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EXHIBIT 4.3
FIRST AMENDMENT TO STOCKHOLDERS' AGREEMENT
This First Amendment (this "Amendment"), dated as of June 1, 2001,
amends that certain Stockholders' Agreement (the "Agreement"), dated as of July
31, 1998, by and among MedCath Holdings, Inc., a Delaware corporation ("MedCath
Holdings"), the KKR Fund and the WCAS Stockholders (the KKR Fund and the WCAS
Stockholders, together, the "Stockholders"). Capitalized terms used in this
Amendment, but not otherwise defined in this Amendment, shall have the meanings
ascribed thereto in the Agreement.
WHEREAS, MedCath Holdings and MedCath Corporation ("MedCath
Corporation" or the "Company") plan to complete an internal reorganization (the
"Reorganization") by effecting (i) the exchange of the issued and outstanding
shares of MedCath Holdings' common stock, $.01 par value per share for an
equivalent number of shares of MedCath Corporation's common stock, $.01 par
value per share ("MedCath Corporation Common Stock") (the "MedCath Holdings
Exchange"); and (ii) the exchange of a portion of the interests held by
investors in certain heart hospitals for shares of MedCath Corporation Common
Stock (the "Hospitals Exchange" and, together with the MedCath Holdings
Exchange, the "Exchanges"), among other things;
WHEREAS, contemporaneous with the consummation of the Reorganization
and the Exchanges, the Company plans to make an underwritten initial public
offering of shares of MedCath Corporation Common Stock (the "IPO"); and
WHEREAS, MedCath Holdings, the Company and each of the Stockholders
desire to amend the Agreement to make certain arrangements among themselves with
respect to the matters set forth therein and herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Amendments
1.1 The parties hereby amend the Agreement to provide
that from and after the date on which this Amendment is effective
pursuant to Section 3 of this Amendment, all references to the
"Company" in the Agreement shall mean MedCath Corporation and the term
"Common Stock" used therein shall mean MedCath Corporation Common
Stock.
1.2 The parties hereby amend Section 1(b)(i) of the
Agreement to read in its entirety as follows:
"(i) four directors designated by KKR Fund (each,
a "KKR Designee"), subject to the provisions immediately
following clause (d) below; and"
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1.3 The parties hereby amend Section 1(b)(ii) of the
Agreement to read in its entirety as follows:
"(ii) three directors designated by the WCAS
Stockholders (each, a "WCAS Designee"), it being understood
that the WCAS Designee shall be selected by the holders of
record of a majority of the Common Stock then held by the WCAS
Stockholders, subject to the provisions immediately following
clause (d) below."
1.4 The parties hereby further amend Section 1 of the
Agreement by deleting in their entirety Section (1)(b)(iii) and Section
1(b)(iv) thereof.
1.5 The parties hereby further amend Section 1 of the
Agreement by inserting two new paragraphs therein immediately after
clause (d) thereof to read in their entirety as follows:
"Notwithstanding anything in this Agreement to the contrary,
based on their respective percentages of ownership of the issued and
outstanding shares of Common Stock as of and immediately upon the
consummation of the IPO (the "Initial Percentage Owned"), KKR Fund and
the WCAS Stockholders will have the rights to designate directors as
set forth above in this Section 1; provided that such rights shall be
reduced at any time KKR Fund or the WCAS Stockholders owns less than
its Initial Percentage Owned for certain incremental ranges below which
its percentage ownership of the issued and outstanding shares of Common
Stock may fall, such increments to be determined in accordance with the
following formula, down to an ownership of 5% of the issued and
outstanding shares of Common Stock (the "Floor"), below which Floor KKR
Fund or the WCAS Stockholders (as the case may be) shall have no right
to designate a director. The aforementioned ranges shall be a spread of
equal increments from the Initial Percentage Owned to the Floor, such
increment being equal to the difference between the Initial Percentage
Owned and the numeral five (5), divided by three (3) in the case of KKR
Fund and two (2) in the case of the WCAS Stockholders, rounded up to
the nearest whole number (in each case, hereinafter, the "Increment").
The right of KKR Fund and the WCAS Stockholders, as the case may be, to
designate directors hereunder shall be reduced by one director with
each Increment drop in their respective Initial Percentage Owned. For
example in the case of KKR Fund, assuming their Initial Percentage
Owned is 28%, the applicable Increment would be eight (8) (28 - 5 = 23;
23 / 3 = 7.6; rounded up to 8), so that at any time KKR Fund owns (v)
more than or equal to 28% of the issued and outstanding shares of
Common Stock, KKR Fund will have the right to designate four (4)
directors; (w) less than 28% but more than or equal to 20% of the
issued and outstanding shares of Common Stock, KKR Fund will have the
right to designate three directors; (x) less than 20% but more than or
equal to 12% of the issued and outstanding shares of Common Stock, KKR
Fund will have the right to designate two directors; (y) less than 12%
but more than or equal to 5% of the issued and outstanding shares of
Common Stock, KKR Fund will have the right to designate one director,
and (z) less than 5% of the issued and outstanding shares of Common
Stock, KKR Fund will have no right
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to designate a director. In the event that either the KKR Fund or the
WCAS Stockholders, as the case may be, shall cease to be entitled to
designate any of a number of directors to which either is entitled to
designate, the Company agrees that the KKR Fund or the WCAS
Stockholders, as the case may be, shall be entitled to determine which
of its existing Board of Director designees are to be removed from the
Board of Directors upon their replacement in accordance with the bylaws
of the Company.
"The bylaws of the Company will establish a board of directors
who will fill staggered terms. The parties hereby agree that effective
upon the consummation of the IPO the board of directors of the Company
will be established so that subject to the other provisions of Section
1, KKR Fund and the WCAS Stockholders will have two directors and one
director, respectively in the class of directors having the longest
term before the election of new directors to such class and the
remaining directors designated by KKR Fund and the WCAS Stockholders
shall be divided equally among the remaining classes of directors.
Subject to the immediately preceding sentence, the Company agrees that
the KKR Fund or the WCAS Stockholders, as the case may be, shall be
entitled to determine which KKR Designees or WCAS Designees, as the
case may be, shall serve in each class of directors."
1.6 The parties hereby further amend Section 1 of the
Agreement by modifying second clause (a) thereof to read in its
entirety as follows:
"(a) an Executive Committee of the Board, consisting of at
least five directors, one of whom is a KKR Designee, one of whom is a
WCAS Designee, which Executive Committee shall exercise such powers as
may be provided in resolutions of the Board and permitted by applicable
law;"
1.7 The parties hereby further amend Section 1 of the
Agreement by modifying second clause (b) thereof to read in its
entirety as follows:
"(b) a Compensation Committee of the Board, consisting of
at least four directors, one of whom is a KKR Designee, one of whom is
a WCAS Designee, which Compensation Committee shall exercise such
powers as may be provided in resolutions of the Board and permitted by
applicable law;"
1.8 The parties hereby further amend Section 1 of the
Agreement by modifying second clause (c) thereof to read in its
entirety as follows:
"(b) an Audit Committee of the Board, consisting of 3
independent directors, which Audit Committee shall review and approve
the financial statements of the Company as audited by the Company's
independent certified public accountants and exercise such other powers
as may be provided in resolutions of the Board and permitted by
applicable law;"
1.9 The parties hereby further amend Section 1 of the
Agreement by inserting a carry-over sentence immediately after the
second clause (c) thereof beginning with the
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words "an Audit Committee" and ending with the words "independent
certified public accountant" such carry-over sentence to read in its
entirety as follows:
"Notwithstanding anything to the contrary herein, the
aforementioned rights of KKR Fund or the WCAS Stockholders, as
the case may be, with regard to the creation and maintenance
of an Executive Committee, a Compensation Committee and an
Audit Committee pursuant to the immediately preceding clauses
(a), (b) and (c), shall expire at any time after KKR Fund or
the WCAS Stockholders, as the case may be, together with their
respective Affiliates, own less than 10% of the issued and
outstanding shares of Common Stock."
1.10 The parties hereby further amend Section 1 of the
Agreement to delete from the fifth through the eighth lines of the last
paragraph of said Section 1, the following sentence in its entirety:
"The Company shall also pay the Stockholders
monitoring fees in the aggregate amount of $300,000 per annum,
subject to annual adjustment based on the Company's size, to
be allocated pro rata among the Stockholders based on their
ownership of the Company."
The parties hereby acknowledge and agree that no fees shall be due to
the Stockholders as a result of the consummation of the IPO and that
there is no agreement to provide further management, monitoring,
success, transaction or other similar fees of any type or nature to the
Stockholders; provided, however, that nothing herein shall prohibit the
payment to Affiliates of the Stockholders serving as directors of the
Company of such director's fees, options and reimbursements to which
all directors who are not employees of the Company are entitled to
receive for serving as directors of the Company.
1.11 The parties hereby further amend Section 1 of the
Agreement by inserting at the end of Section 1 the following new
paragraph:
"For purposes of this Agreement, where any reference
is made to a percentage of ownership of shares of Common
Stock, ownership of shares of Common Stock on a percentage
basis shall be determined on a fully diluted basis as of the
date of such determination."
1.12 The parties hereby amend Section 2 of the Agreement
to read in its entirety as follows:
"Section 2. Stockholder Voting Rights. (a) Without
obtaining the approval of each of (i) a majority of the shares
held of record by KKR Fund and its Affiliates (as defined
below) and (ii) a majority of the shares held of record by the
WCAS Stockholders and their Affiliates (as defined), the
Company shall not and shall not permit any subsidiary of the
Company to:
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(i) appoint, dismiss or replace the Chief
Executive Officer of the Company;
(ii) merge or consolidate with or into another
corporation unless a wholly-owned subsidiary
of the Company;
(iii) sell, transfer or dispose of all or
substantially all of its assets other than a
wholly-owned subsidiary of the Company; and
(iv) acquire, purchase or invest in any material
assets, other than in the ordinary course of
business, or dispose of material any assets,
other than in the ordinary course of
business.
(b) Notwithstanding anything to the contrary herein, the
approval of KKR Fund or the WCAS Stockholders, as the case may
be, pursuant to Section 2(a) shall not be required with
respect to any actions by the Company (other than to the
extent required under applicable law) at any time after KKR
Fund or the WCAS Stockholders, as the case may be, together
with its respective Affiliates, own less than 20% of the
issued and outstanding shares of Common Stock."
1.13 The parties hereby amend Section 3 of the Agreement
by inserting at the beginning of the third sentence thereof the
following:
"Except for a transferee in a transfer made pursuant to clause
(z) of the immediately preceding sentence,"
1.14 The parties hereby amend Section 10 of the Agreement
to read in its entirety as follows: "Section 10. Intentionally
omitted."
1.15 The parties hereby amend Section 15 of the Agreement
by deleting therefrom the semicolon and the proviso thereof beginning
in line six thereof as follows:
"; provided, however, that the Management Contributors shall
be entitled to rights as third-party beneficiaries with
respect to the provisions of Section 1 hereof (other than the
provisos in clauses (b)(i) and (b)(ii) of Section 1)"
1.16 The parties hereby further amend Section 15 of the
Agreement by inserting in the seventh line from the bottom thereof,
after the words "provided, however, that the rights of a Stockholder to
designate directors pursuant to Section 1 hereof" the following words:
"and a Stockholder's voting rights pursuant to Section 2 hereof other
than to any Affiliate".
1.17 The parties hereby amend Section 17 of the Agreement
to read in its entirety as follows:
"Section 17. Modification. Neither this Agreement nor
any provision hereof may be modified, changed, discharged or
terminated except by an instrument in writing signed by the
Stockholders and the Company."
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2. Ratification and Assumption. Except to the extent amended
hereby, the terms and provisions of the Agreement shall remain in full force and
effect and are ratified, confirmed and approved in all respects. MedCath
Corporation hereby accepts, agrees to, and acknowledges all such terms and
provisions, and agrees to assume all obligations of the Company under the
Agreement as if MedCath Corporation were the "Company" under the Agreement.
3. Effectiveness of Amendment. This Amendment shall become
effective as of the date on which the IPO is consummated and shall have no force
and effect unless and until the consummation of the IPO.
4. Reference. From and after the date hereof, each reference in
the Agreement and any other document describing or referencing the Agreement to
the "Agreement," "hereunder," "hereof," "herein," or words of like import
referring to the Agreement, shall mean and be a reference to the Agreement as
amended by this Amendment.
5. Binding Effect. This Amendment shall be binding upon and inure
to the benefit of the respective successors and assigns of the parties hereto.
6. Governing Law. This Amendment shall be governed by and
construed in accordance with New York law.
7. Counterparts. This Amendment may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together only one instrument.
[Remainder of this page is intentionally blank.]
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as a sealed instrument, all as of the day and year first above
written.
MEDCATH HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Name:
Title:
MEDCATH CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Name:
Title:
▇▇▇▇▇▇▇ ▇▇▇▇ LLC
By: /s/ ▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇
Title: Vice President
WELSH, CARSON, ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇ VII, L.P.
By WCAS VII Partners, L.P.
General Partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇. Rather
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Name: ▇▇▇▇▇▇▇▇ ▇. Rather
Title: General Partner
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WCAS HEALTHCARE PARTNERS, L.P.
By: WCAS HP Partners
General Partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇. Rather
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General Partner
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By: /s/ ▇▇▇▇▇▇▇▇ ▇. Rather
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Name: ▇▇▇▇▇▇▇▇ ▇. Rather
Individually and as Attorney-in-Fact
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D. ▇▇▇▇▇ ▇▇▇▇▇▇▇
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