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                                                                     EXHIBIT 4.7

             AMENDED AND RESTATED MANAGEMENT STOCKHOLDER'S AGREEMENT

         This Amended and Restated Management Stockholder's Agreement (this
"Agreement") is entered into as of July 18, 2001 between MedCath Corporation, a
Delaware corporation (the "Company"), Stephen R. Puckett, P IV Limited
Partnership, and P V Limited Partnership (collectively, the "Management
Stockholder") (the Company and the Management Stockholder being hereinafter
collectively referred to as the "Parties").

         On March 12, 1998, MedCath Incorporated, a North Carolina corporation
("MedCath"), MCTH Acquisition Inc., a North Carolina corporation ("Acquisition")
and MedCath Holdings, Inc., a Delaware corporation ("Holdings") entered into an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which
Acquisition was merged with and into MedCath (the "Merger"). Pursuant to the
Merger, except as provided in the next sentence, each share of common stock, par
value $.01 per share, of MedCath was cancelled, extinguished and converted
automatically into the right to receive an amount equal to $19.00 per share in
cash. In connection with the Merger and the terms of the Contribution Agreement
dated as of July 31, 1998 among the Management Stockholder, the Company and the
"Contributors" named therein (the "Contribution Agreement"), the Management
Stockholder rolled over certain of his existing shares of common stock in
MedCath for 594,022 shares of common stock, par value $.01 per share, of
Holdings (the "Holdings Common Stock") (the "Rollover Equity"). In connection
with the Merger and the terms of the Management Stockholder's Agreement is
entered into as of July 31, 1998 (the "Management Stockholder's Agreement")
between Holdings and the Management Stockholder, the Management Stockholder
exchanged options previously granted pursuant to stock option plans of MedCath
(the "MedCath Options") for options to purchase Holdings Common Stock, with the
same aggregate unrealized gain as the MedCath Options ("Replacement Options"),
all of which were granted under the Holdings Option Plan (defined below), the
Non-Qualified Replacement Stock Option Agreement, attached hereto as Exhibit A;
provided, however, that such Replacement Options were fully vested at the time
of the closing of the Merger.

         In addition, Holdings granted to the Management Stockholder at the
effective time of the Merger an option or options to purchase Holdings Common
Stock ("New Options") (and, collectively with the Replacement Options, the
"Options") at an exercise price of $19.00 per share of Holdings Common Stock
(the "Exercise Price") pursuant to the terms of the 1998 Stock Option Plan for
Key Employees of MedCath Holdings, Inc. and Subsidiaries (the "Holdings Option
Plan"), the "Incentive Stock Option Agreement", attached hereto as Exhibit B,
and the "Non-Qualified Stock Option Agreement", attached hereto as Exhibit C,
which New Options (taken together with the new options of all other employees)
of Holdings, as of that date represented 15 percent of the fully diluted equity
of Holdings at the time of closing of the Merger. Certain of such documents have
previously been amended.

         This Agreement is one of several other agreements including, without
limitation, employment agreements, and agreements under the Holdings Option Plan
("Other Management and Employee Stockholders' Agreements") which have been
entered into between Holdings and


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other individuals who were, are or will be key employees of Holdings or one of
its subsidiaries (collectively, the "Other Management and Employee
Stockholders").

         In connection with the proposed initial public offering of common
stock, par value $0.01, of the Company (the "Common Stock"), the Management
Stockholder and the Company have agreed to amend and restate the Management
Stockholder's Agreement as of the date hereof. The Company has agreed to assume
the obligations of Holdings under the Management Stockholder's Agreement and the
Management Stockholder has agreed to be bound be the terms and conditions of
this Agreement. The public offering of Common Stock of the Company is a
Qualified Public Offering for purposes of this Agreement.

         NOW THEREFORE, to implement the foregoing and in consideration of the
mutual agreements contained herein, the Parties agree as follows:

         1.       Rollover Equity; Issuance of Options.

                  (a)      Subject to the terms and conditions hereinafter set
forth herein and pursuant to the terms of the Contribution Agreement, the
Management Stockholder received, in exchange for the Management Stockholder's
existing shares of common stock in MedCath, and the Company received such common
stock in MedCath and in exchange delivered to the Management Stockholder, the
Rollover Equity on the Purchase Date.

                  (b)      Subject to the terms and conditions hereinafter set
forth herein and as set forth in the Management Stockholder's Non-Qualified
Replacement Stock Option Agreement, the Management Stockholder's Incentive Stock
Agreement, and the Management Stockholder's Non-Qualified Stock Option
Agreement, and upon and as of July 31, 1998 (the "Option Grant Date"), (i) the
Management Stockholder surrendered to the Company all MedCath Options and the
Company issued to the Management Stockholder Replacement Options in exchange
therefor, and (ii) the Company issued to the Management Stockholder New Options.
The Parties executed and delivered to each other copies of the Non-Qualified
Replacement Stock Option Agreement, the Management Stockholder's Replacement
Incentive Stock Option Agreement, the Management Stockholder's Incentive Stock
Option Agreement, and Non-Qualified Stock Option Agreement concurrently with the
issuance of the Options.

                  (c)      For purposes of this Agreement, the "Purchase Price"
of the Rollover Equity shall be deemed to be $19 per share, "Stock" shall mean
collectively the Rollover Equity and Option Shares (as hereinafter defined) and
July 31, 1998 shall be the "Purchase Date".

         2.       Management Stockholder's Representations, Warranties and
Agreements.

                  (a)      The Management Stockholder agrees and acknowledges
that he will not, directly or indirectly, offer, transfer, sell, assign, pledge,
hypothecate or otherwise dispose of (any such act being referred to herein as a
"transfer") any shares of the Common Stock unless such transfer complies with
Section 3 of this Agreement. If the Management Stockholder is an "affiliate" (as
defined under Rule 405 of the rules and regulations promulgated under the Act
(defined below) (an "Affiliate")) and as interpreted by the board of directors
of the Company


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(the "Board"), the Management Stockholder also agrees and acknowledges that he
will not transfer any shares of the Common Stock unless (i) the transfer is
pursuant to an effective registration statement under the Securities Act of
1933, as amended, and the rules and regulations in effect thereunder (the
"Act"), and in compliance with applicable provisions of state securities laws or
(ii) (A) counsel for the Management Stockholder (which counsel shall be
reasonably acceptable to the Company) shall have furnished the Company with an
opinion, reasonably satisfactory in form and substance to the Company, that no
such registration is required because of the availability of an exemption from
registration under the Act and (B) if the Management Stockholder is a citizen or
resident of any country other than the United States, or the Management
Stockholder desires to effect any transfer in any such country, counsel for the
Management Stockholder (which counsel shall be reasonably satisfactory to the
Company) shall have furnished the Company with an opinion or other advice
reasonably satisfactory in form and substance to the Company to the effect that
such transfer will comply with the securities laws of such jurisdiction.
Notwithstanding the foregoing, the Company acknowledges and agrees that any of
the following transfers are deemed to be in compliance with the Act and this
Agreement (including being permitted under Section 3 hereof) and no opinion of
counsel is required in connection therewith: (x) a transfer made pursuant to
Section 4, 5 or 6 hereof, (y) a transfer upon the death of the Management
Stockholder to his executors, administrators, testamentary trustees, legatees or
beneficiaries (the "Management Stockholder's Estate") or a transfer to the
executors, administrators, testamentary trustees, legatees or beneficiaries of a
person who has become a holder of Common Stock in accordance with the terms of
this Agreement, provided that it is expressly understood that any such
transferee shall be bound by the provisions of this Agreement and (z) a transfer
made after the Purchase Date in compliance with the federal securities laws to a
trust or custodianship the beneficiaries of which may include only the
Management Stockholder, his spouse or his lineal descendants (a "Management
Stockholder's Trust" and, collectively with "Management Stockholder" and
"Management Stockholder's Estate", "Management Stockholder Entities") or a
transfer made after the fifth anniversary of the Purchase Date to such a trust
by a person who has become a holder of Common Stock in accordance with the terms
of this Agreement, provided that such transfer is made expressly subject to this
Agreement and that the transferee agrees in writing to be bound by the terms and
conditions hereof.

                  (b)      The certificate (or certificates) representing the
Common Stock shall bear the following legend:

         "THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
         SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
         SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
         DISPOSITION COMPLIES WITH THE PROVISIONS OF THE AMENDED AND RESTATED
         MANAGEMENT STOCKHOLDER'S AGREEMENT DATED AS OF JULY __, 2001 BETWEEN
         MEDCATH CORPORATION ("THE COMPANY") AND THE MANAGEMENT STOCKHOLDER
         NAMED ON THE FACE HEREOF (A COPY OF WHICH IS ON FILE WITH THE SECRETARY
         OF THE COMPANY)."


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                  (c)      The Management Stockholder acknowledges that he has
been advised that (i) a restrictive legend in the form heretofore set forth
shall be placed on the certificates representing the Common Stock and (ii) a
notation shall be made in the appropriate records of the Company indicating that
the Common Stock is subject to restrictions on transfer and appropriate stop
transfer restrictions will be issued to the Company's transfer agent with
respect to the Common Stock. If the Management Stockholder is an Affiliate, the
Management Stockholder also acknowledges that (1) the Common Stock must be held
indefinitely and the Management Stockholder must continue to bear the economic
risk of the investment in the Common Stock unless it is subsequently registered
under the Act or an exemption from such registration is available, (2) when and
if shares of the Common Stock may be disposed of without registration in
reliance on Rule 144 of the rules and regulations promulgated under the Act,
such disposition can be made only in limited amounts in accordance with the
terms and conditions of such Rule and (3) if the Rule 144 exemption is not
available, sale without registration will require compliance with some other
exemption under the Act.

                  (d)      If any shares of the Common Stock are to be disposed
of in accordance with Rule 144 under the Act or otherwise, the Management
Stockholder shall promptly notify the Company of such intended disposition and
shall deliver to the Company at or prior to the time of such disposition such
documentation as the Company may reasonably request in connection with such sale
and, in the case of a disposition pursuant to Rule 144, shall deliver to the
Company an executed copy of any notice on Form 144 required to be filed with the
Securities and Exchange Commission (the "SEC").

                  (e)      The Management Stockholder agrees that, if any shares
of the Common Stock of the Company are offered to the public pursuant to an
effective registration statement under the Act (other than registration of
securities issued under an employee plan), the Management Stockholder will not
effect any public sale or distribution of any shares of the Common Stock not
covered by such registration statement from the time of the receipt of a notice
from the Company that the Company has filed or imminently intends to file such
registration statement to, or within 180 days after, the effective date of such
registration statement, unless otherwise agreed to in writing by the Company.

                  (f)      The Management Stockholder further represents and
warrants that with respect to the Common Stock and the Options (i) the
Management Stockholder received and reviewed the available information relating
to the Common Stock and the Options and the documents referred to therein, (ii)
the Management Stockholder was given the opportunity to obtain any additional
information or documents and to ask questions and receive answers about such
documents, the Company and the business and prospects of the Company as the
Management Stockholder deems necessary to evaluate the merits and risks related
to an investment in the Common Stock, and to verify the information received and
reviewed, and no representations concerning such matters or any other matters
have been made to the Management Stockholder except as set forth in this
Agreement, (iii) the Management Stockholder's net worth and financial condition
is such that the Management Stockholder can afford to bear the economic risk of
holding the unregistered Common Stock for an indefinite period of time and has
adequate means for providing for the Management Stockholder's current needs and
personal contingencies, (iv) the Management Stockholder can afford to suffer a
complete loss of the


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Management Stockholder's investment in the Common Stock, (v) all information
which the Management Stockholders has provided to the Company concerning the
Management Stockholder and the Management Stockholder's financial position is
substantially correct and complete as of the date of this Agreement, (vi) the
Management Stockholder understands and has taken cognizance of all risk factors
related to the purchase of the Common Stock, (vii) the Management Stockholder's
knowledge and experience in financial and business matters are such that the
Management Stockholder is capable of evaluating the merits and risks of the
purchase of the Common Stock as contemplated by this Agreement and (viii) the
Management Stockholder is the sole party in interest to this Agreement and is
acquiring the Common Stock and the Options for the Management Stockholder's own
account.

         3.       Restriction on Transfer.

                  Except for (i) transfers permitted by Section 2(a), (ii) a
sale of shares of Common Stock pursuant to an effective registration statement
under the Act filed by the Company or (iii) transfers pursuant to the Sale
Participation Agreement (as defined below), the Management Stockholder agrees
that he will not transfer any shares of the Common Stock at any time prior to
the fifth anniversary of the Purchase Date. No transfer of any such shares in
violation hereof shall be made or recorded on the books of the Company and any
such transfer shall be void and of no effect.

         4.       [INTENTIONALLY OMITTED].

         5.       Management Stockholder's Resale of Common Stock and Options to
the Company Upon the Management Stockholder's Death or Disability.

                  (a)      Except as otherwise provided herein, if, prior to the
fifth anniversary of the Purchase Date, (i)(x) the Management Stockholder is
still in the employ of the Company or any subsidiary of the Company or (y) has
retired from the Company or any of its subsidiaries at age 65 or over (or such
other age as may be approved by the Board of Directors of the Company) after
having been employed by the Company or any subsidiary for at least three years
after the closing date of the merger, and (ii) the Management Stockholder either
dies or becomes permanently disabled (as defined below) (a "Section 5(a) Put
Event"), then the Management Stockholder Entities shall have the right, for 60
days following the date of death or permanent disability, (A) to sell to the
Company, and the Company shall be required to purchase, on one occasion, all or,
if selling less than all, any portion of the shares of Common Stock then held by
the applicable Management Stockholder Entities, at the Section 5(a) Repurchase
Price, as determined in accordance with Section 7(a) hereof, and (B) with
respect to all exercisable Options to require the Company to pay to the
applicable Management Stockholder Entity, an amount equal to the Option Excess
Price determined on the basis of a Section 5(a) Repurchase Price as provided in
Section 8 with respect to the termination and payment of such Options held by
the applicable Management Stockholder Entities. Upon the occurrence of a Section
5(a) Put Event, all unexercisable New Options and Options whose Repurchase Price
is less than the Option Exercise Price (as defined in Section 8) shall terminate
automatically and immediately without payment therefor.


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                  (b)      The Management Stockholder Entities shall send
written notice to the Company of their intention to sell shares of Common Stock
in exchange for the payment referred in Section 5(a) above and to terminate such
Options (in exchange for the payment referred to in Section 5(a)) (the
"Redemption Notice") within 60 days after the event described in Section 5(a)
occurs. The completion of the purchase shall take place at the principal office
of the Company on the tenth business day after the giving of the Redemption
Notice. The applicable Repurchase Price and any payment with respect to the
Options as described above shall be paid by delivery to the applicable
Management Stockholder Entity of a certified bank check or checks in the
appropriate amount payable to the order of the applicable Management Stockholder
Entity, against delivery of certificates or other instruments representing the
Common Stock so purchased and appropriate documents cancelling the Options so
terminated appropriately endorsed or executed by the applicable Management
Stockholder Entity, or duly authorized representative thereof. For purposes of
this Agreement, the Management Stockholder shall be deemed to have a "permanent
disability" as such term is defined in the Company's long-term disability
benefit plan applicable to senior executive officers as in effect on the date
hereof.

                  (c)      Notwithstanding anything in Section 5(a) to the
contrary and subject to Section 11, if there exists and is continuing a material
default or material event of default on the part of the Company or any
subsidiary of the Company under any loan, guarantee or other agreement under
which the Company or any subsidiary of the Company has borrowed money, (the
"Debt Agreements"), which default or event of default would be reasonably likely
to prevent payment thereon, or if the repurchase referred to in Section 5(a)
would result in a material default or material event of default on the part of
the Company or any subsidiary of the Company under any such agreement, or if a
repurchase would not be permitted under the Delaware General Corporation Law
(the "DGCL") or would otherwise violate the DGCL (or if the Company
reincorporates in another state, the business corporation law of such state)
(each such occurrence being an "Event"), the Company shall not be obligated to
repurchase any of the Common Stock or the Options from the applicable Management
Stockholder Entities, until the first business day which is 10 calendar days
after all of the foregoing Events have ceased to exist (the "Repurchase
Eligibility Date"); provided, however, that (i) the number of shares of Common
Stock subject to repurchase under this Section 5(c) shall be that number of
shares of Common Stock and (ii) in the case of a repurchase pursuant to Section
5(a), the number of Exercisable Option Shares (as defined in Section 8) for
purposes of calculating the Option Excess Price payable under this Section 5
shall be the number of Exercisable Option Shares, both as held by the applicable
Management Stockholder Entities at the time of delivery of a Redemption Notice
in accordance with Section 5(b) hereof; provided, further, that the Repurchase
Price upon the Repurchase Eligibility Date shall be the higher of the Section
5(a) Repurchase Price calculated as of the last day of the month preceding (i)
the month in which the Event giving rise to the repurchase occurs and (ii) the
month in which the Repurchase Eligibility Date occurs, as determined in good
faith by the Board of Directors of the Company. All Options exercisable as of
the date of a Redemption Notice, in the case of a repurchase pursuant to Section
5(a), shall continue to be exercisable until the repurchase pursuant to such
Redemption Notice, provided that to the extent any Options are exercised after
the date of such Redemption Notice, the number of Exercisable Option Shares for
purposes of calculating the Option Excess Price shall be reduced accordingly and
the number of shares of Common Stock subject to repurchase shall be increased
commensurately. The Company will use its best efforts to include terms in the
Debt Agreements


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permitting repurchases of stock referred to in this Section 5, pursuant to the
terms of this Agreement and any other related documents, so long as an Event has
not yet occurred or is not continuing.

                  (d)      Notwithstanding any other provision of this Section 5
to the contrary and subject to Section 11, (i) the Management Stockholder
Entities shall have the right to withdraw any Redemption Notice which has been
pending for 90 or more days and which has remained unsatisfied because of the
provisions of Section 5(c); (ii) upon the withdrawal of any Redemption Notice
pursuant to Section 5(d)(i), the Management Stockholder Entities shall have the
right to sell the shares of Common Stock underlying the withdrawn Redemption
Notice free of any restrictions on transfer imposed herein and (iii) upon the
withdrawal of any Redemption Notice pursuant to Section 5(d)(i) all exercisable
Options shall survive until 90 days after the Management Stockholder Entities
have withdrawn such Redemption Notice.

         6.       The Company's Option to Repurchase Common Stock and Options of
Management Stockholder.

                  (a)      If, prior to the fifth anniversary of the Purchase
Date, (i) the Management Stockholder's active employment with the Company
(and/or, if applicable, its subsidiaries) is terminated by the Company with
Cause (as defined in Section 7(e) hereof) or (ii) the Management Stockholder
effects a transfer of any of the Common Stock other than as permitted in this
Agreement (each, a "Section 6(a) Call Event"), then the Company shall have the
right to purchase (i) all, but not less than all, of the shares of Common Stock
then held by the applicable Management Stockholder Entity at the Section 6(a)
Repurchase Price determined in accordance with Section 7(b) hereof and (ii) all
Replacement Options at a price equal to the Option Excess Price determined on
the basis of a Section 6(a) Repurchase Price as provided in Section 8(b) with
respect to the termination and payment of such Options. Upon the occurrence of a
Section 6(a) Call Event, whether or not the Company exercises the call rights
granted under this Section 6(a), any New Options (whether or not exercisable)
and Options whose Repurchase Price is less than the Option Exercise Price shall
terminate automatically and immediately without payment therefor.

                  (b)      If, prior to the fifth anniversary of the Purchase
Date, the Management Stockholder's employment with the Company (and/or, if
applicable, its subsidiaries) is terminated as a result of the death or
permanent disability of the Management Stockholder (a "Section 6(b) Call
Event"), then the Company shall have the right to purchase (i) all or any
portion of the shares of Common Stock then held by the applicable Management
Stockholder Entity at the Section 5(a) Repurchase Price determined in accordance
with Section 7(a) hereof and (ii) all Replacement Options and exercisable New
Options at a price equal to the Option Excess Price determined on the basis of a
Section 5(a) Repurchase Price with respect to the termination and payment for
such Options. Upon the occurrence of a Section 6(b) Call Event, whether or not
the Company exercises the call rights under this Section 6(b), all unexercisable
New Options and Options whose Repurchase Price is less than the Option Exercise
Price shall terminate automatically and immediately without payment therefor.


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                  (c)      If, prior to the fifth anniversary of the Purchase
Date, the Management Stockholder's employment with the Company (and/or, if
applicable, its subsidiaries) is terminated as a result of a termination by the
Management Stockholder with Good Reason or by the Company without Cause (each a
"Section 6(c) Call Event"), then the Company shall have the right (i) to
purchase all, but not less than all, of the shares of Common Stock then held by
the Management Stockholder or a Management Stockholder's Trust at the Section
6(c) Repurchase Price determined in accordance with Section 7(c) hereof and (ii)
all Replacement Options at a price equal to the Option Excess Price determined
on the basis of a Section 5(a) Repurchase Price with respect to the termination
and payment for such Options, and all exercisable New Options at a price equal
to the Option Excess Price determined on the basis of a Section 7(c)(ii)
Repurchase Price as provided in Section 8 with respect to the termination and
payment of such options. Upon the occurrence of a Section 6(c) Call Event,
whether or not the Company exercises the call rights under this Section 6(c),
all unexercisable New Options and Options whose Repurchase Price is less than
the Option Exercise Price shall terminate automatically and immediately without
payment therefor.

                  (d)      If, prior to the fifth anniversary of the Purchase
Date, (i) the Management Stockholder's active employment with the Company
(and/or, if applicable, its subsidiaries) is terminated by the Management
Stockholder without Good Reason (a "Section 6(d) Call Event" and together with
the Section (a) Call Event, the Section 6(b) Call Event and the Section 6(c)
Call Event, "Call Events"), then the Company shall have the right to (i)
purchase all, but not less than all, of the Rollover Equity at a price equal to
the Section 5(a) Repurchase Price and (ii) purchase all Option Shares at a price
equal to the Section 6(d) Repurchase Price (as defined in Section 7(d)) with
respect to the termination and payment for such Options. In the event of a call
by the Company under this Section 6(d) the Company may purchase all Replacement
Options at a price equal to the Option Excess Price determined on the basis of a
Section 5(a) Repurchase Price and all exercisable New Options at a price equal
to the Section 6(d) Option Excess Price (as defined in Section 8(b)) with
respect to the termination and payment of such options. Upon the occurrence of a
Section 6(d) Call Event, all unexercisable New Options and Options whose
Repurchase Price is less than the Option Exercise Price shall terminate
automatically and immediately without payment therefor.

                  (e)      The Company shall have a period of 60 days from the
date of a Call Event in which to give notice in writing to the Management
Stockholder of the exercise of such election ("Call Notice").

                  (f)      The completion of the purchases pursuant to the
foregoing shall take place at the principal office of the Company on the tenth
business day after the giving of notice of the exercise of the option to
purchase. The applicable Repurchase Price and any payment with respect to the
Options shall be paid by delivery to the applicable Management Stockholder
Entity of a certified bank check or checks in the appropriate amount payable to
the order of the applicable Management Stockholder Entity against delivery of
certificates or other instruments representing the Common Stock so purchased and
appropriate documents cancelling the Options, appropriately endorsed or executed
by the applicable Management Stockholders Entity or the duly authorized
representative thereof.


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<PAGE>   9

                  (g)      Notwithstanding any other provision of this Section 6
to the contrary and subject to Section 11, if there exists and is continuing any
Event, the Company shall delay the repurchase of any of the Common Stock or the
Options (pursuant to a Call Notice timely given in accordance with Section 6(e)
hereof) from the applicable Management Stockholder Entity until the Repurchase
Eligibility Date but in no event later than the first anniversary of the Call
Notice; provided, however, that the number of shares of Common Stock subject to
repurchase under this Section 6(g) shall be that number of shares of Common
Stock held by the Management Stockholder Entity at the time of delivery of a
Call Notice in accordance with Section 6(e) hereof; and provided, further, that
the Repurchase Price payable upon the Repurchase Eligibility Date shall be the
higher of the applicable Repurchase Price determined in accordance with Section
7 calculated as of the last day of the month preceding (i) the month in which
the Event giving rise to the repurchase occurs and (ii) the month in which the
Repurchase Eligibility Date occurs, as determined in good faith by the Board of
Directors of the Company. Notwithstanding the foregoing, the repurchase of the
Common Stock or Options from the applicable Management Stockholder Entity
(pursuant to a Call Notice timely given in accordance with Section 6(e) hereof)
cannot be delayed by the Company beyond the fifth anniversary of the Purchase
Date.

                  (h)      All Options exercisable as of the date of a Call
Notice, in the case of a repurchase pursuant to Section 6(c) or Section 6(d),
shall continue to be exercisable until the repurchase pursuant to such Call
Notice.

         7.       Determination of Repurchase Price.

                  (a)      The Section 5(a) Repurchase Price shall be a per
share repurchase price equal to the fair market value of the shares, as
determined in good faith by the Board of Directors of the Company, on the basis
of the value of the Company as a whole divided by the fully diluted equity of
the Company (the "Fair Market Value Per Share"), or, after a Public Offering,
the Market Price Per Share (as defined in Section 7(h) herein).

                  (b)      The Section 6(a) Repurchase Price shall be a per
share repurchase price equal to the lesser of (i) the Purchase Price and (ii)
the Book Value (or after a Public Offering, the Market Price Per Share).

                  (c)      (i) with respect to Rollover Equity, the Section 6(c)
Repurchase Price shall be a per share repurchase price equal to the Fair Market
Value Per Share (or after a Public Offering, the Market Price Per Share), (ii)
with respect to Option Shares, the Section 6(c) Repurchase Price shall be a per
share repurchase price equal to Book Value (or after a Public Offering, the
Market Price Per Share).

                  (d)      The Section 6(d) Repurchase Price shall be the lesser
of (A) the Book Value (or after a Public Offering, the Market Price Per Share)
or (B) the Purchase Price plus (i) the Applicable Percentage (as defined)
multiplied by (ii) the excess, if any, of the Book Value (or after a Public
Offering, the Market Price Per Share) over the Purchase Price. The Applicable
Percentage equals 25% on and after the first anniversary of the Purchase Date,
50% on and after


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<PAGE>   10

the second anniversary of the Purchase Date, 75% on and after the third
anniversary of the Purchase Date and 100% on and after the fourth anniversary of
the Purchase Date.

                  (e)      As used herein, "Cause" shall mean (i) the Management
Stockholder's willful and continued failure to perform his material duties with
respect to the Company or its subsidiaries, which failure continues beyond 10
days after a written demand for substantial performance of such duties was given
to the Management Stockholder by the Company, (ii) willful misconduct by the
Management Stockholder involving dishonesty or breach of trust in connection
with the Management Stockholder's employment which results in a demonstrable
injury (which is other than de minimis or insignificant) to the Company, or
(iii) the Management Stockholder's conviction of, or plea of nolo contendere to,
a felony.

                  (f)      As used herein, "Good Reason" shall mean (i) a
substantial reduction by the Company in the Management Stockholder's duties or
responsibilities, other than (x) as agreed by the Management Stockholder, and
(y) in connection with the termination of the Management Stockholder's
employment by the Company for Cause, by the Management Stockholder without Good
Reason, or as a result of permanent disability or the Management Stockholder's
death, (ii) a reduction by the Company in the Management Stockholder's base
salary or an amendment to the terms of the annual cash bonus plan which would
adversely affect the ability of the Management Stockholder to receive a bonus
(except that the establishment of the earnings per share or other performance
targets to be set by the Board annually will not constitute such an amendment),
(iii) a reduction or elimination of the Management Stockholder's eligibility to
participate in any of the Company's employee benefit programs that is
inconsistent with the eligibility of similarly situated employees of the Company
to participate therein, or (iv) any relocation to a primary workplace that is
more than fifty (50) miles from the Management Stockholder's workplace in effect
as of the date of this Agreement. Notwithstanding the foregoing, in the event of
a voluntary termination by the Management Stockholder on account of any serious
chronic mental or physical illness or death of an immediate family member that
requires the Management Stockholder to terminate his or her employment with the
Company because of a substantial interference with his or her duties at the
Company, such termination, solely for purposes of any call rights by the
Company, shall be treated the same as a termination by the Management
Stockholder with Good Reason.

                  (g)      As used herein, "Book Value" shall mean, on a per
share basis, the quotient of (a) (i) $228,692,744 plus (ii) the aggregate net
income of the Company from and after the Closing Date (as decreased by any net
losses from and after the Closing Date) excluding the effect of adjustments
required by or permitted by Accounting Principles Board Opinion Nos. 16 & 17
with respect to assets acquired or liabilities assumed by the Company in this
transaction plus (iii) the aggregate dollar amount contributed to (or credited
to common stockholders' equity of) the Company after the Closing Date as equity
of the Company (including consideration to be received upon exercise of options
and other stock equivalents) plus (iv) to the extent reflected as deductions to
Book Value in clause (ii) above, unusual or other items recognized by the
Company (including, without limitation, extraordinary charges, one time or
accelerated write-offs of good will), in each case, if and to the extent
determined in good faith by the Board of Directors of the Company, minus (v) to
the extent reflected as additions to Book Value in clause (ii) above, unusual or
other items recognized by the Company, in each case, if and to the extent


                                       10
<PAGE>   11

determined in good faith by the Board of Directors of the Company, minus (vi)
the aggregate dollar amount of any dividends paid by the Company after the
Closing Date and a Public Offering, divided by (b) the sum of the number of
shares of Common Stock then outstanding and the number of shares of Common Stock
issuable upon the exercise of all outstanding stock options and other rights to
acquire Common Stock and the conversion of all securities convertible into
shares of Common Stock. The items referred to in the calculations set forth in
clauses (a)(ii) through (v) of the immediately preceding sentence shall be
determined in good faith, and to the extent possible, in accordance with
generally accepted accounting principles applied on a basis consistent with any
prior periods as retlected in the consolidated financial statements of the
Company.

                  (h)      As used herein the term "Public Offering" shall mean
the sale of shares of the Common Stock to the public, subsequent to the date
hereof pursuant to a registration statement under the Act which has been
declared effective by the SEC (other than a registration statement on Form S-8
or any other similar form). A "Qualified Public Offering" shall mean a Public
Offering pursuant to an effective registration statement relating to the sale of
shares of the Common Stock held by KKR 1996 Fund L.P., a Delaware limited
partnership (the "Partnership") or Welsh, Carson, Anderson & Stowe VII, L.P.
("WCAS"), a Delaware limited partnership, or their respective affiliates;
provided, however, that a "Qualified Public Offering" shall be deemed to have
occurred if there has been any Public Offering that results in an active trading
market in 40% or more of the Common Stock.

                  (i)      As used herein, the term "Market Price Per Share"
shall mean the price per share equal to the average of the last sale price of
the Common Stock on the Repurchase Eligibility Date on each exchange on which
the Common Stock may at the time be listed or, if there shall have been no sales
on any of such exchanges on the Repurchase Eligibility Date, the average of the
closing bid and asked prices on each such exchange at the end of the Repurchase
Eligibility Date or if there is no such bid and asked price on the Repurchase
Eligibility Date on the next preceding date when such bid and asked price
occurred or, if the Common Stock shall not be so listed, the average of the
closing sales prices as reported by Nasdaq at the end of the Repurchase
Eligibility Date in the over-the-counter market. If the Common Stock is not so
listed or reported by Nasdaq, then the Market Price Per Share shall be the Book
Value Per Share.

                  (j)      In determining the Repurchase Price, appropriate
adjustments shall be made, pursuant to Section 17 hereof, for any stock
dividends, splits, combinations, recapitalizations or any other adjustment in
the number of outstanding shares of Common Stock in order to maintain, as nearly
as practicable, the intended operation of the provisions of this Section 7.

                  (k)      As used herein, the term "Physician Purchasers" shall
mean physicians signatories to the Contribution Agreement and "Other Management
Stockholders" and "Other Employee Stockholders" shall mean those members of
senior management and other key employees, respectively, of the Company who have
entered into Management Stockholder's Agreements and Employee Stockholder's
Agreements that are substantially similar to this Agreement.


                                       11
<PAGE>   12

         8.       Common Stock Issued to Management Stockholder Upon Exercise of
Stock Options; Calculation of Option Excess Price.

                  (a)      The Company may from time to time grant to the
Management Stockholder, in addition to the Options, options under the Option
Plan to purchase shares of Common Stock at the Purchase Price or at a different
option exercise price.

                  (b)      With respect to each Option, the "Option Excess
Price" is the excess, if any, of the Section 5(a) Repurchase Price, Section 6(b)
Repurchase Price, Section 6(c) Repurchase Price or the Section 6(d) Repurchase
Price, depending on which Repurchase Price is being used to repurchase the
remainder of the Common Stock, over the respective Option Exercise Price,
multiplied by the number of Exercisable Option Shares thereunder; provided,
however, that the Section 6(d) Option Excess Price shall mean the Applicable
Percentage multiplied by the excess, if any, of the Book Value (or after a
Public Offering, the MP) over the Exercise Price of the exercisable New Options,
multiplied by the number of Exercisable Option Shares thereunder. For purposes
hereof, "Option Exercise Price" shall mean the applicable exercise price for the
Options, "Option Shares" shall mean the shares of Common Stock underlying the
Options and "Exercisable Option Shares" shall mean the shares of Common Stock
which, at the time of determination of the Option Excess Price could be
purchased by the Management Stockholder upon exercise of his or her outstanding
Options.

         9.       The Company's Representations and Warranties.

                  (a)      The Company represents and warrants to the Management
Stockholder that (i) this Agreement has been duly authorized, executed and
delivered by the Company and (ii) the Common Stock, when issued and delivered in
accordance with the terms hereof, will be duly and validly issued, fully paid
and nonassessable.

                  (b)      Following any Public Offering, the Company will file
the reports required to be filed by it under the Act and the Exchange Act and
the rules and regulations adopted by the SEC thereunder, to the extent required
from time to time to enable the Management Stockholder to sell shares of Common
Stock without registration under the Act within the limitations of the
exemptions provided by (A) Rule 144 under the Act, as such Rule may be amended
from time to time, or (B) any similar rule or regulation hereafter adopted by
the SEC. Notwithstanding anything contained in this Section 9(b), the Company
may de-register under Section 12 of the Exchange Act if it is then permitted to
do so pursuant to the Exchange Act and the rules and regulations thereunder and,
in such circumstances, shall not be required hereby to file any reports which
may be necessary in order for Rule 144 or any similar rule or regulation under
the Act to be available. Nothing in this Section 9(b) shall be deemed to limit
in any manner the restrictions on sales of Common Stock contained in this
Agreement or to require the Company to effect any registration of Common Stock
under the Act.

         10.      "Piggyback" Registration Rights.

                  (a)      Effective upon the date of this Agreement, until the
later of (i) the first occurrence of a Qualified Public Offering (as defined in
Section 7(h) above) or (ii) the fifth


                                       12
<PAGE>   13

anniversary of the Purchase Date, the Management Stockholder hereby agrees to be
bound by all of the obligations of the Registration Rights Agreement dated as of
July 31, 1998, among the Company, the Partnership and the "WCAS Stockholders" as
defined therein (the "Registration Rights Agreement", a copy of which is
attached hereto as Exhibit E) and, in the case of a Qualified Public Offering
and subject to the limitations set forth in this Section 10, shall have all of
the rights and privileges of the Registration Rights Agreement, in each case as
if the Management Stockholder were an original party (other than the Company)
thereto; provided, however, that the Management Stockholder shall not have any
rights to request registration under Section 3 of the Registration Rights
Agreement; and provided further, that the Management Stockholder shall not be
bound by any amendments to the Registration Rights Agreement unless the
Management Stockholder consents thereto. Notwithstanding anything to the
contrary contained in the Registration Rights Agreement, the Management
Stockholder's rights and obligations under the Registration Rights Agreement
shall be subject to the limitations and additional obligations set forth in this
Section 10. In the event that the Management Stockholder is an Affiliate, to the
extent that registration under Form S-8 is not available, the rights and
privileges of the Registration Rights Agreement shall continue to apply to such
Management Stockholder beyond the fifth anniversary of the Purchase Date. All
Stock purchased or held by the Management Stockholder Entities pursuant to this
Agreement shall be deemed to be Restricted Stock as defined in the Registration
Rights Agreement.

                  (b)      The Company will promptly notify the Management
Stockholder in writing (a "Notice") of any proposed registration (a "Proposed
Registration") in connection with a Qualified Public Offering. If within 15 days
of the receipt by the Management Stockholder of such Notice, the Company
receives from the applicable Management Stockholder Entity a written request (a
"Request") to register shares of Common Stock held by the Management Stockholder
Entities (which Request will be irrevocable unless otherwise mutually agreed to
in writing by the Management Stockholder and the Company), shares of Common
Stock will be so registered as provided in this Section 10; provided, however,
that for each such registration statement only one Request, which shall be
executed by the applicable Management Stockholder Entity may be submitted for
all Restricted Stock held by the Management Stockholder Entities.

                  (c)      The maximum number of shares of Common Stock which
will be registered pursuant to a Request will be the lowest of (i) the number of
shares of Common Stock then held by the Management Stockholder (which for
purposes of this subparagraph (c) shall include shares held by the Management
Stockholder's Estate or a Management Stockholder's Trust), including all shares
of Common Stock which the Management Stockholder is then entitled to acquire
under an unexercised Option to the extent then exercisable multiplied by the
fraction the numerator of which is the number of shares of stock being sold by
the Partnership, WCAS and their respective Affiliates and the denominator of
which is the number of shares of stock owned by the Partnership, WCAS and their
respective Affiliates or (ii) the maximum number of shares of Common Stock which
the Company can register in the Proposed Registration without adverse effect on
the offering in the view of the managing underwriters (reduced pro rata with all
Other Management Stockholders, Employee Stockholders and Physician Purchasers)
as more fully described in subsection (d) of this Section 10 or (iii) the
maximum number of shares which the Management Stockholder (pro rata based upon
the aggregate number of shares of Common Stock the Management Stockholder, all
Other


                                       13
<PAGE>   14

Management Stockholders, Employee Stockholders and Physician Purchasers have
requested be registered) and all Other Management Stockholders are permitted to
register under the Registration Rights Agreement.

                  (d)      If a Proposed Registration involves an underwritten
offering and the managing underwriter advises the Company in writing that, in
its opinion, the number of shares of Common Stock requested to be included in
the Proposed Registration exceeds the number which can be sold in such offering,
so as to be likely to have an adverse effect on the price, timing or
distribution of the shares of Common Stock offered in such Qualified Public
Offering as contemplated by the Company, then the Company will include in the
Proposed Registration (i) first, 100% of the shares of Common Stock the Company
proposes to sell, (ii) second, to the extent of the number of shares of Common
Stock requested to be included in such registration which, in the opinion of
such managing underwriter, can be sold without having the adverse effect
referred to above, the number of shares of Common Stock which the Partnership
and WCAS have requested to be included in the Proposed Registration, and (iii)
third, to the extent of the number of shares of Common Stock requested to be
included in such registration which, in the opinion of such managing
underwriter, can be sold without having the adverse effect referred to above,
the number of shares of Common Stock which the holders of Restricted Stock (as
defined in the Registration Rights Agreement), including the Management
Stockholder, Other Management Stockholders, Employee Stockholders and Physician
Purchasers have requested to be included in the Proposed Registration, such
amount to be allocated pro rata among all requesting holders on the basis of the
relative number of shares of Common Stock then held by each such holder
(provided that any shares thereby allocated to any such holder that exceed such
holder's request will be reallocated among the remaining requesting holders in
like manner).

                  (e)      Upon delivering a Request the Management Stockholder
will, if requested by the Company, execute and deliver a custody agreement and
power of attorney in form and substance satisfactory to the Company with respect
to the shares of Common Stock to be registered pursuant to this Section 10 (a
"Custody Agreement and Power of Attorney"). The Custody Agreement and Power of
Attorney will provide, among other things, that the Management Stockholder will
deliver to and deposit in custody with the custodian and attorney-in-fact named
therein a certificate or certificates representing such shares of Common Stock
(duly endorsed in blank by the registered owner or owners thereof or accompanied
by duly executed stock powers in blank) and irrevocably appoint said custodian
and attorney-in-fact as the Management Stockholder's agent and attorney-in-fact
with full power and authority to act under the Custody Agreement and Power of
Attorney on the Management Stockholder's behalf with respect to the matters
specified therein.

                  (f)      The Management Stockholder agrees that he or she will
execute such other agreements as the Company may reasonably request to further
evidence the provisions of this Section 10.

         11.      Pro Rata Repurchases; Pro Rata Participation.

                  (a)      Notwithstanding anything to the contrary contained in
Section 5, 6 or 7, if at any time consummation of all purchases and payments to
be made by the Company pursuant


                                       14
<PAGE>   15

to this Agreement and the Other Management Stockholders' Agreements would result
in an Event, then the Company shall make purchases from, and payments to, the
Management Stockholder and Other Management Stockholders pro rata (on the basis
of the proportion of the number of shares of Common Stock and the number of
Options each such Management Stockholder and all Other Management Stockholders
have elected or are required to sell to the Company) for the maximum number of
shares of Common Stock permitted without resulting in an Event (the "Maximum
Repurchase Amount"). The provisions of Section 5(c) and 6(g) shall apply in
their entirety to payments and repurchases with respect to Options and shares of
Common Stock which may not be made due to the limits imposed by the Maximum
Repurchase Amount under this Section 11. Until all of such Common Stock and
Options are purchased and paid for by the Company, the Management Stockholder
and the Other Management Stockholders whose Common Stock and Options are not
purchased in accordance with this Section 11 shall have priority, on a pro rata
basis, over other purchases of Common Stock and Options by the Company pursuant
to this Agreement and Other Management Stockholders' Agreements.

                  (b)      In the event of an assignment of a call right, the
delegation of the duty to pay for a put or of the right of first refusal in the
event of an Offer with respect to shares of the Management Stockholder's Common
Stock and Options in accordance with Section 24, Other Management Stockholders
who are parties to Other Management Stockholder's Agreements with the Company
similar to this Agreement will have the right to participate in the purchase of
such shares of Common Stock and Options made pursuant to Sections 4, 5 and 6,
pro rata with each other, the Partnership, WCAS, and any of their affiliates.

         12.      Rights to Negotiate Repurchase Price.

         Nothing in this Agreement shall be deemed to restrict or prohibit the
Company from purchasing shares of Common Stock or Options from the Management
Stockholder, at any time, upon such terms and conditions, and for such price, as
may be mutually agreed upon between the Parties, whether or not at the time of
such purchase circumstances exist which specifically grant the Company the right
to purchase, or the Management Stockholder the right to sell, shares of Common
Stock or the Company the right to pay, or the Management Stockholder the right
to receive, the Option Excess Price under the terms of this Agreement.

         13.      Covenant Regarding 83(b) Election.

         Except as the Company may otherwise agree in writing or upon the
expiration of certain provisions pursuant to Section 15(a) herein, the
Management Stockholder hereby covenants and agrees that he will make an election
provided pursuant to Treasury Regulation 1.83-2 with respect to the Common Stock
to be acquired upon each exercise of the Management Stockholder's Non-Qualified
Options; and Management Stockholder further covenants and agrees that he will
furnish the Company with copies of the forms of election the Management
Stockholder files within 30 days after the date hereof, and within 30 days after
each exercise of Management Stockholder's Non-Qualified Options and with
evidence that each such election has been filed in a timely manner.


                                       15
<PAGE>   16

         14.      Notice of Change of Beneficiary; Definitions.

         Immediately prior to any transfer of Common Stock to a Management
Stockholder's Trust, the Management Stockholder shall provide the Company with a
copy of the instruments creating the Management Stockholder's Trust and with the
identity of the beneficiaries of the Management Stockholder's Trust. The
Management Stockholder shall notify the Company immediately prior to any change
in the identity of any beneficiary of the Management Stockholder's Trust.

         15.      Expiration of Certain Provisions; Limitation on the
Application of Certain Provisions; Definitions.

                  (a)      The provisions contained in Sections 3, 4, 5 and 6 of
this Agreement and the portion of any other provision of this Agreement which
incorporates the provisions of Sections 3, 4, 5 and 6, shall terminate and be of
no further force or effect with respect to any shares of Common Stock owned by
the Management Stockholder upon a Change of Control or, but only with respect to
the Rollover Equity and Replacement Options, if a Liquidity Event occurs.
Notwithstanding the forgoing, the provisions contained in Sections 5 and 6 of
this Agreement and the portion of any other provision of this Agreement which
incorporates the provisions of Sections 5 and 6, shall terminate and be of no
further force or effect with respect to the Rollover Equity and Replacement
Options upon a Public Offering.

                  (b)      The put rights and call rights described in Sections
5 and 6 of this Agreement and the portion of any other provision of this
Agreement which incorporates or otherwise relates to the provisions of Sections
5 and 6 shall not apply to any Rollover Equity or Replacement Options received
by the Management Stockholder Entities in consideration for the Management
Stockholder's investment of shares of common stock of MedCath and/or MedCath
Options in the Company in connection with the Merger, which Rollover Equity
and/or Replacement Options, as of the closing of the Merger, are, in the
aggregate, in excess of $4,000,000. All other provisions contained in this
Agreement shall apply to such additional Rollover Equity and Replacement Options
held by the Management Stockholder Entities immediately after the closing of the
Merger.

                  (c)      Notwithstanding anything to the contrary in this
Agreement, none of the sale participation rights (other than Section 6) set
forth in the Sale Participation Agreement, the put rights set forth in Section 5
of this Agreement, the "piggyback" registration rights set forth in Section 10
of this Agreement and in the Registration Rights Agreement and the preemptive
rights set forth in Section 16 of this Agreement and any other provisions of
this Agreement which incorporate or otherwise relate to any of the rights and or
provisions referred to above in this sentence shall apply to any Rollover Equity
which, prior to the Merger, constituted common stock of MedCath that was
received upon the Management Stockholder's exercise of MedCath Options that were
granted as and treated as "incentive stock options".

                  (d)      As used herein, "Change of Control" means (i) sales
of all or substantially all of the assets of the Company to a Person who is not
an affiliate of Kohlberg Kravis Roberts & Co., LLC ("KKR") or WCAS, (ii) a sale
by KKR or WCAS or any of its respective affiliates


                                       16
<PAGE>   17

resulting in more than 50% of the voting stock of the Company being held by a
person or group that does not include KKR or WCAS or any of their respective
affiliates or (iii) a merger or consolidation of the Company into another Person
which is not an affiliate of KKR or WCAS; if and only if any such event results
in the inability of certain affiliates of Kohlberg Kravis Roberts & Co., L.P.
(the "KKR Partnerships") and partnerships affiliated with WCAS (the "WCAS
Partnerships") to elect a majority of the Board of Directors of the Company (or
the resulting entity); provided, however, that in the event that the Company is
merged with another company controlled by the KKR Partnerships or the WCAS
Partnerships or their respective Affiliates and, if the chief executive officer
of the surviving entity (or the ultimate parent) is not Stephen R. Puckett or a
person who has held the position of chief executive officer of the Company for
at least six months, such an event shall be deemed a Change of Control.

                  (e)      As used herein, "Liquidity Event" means a sale or
distribution by the KKR Partnerships or WCAS Partnerships which, when aggregated
with any prior sales or distributions made by either of them or their respective
affiliates, excluding any of the individuals listed on Schedule I to the
Management Stockholder's Agreement (the "Initial Investors"), results in the
aggregate holdings of the Initial Investors representing 20 percent or less of
the equity of the Company originally issued to the Initial Investors following
the consummation of the Merger.

         16.      Preemptive Rights.

                  (a)      In the case of the proposed issuance of, or the
proposed granting by the Company of warrants, options or other rights to
purchase Common Stock, preferred stock or other equity securities of the Company
(or securities convertible into or exchangeable for such Common Stock, other
equity securities or preferred stock), in each case after the date hereof
(collectively, the "Preemptive Rights Securities"), the Management Stockholder
shall have the right, on the same terms as those of the proposed issuance or
grant and during a reasonable time of no less than 15 days after the Company has
given notice to the Management Stockholder of such proposed issuance or granting
(containing the terms and conditions of such issuance or grant and the terms and
conditions of the Preemptive Rights Securities proposed to be issued or
granted), to purchase an amount of such Preemptive Rights Securities equal to
the proportion of the aggregate amount of such outstanding Common Stock,
preferred stock or other equity securities then owned by the Management
Stockholder, in each case, on a fully diluted basis based on a record date not
more than 30 days prior to such issuance or granting. The price or prices and
terms of such Preemptive Rights Securities shall be identical to the price or
prices and terms at which such Preemptive Rights Securities are proposed to be
offered for sale or granted to others.

                  (b)      The provisions of Section 16 above shall not apply to
any proposed issuance or grant made pursuant to: (i) any employee stock option
plan or other employment or compensation arrangement, (ii) the terms of any
options, warrants or other securities provided that such optionees and/or
stockholders were given preemptive rights at the time such options, warrants or
other securities were issued or granted, (iii) the exchange by the Company of
one equity security for another to the extent such securities are made available
to all holders of such class of securities and (iv) any bona fide merger or
consolidation of any person, business,


                                       17
<PAGE>   18

division or assets, which merger or consolidation has been approved by the Board
and, if required, by the holders of the common stock.

                  (c)      Notwithstanding anything to the contrary in this
Agreement, the rights set forth in this Section 16 shall terminate on the date
on which the Company has a publicly traded class of common equity securities
following a Public Offering.

         17.      Recapitalizations, etc.

         The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to the Common Stock or the Options, to any and all
shares of capital stock of the Company or any capital stock, partnership units
or any other security evidencing ownership interests in any successor or assign
of the Company (whether by merger, consolidation, sale of assets or otherwise)
which may be issued in respect of, in exchange for, or substitution of the
Common Stock or the Options, by reason of any stock dividend, split, reverse
split, combination, recapitalization, liquidation, reclassification, merger,
consolidation or otherwise.

         18.      Management Stockholder's Employment by the Company.

         Other than as expressly set forth in an employment agreement between
the Management Stockholder and the Company, nothing contained in this Agreement
or in any other agreement entered into by the Company and the Management
Stockholder contemporaneously with the execution of this Agreement (i) obligates
the Company or any subsidiary of the Company to employ the Management
Stockholder in any capacity whatsoever or (ii) prohibits or restricts the
Company (or any such subsidiary) from terminating the employment, if any, of the
Management Stockholder at any time or for any reason whatsoever, with or without
Cause, and the Management Stockholder hereby acknowledges and agrees that
neither the Company nor any other person has made any representations or
promises whatsoever to the Management Stockholder concerning the Management
Stockholder's employment or continued employment by the Company or any
subsidiary of the Company.

         19.      State Securities Laws.

         The Company hereby agrees to use its best efforts to comply with all
state securities or "blue sky" laws which might be applicable to the sale of the
Common Stock and the issuance of the Options to the Management Stockholder.

         20.      Binding Effect.

         The provisions of this Agreement shall be binding upon and accrue to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns. In the case of a transferee permitted
under Section 2(a) hereof, such transferee shall be deemed the Management
Stockholder hereunder; provided, however, that no transferee (including without
limitation, transferees referred to in Section 2(a) hereof) shall derive any
rights under this Agreement unless and until such transferee has delivered to
the Company a valid undertaking and becomes bound by the terms of this
Agreement.


                                       18
<PAGE>   19

         21.      Amendment.

         This Agreement may be amended only by a written instrument signed by
the Parties hereto.

         22.      Closing.

         Except as otherwise provided herein, the closing of each purchase and
sale of shares of Common Stock and the payment of the Option Excess Price, if
any, pursuant to this Agreement shall take place at the principal office of the
Company on the tenth business day following delivery of the notice by either
Party to the other of its exercise of the right to purchase or sell such Common
Stock hereunder or to cause the payment of the Option Excess Price, if any.

         23.      Applicable Law; Enforcement. (a) The laws of the state of
Delaware (or if the Company reincorporates in another state, of that state)
shall govern the interpretation, validity and performance of the terms of this
Agreement, regardless of the law that might be applied under principles of
conflicts of law. Any suit, action or proceeding against any Party, with respect
to this Agreement, or any judgment entered by any court in respect of any
thereof, may be brought in any court of competent jurisdiction in the State of
Delaware (or if the Company reincorporates in another state, in that state) or
North Carolina, as the Party bringing suit may elect in its sole discretion, and
each of the Parties hereby submits to the non-exclusive jurisdiction of such
courts for the purpose of any such suit, action, proceeding or judgment. By the
execution and delivery of this Agreement, each Party appoints The Corporation
Trust Company, at its office in Charlotte, North Carolina or Wilmington,
Delaware (or if the Company reincorporates in another state, an office in that
state), as the case may be, as his or its agent upon which process may be served
in any such suit, action or proceeding. Service of process upon such agent,
together with notice of such service given to the appropriate Party in the
manner provided in Section 25 hereof, shall be deemed in every respect effective
service of process upon such Party in any suit, action or proceeding. Nothing
herein shall in any way be deemed to limit the ability of either Party to serve
any such writs, process or summonses in any other manner permitted by applicable
law or to obtain jurisdiction over either party in such other jurisdictions and
in such manner, as may be permitted by applicable law. Each of the Parties
hereby irrevocably waives any objections which he or it may now or hereafter
have to the laying of the venue of any suit, action or proceeding arising out of
or relating to this Agreement brought in any court of competent jurisdiction in
the State of Delaware (or if the Company reincorporates in another state, in
that state) or North Carolina, and hereby further irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in any inconvenient forum. No suit, action or proceeding against either
Party with respect to this Agreement may be brought in any court, domestic or
foreign, or before any similar domestic or foreign authority other than in a
court of competent jurisdiction in the State of Delaware (or if the Company
reincorporates in another state, in that state) or North Carolina, and each of
the Parties hereby irrevocably waives any right which he or it may otherwise
have had to bring such an action in any other court, domestic or foreign, or
before any similar domestic or foreign authority. Each Party hereby submits to
the jurisdiction of such courts for the purpose of any such suit, action or
proceeding. Each Party hereto hereby irrevocably and unconditionally


                                       19
<PAGE>   20

waives trial by jury in any legal action or proceeding in relation to this
Agreement and for any counterclaim therein.

                  (b)      In the event of a breach or threatened breach of this
Agreement, the company or its successors or assigns may, in addition to other
rights and remedies existing in the favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive relief in order to
enforce, or prevent any violations of, the provisions hereof without the posting
of a bond or other security).

         24.      Assignability of Certain Rights by the Company.

         Subject to Section 1l(b) hereof, the Company shall have the right to
assign any or all of its rights or obligations to purchase shares of Common
Stock and Options pursuant to Sections 4, 5, and 6 hereof; provided, however,
that the Company shall remain obligated to perform its obligations
notwithstanding any such assignments in the event that such assignee fails to
perform the obligations so assigned to it.

         25.      Miscellaneous.

                  (a)      In this Agreement (i) all references to "dollars" or
"$" are to United States dollars and (ii) the word "or" is not exclusive.

                  (b)      If any provision of this Agreement shall be declared
illegal, void or enforceable by any court of competent jurisdiction, the other
provisions shall not be affected, but shall remain in full force and effect.

                  (c)      The Company shall have the right to deduct from any
cash payment made ruder this Agreement to the applicable Management Stockholder
Entities any federal, state or local income or other taxes required by law to be
withheld with respect to such payment.

                  (d)      The term "Management Stockholder": (i) with respect
to the Rollover Equity and where the context so indicates, shall refer to
Stephen R. Puckett, individually, Stephen R. Puckett, as the general partner on
behalf of P IV Limited Partnership, and Stephen R. Puckett, as the general
partner on behalf of P V Limited Partnership; (ii) with respect to the
provisions of the Agreement regarding employment, shall refer only to Stephen R.
Puckett individually, and shall not require either P IV Limited Partnership or P
V Limited Partnership to be employed, and (iii) shall otherwise refer to Stephen
R. Puckett, individually, or, collectively, to Stephen R. Puckett, individually,
Stephen R. Puckett, as the general partner on behalf of P IV Limited
Partnership, and Stephen R. Puckett, as the general partner on behalf P V
Limited Partnership.

         26.      Notices.

         All notices and other communications provided for herein shall be in
writing and shall be deemed to have been duly given if delivered by hand
(whether by overnight courier or otherwise)


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\
or sent by registered or certified mail, return receipt requested, postage
repaid, or by overnight delivery or telecopy (with machine confirmation), to the
Party to whom it is directed:

                  (a)      If to the Company, to it at the following address:

                           c/o Kohlberg Kravis Roberts & Co.
                           2800 Sand Hill Road, Suite 200
                           Menlo Park, California 94025
                           Attn: Edward A. Gilhuly

         with a copy to:

                           Simpson Thacher & Bartlett
                           425 Lexington Avenue
                           New York, New York 10017-3909
                           Attn: Gary I. Horowitz, Esq.

         with a copy to:

                           Welsh, Carson, Anderson & Stowe VII, L.P.
                           320 Park Avenue, Suite 2500
                           New York, New York 10022-6815
                           Attn: Paul B. Queally

         with a copy to:

                           Reboul, MacMurray, Hewitt, Maynard & Kristol
                           45 Rockefeller Plaza
                           New York, New York 10111
                           Attn: Karen Wiedemann, Esq.

         (b)      If to the Management Stockholder, to him at the address set
forth below under his signature;

         with a copy to:

                           Wilmer, Cutler & Pickering
                           2445 M Street, N.W.
                           Washington, D.C. 20037
                           Attn: Richard W. Cass, Esq.
                           Fax: 202-663-6363

         or at such other address as either party shall have specified by notice
in writing to the other.


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<PAGE>   22

         27.      Counterparts.

         This Agreement may be executed in two or more counterparts, each of
which will be deemed an original.

         IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
first above written.

                                    MEDCATH CORPORATION

                                    By:      /s/ James E. Harris
                                       -----------------------------------------
                                    Name:  James E. Harris
                                    Title: Senior Vice President and
                                           Chief Financial Officer


                                    /s/ Stephen R. Puckett
                                    --------------------------------------------
                                    Stephen R. Puckett
                                    2324 Kingsmill Terrace
                                    Charlotte, NC 28270

                                    P IV LIMITED PARTNERSHIP


                                    /s/ Stephen R. Puckett
                                    --------------------------------------------
                                    By: Stephen R. Puckett, the
                                        General Partner

                                    P V LIMITED PARTNERSHIP


                                    /s/ Stephen R. Puckett
                                    --------------------------------------------
                                    By: Stephen R. Puckett, the
                                        General Partner


                                       22