investigation for any violation of the
"Stark" laws, anti-kickback laws or the laws relating to Medicare,
Medicaid, Champus or any rules or regulations related thereto.
ARTICLE 8
Termination; Non-Survival of Representations, Warranties
and Covenants; Waiver and Amendment
Section 8.1 Termination.
This Agreement may be terminated, and the Merger abandoned,
at any time prior to the Effective Time, by:
(a) mutual written consent of the boards of directors of
the Constituent Corporations;
(b) Acquiror may terminate this Agreement by giving written
notice to MedCath at any time prior to the Effective Time (i) in the
event MedCath has breached any representation, warranty, or covenant
contained in this Agreement in any material respect, Acquiror has
notified MedCath of the breach, and the breach has continued without
cure for a period of thirty (30) days after the notice of breach or
(ii) if the Closing shall not have occurred on or before August 31,
1998, by reason of the failure of any condition precedent under Section
7.1 or 7.3 hereof (unless the failure results primarily from Acquiror
breaching any representation, warranty, or covenant contained in this
Agreement);
(c) MedCath may terminate this Agreement by giving
written notice to Acquiror at any time prior to the Effective Time (i)
in the event Acquiror has breached any representation, warranty, or
covenant contained in this Agreement in any material respect, MedCath
has notified Acquiror of the breach, and the breach has continued
without cure for a period of thirty (30) days after the notice of
breach or (ii) if the Closing shall not have occurred on or before
August 31, 1998, by reason of the failure of any condition precedent
under Sections 7.1 or 7.2 hereof (unless the failure results primarily
from MedCath breaching any representation, warranty, or covenant
contained in this Agreement);
(d) MedCath, by written notice to Acquiror, if (i) the
board of directors of MedCath or the Strategic Options Committee has
withdrawn or modified its approval or recommendation of this Agreement
or the Merger in accordance with Section 3.1; (ii) the board of
directors of MedCath or the Strategic Options Committee has determined
that MedCath has entered into a definitive agreement with a Person with
respect to a transaction the proposal of which qualifies as an
Acquisition Proposal; provided that the board of directors of MedCath
or the Strategic Options Committee, as the case may be, has first
determined in good faith based upon the reasonably concluded written
advice of outside counsel to MedCath or counsel to the Strategic
Options Committee, as the case may be, that failing to take such action
would violate MedCath's board of directors' fiduciary duty under
applicable law; or (iii) (A) a third party commences a tender offer or
exchange offer for 25% or more of the outstanding shares of MedCath
Common Stock and that tender offer or exchange offer is not solicited,
initiated or encouraged after the date hereof by MedCath and (B) the
board of directors of MedCath has recommended that the shareholders of
MedCath tender their shares in such tender of exchange offer; provided
that the board of directors of MedCath or the Strategic Options
Committee has first determined in good faith upon the reasonably
concluded written advice of outside counsel to MedCath or counsel to
the Strategic Options Committee, as the case may be, that failing to
take such action would violate MedCath's board of directors' fiduciary
duty under applicable law; and provided further, that termination under
this Section 8.1(d) shall be of no effect unless and until MedCath pays
the fees and expenses referred to in Section 8.6(a); (e) Acquiror, by
written notice to MedCath, if (i) the board of directors of MedCath has
withdrawn or modified its approval or recommendation of this Agreement
or the Merger, (ii) MedCath enters into a definitive agreement with a
Person with respect to a transaction the proposal of which qualifies as
an Acquisition Proposal or (iii) (A) a third party commences a tender
offer or exchange offer for 25% or more of the outstanding shares of
MedCath Common Stock and (B) the board of directors of MedCath has
recommended that the shareholders of MedCath tender their shares in
such tender or exchange offer;
(f) MedCath or Acquiror, by written notice to the other, if
upon a vote at the Special Meeting, any approval of the shareholders of
MedCath necessary to consummate the Merger and the transactions
contemplated hereby shall not have been obtained; or
(g) any of the parties, by written notice, if any court of
competent jurisdiction or other governmental entity shall have issued
an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and
nonappealable.
Any action to be taken to terminate this Agreement under
this Section shall be taken by, or pursuant to authority granted by,
the boards of directors of MedCath or Acquiror, as applicable. Any
such action by MedCath shall be authorized by the Strategic Options
Committee, provided a termination by MedCath pursuant to Section 8.1(d)
as a result of an Acquisition Proposal that is not an Interested Party
Proposal may be authorized by the board of directors of MedCath without
the action of the Strategic Options Committee.
Section 8.2 Non-Survival of Representations, Warranties and
Covenants.
The respective representations and warranties of MedCath and
Acquiror contained herein or in any certificate delivered pursuant
hereto shall expire with, and be terminated and extinguished upon,
consummation of the Merger, and thereafter neither Surviving
Corporation nor MedCath or Acquiror or any officer, director or
principal thereof shall be under any liability whatsoever with respect
to any such representation or warranty. This Section 8.2 shall have no
effect upon any other covenant or agreement of the parties hereto,
whether to be performed before or after the consummation of the Merger.
Section 8.3 Amendment.
This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto; provided,
however, that after approval of this Agreement by the shareholders of
MedCath, no amendment may be made which reduces the amount or changes
the form of consideration to be received in the Merger or otherwise
changes or effects any change which would adversely affect the holders
of MedCath Common Stock without the further approval of the
shareholders of MedCath in accordance with Section 7.1(a).
Section 8.4 Waiver.
At any time prior to the Effective Time, whether before or
after the Special Meeting, any party hereto, by action taken by its
board of directors, may (i) extend the time for the performance of any
of the obligations or other acts of any other party hereto or (ii)
subject to the proviso contained in Section 8.3, waive compliance with
any of the agreements of any other party or with any conditions (other
than those appearing in Section 7.1(a) and (c)) to its own obligations.
Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party by a duly authorized officer, and, in
the case of MedCath, authorized by the Strategic Options Committee.
Section 8.5 Effect of Termination.
In the event of the termination of this Agreement under
Section 8.1, this Agreement shall thereafter become void and have no
effect and no party hereto shall have any liability to any other party
hereto or its shareholders or directors or officers in respect thereof,
except that the provisions of Section 3.8 and the Confidentiality
Agreement, and Section 8.6 and Article 9 shall survive any such
termination if such obligations arose at or before the time of such
termination.
Section 8.6 Certain Payments.
(a) In the event that:
(i) this Agreement is terminated pursuant to Section 8.1(d)
or (e);
(ii) an Acquisition Proposal is commenced, publicly proposed,
publicly disclosed or communicated to MedCath at any time after
the date of this Agreement and MedCath, either on or prior to the
date which is five (5) months after the termination of this
Agreement pursuant to Section 8.1(f) or one year after the
termination of this Agreement for any other reason other than by
MedCath under 8.1(c), consummates with any individual,
corporation, partnership, joint venture, association, joint stock
company, trust, fund, unincorporated association or organization
(a "Person") a transaction the proposal of which would otherwise
qualify as an Acquisition Proposal or enters into a definitive
agreement with a Person with respect to a transaction the proposal
of which would otherwise qualify as an Acquisition Proposal; or
(iii) the board of directors of MedCath, withdraws or modifies
its approval or recommendation of this Agreement or the Merger;
then in any such event, MedCath shall pay Acquiror Six Million Seven
Hundred Seventy Four Thousand Six Hundred and Forty Dollars
($6,774,640), plus an amount equal to Acquiror's actual and reasonably
documented out-of-pocket fees and expenses incurred by Acquiror, Parent
or shareholders of Parent in connection with this Agreement and the
proposed consummation of the transactions contemplated hereby,
exclusive in all events of any fee due to Parent or any of its
stockholders or affiliates, which amounts shall be payable in
immediately available funds and within three business days after such
event has occurred (or in the case of fees and expenses, within three
business days after MedCath's receipt of reasonable documentation
thereof).
(b) (i) In the event that this Agreement is
terminated by Acquiror or MedCath pursuant to Section 8.1(b)(i) or
8.1(c)(i) the breaching party shall pay the non-breaching party,
in immediately available funds within three business days after
the breaching party's receipt of reasonable documentation thereof,
an amount equal to the actual and documented fees and expenses
incurred by such non-breaching party in connection with this
Agreement and the proposed consummation of the transactions
contemplated hereby (exclusive of any fees due to the Parent or
any of its stockholders or affiliates in the event Acquiror is the
non- breaching party).
(ii) In the event that any approval of the share-
holders of MedCath necessary to consummate the Merger and the
transactions contemplated thereby shall not have been obtained,
MedCath shall pay Acquiror in immediately available funds an
amount equal to the actual and documented fees and expenses
incurred by Acquiror, Parent and shareholders of Parent in
connection with this Agreement and the proposed consummation of
the transactions contemplated hereby (exclusive of any fees due to
the Parent or any of its stockholders or affiliates).
(c) The payments made by Acquiror to MedCath, or by MedCath
to Acquiror, as set forth above shall represent the sole and
exclusive remedy at law or in equity to which either party and its
officers, directors, representatives and affiliates shall be
entitled in the event this Agreement shall be terminated in the
circumstances contemplated by subsection (a) or (b) above. Such
payments shall be made without duplication. Accordingly, Acquiror
shall not be entitled to payments under Section 8.6(a) in more
than one instance, and if Acquiror is entitled to payments under
Section 8.6(a) it shall not be entitled to payments under Section
8.6(b); provided, however, that if Acquiror is entitled to
payments under Section 8.6(b) it shall be entitled to payments
under Section 8.6(a) to the extent applicable and not duplicative.
ARTICLE 9
General Agreements
Section 9.1 Notice.
All notices, requests and other communications to any party
shall be in writing (including telecopy or similar writing) and shall
be given,
(a) If to Acquiror:
c/o Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road, Suite 200
Menlo Park, California 94025
Attention: Edward A. Gilhuly
Facsimile No.: (415) 233-6561
and
c/o Welsh, Carson, Anderson & Stowe VII, L.P.
320 Park Avenue
Suite 2500
New York, New York 10022-6815
Attention: Paul B. Queally
Facsimile No.: (212) 893-9575
with copies to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Gary I. Horowitz
Facsimile No.: (212) 455-2502
and
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, N.Y. 10111
Attention: Karen C. Wiedemann
Facsimile No.: (212) 841-5725
(b) If to MedCath, to:
MedCath Incorporated
7621 Little Avenue, Suite 106
Charlotte, North Carolina 28226
Attention: Stephen R. Puckett
Facsimile No.: (704) 541-2615
with copies to:
Moore & Van Allen, PLLC
100 N. Tryon Street, Floor 47
Charlotte, North Carolina 28202
Attention: Hal A. Levinson
Facsimile No. (704) 331-1159
and to:
Strategic Options Committee
c/o John B. McKinnon
2020 Virginia Road
Winston-Salem, North Carolina 27104
Facsimile No.: (910) 777-8510
and to:
Womble Carlyle Sandridge & Rice, PLLC
3300 One First Union Center
Charlotte, North Carolina 28202
Attention: Garza Baldwin, III
Facsimile No.: (704) 338-7816
or to such other address or telecopier number as such party may
hereafter specify for the purpose of notice to the other parties. Any
such notice, request or other communication shall be deemed to have
been given and received on the day on which it is delivered or
telecopied (or, if such day is not a business day in North Carolina or
if the notice or other communication is not telecopied during business
hours, at the place of receipt, on the next following business day);
provided that if notice or other communication is given by telecopy,
such notice or communication shall also be given by certified mail or
by overnight courier.
Section 9.2 Entire Agreement.
This Agreement (including the documents and instruments
referred to herein) and the Confidentiality Agreement constitute the
entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties with respect
to the subject matter hereof.
Section 9.3 Parties in Interest.
This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and, except as provided in Section 3.10
with respect to the obligations of Parent thereunder, nothing in this
Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 9.4 Publicity.
The written release to the public by any party of any
information relating to the Merger shall be approved in advance by the
other parties, which approval shall not be unreasonably withheld or
delayed.
Section 9.5 Headings.
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.6 Interpretation.
As used herein, "knowledge" (or words to such effect) of
MedCath shall mean actual knowledge of the officers of MedCath, as the
case may be, and "knowledge" (or words to such effect) of Acquiror
shall mean the actual knowledge of its officers or actual knowledge of
any partner, managing director or employee of Acquiror.
Section 9.7 Subsidiaries.
When a reference is made in this Agreement to subsidiaries
of MedCath, the word "subsidiaries", means any corporation all of whose
outstanding voting securities are directly or indirectly owned by
MedCath.
Section 9.8 Successors and Assigns.
This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns
of the parties hereto.
Section 9.9 Governing Law.
This Agreement shall be governed in all respects, including
validity, interpretation and effect, by the internal laws of the State
of North Carolina, without giving effect to the principles of conflict
of laws thereof, except the laws of the state of incorporation of a
party shall govern its internal corporate affairs.
Section 9.10 Costs and Expenses.
Except as provided in Section 8.6, all costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
Section 9.11 Counterparts.
This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
Section 9.12 Specific Performance.
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.
Section 9.13 Conciliation and 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 and the Company 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 9.13. 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, 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.
<PAGE>
(b) Subject to and not in any way limiting the preceding
Section 9.13(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 9.13(a). Parent hereby appoints CT Corporation
System as their agent for service of process in New York.
SIGNATURE PAGE FOLLOWS
IN WITNESS WHEREOF, the parties have executed this Agreement by
their duly authorized officers as of the date first above written.
MEDCATH INCORPORATED, a North Carolina corporation
By:
Name:
Title:
MCTH ACQUISITION INC., a North Carolina corporation
By:
Name:
Title:
MEDCATH HOLDINGS, INC. a Delaware corporation
By:
Name:
Date:
