Document:

Ex-10.56

 

Healthcare Management Consulting • Project Development • Ventures

February 5, 2004

Mr. John T. Casey

President and CEO

MedCath Corporation

10720 Sikes Place, Suite 300

Charlotte, NC 28277

Re:  Addendum to Engagement Letter dated 10/30/03

Dear John:

You recently requested that SSB provide you with an Addendum letter to our
Engagement Letter dated October 30, 2003. You have asked SSB to furnish
additional services related to several projects that go beyond the scope of the
original Engagement. Specifically, you have asked for our help in the
following areas:

	1.	 	Additional strategic planning activities, including one or more
additional planning sessions; my attendance at the February Board
meeting to help present and defend the recommendations developed over
the past three months by your management team (with our assistance);
and possible assistance in developing slides and other materials for
the Board meeting.
	 
	2.	 	Assistance with organizing and facilitating a retreat of
hand-picked hospital industry leaders and members of MedCath’s senior
management team, to be held this spring in Scottsdale. The purpose of
the retreat is to explain MedCath’s new strategy and get feedback and
input from the attendees.
	 
	3.	 	A joint planning effort involving MedCath and the Arizona Heart
Institute, addressing win/win opportunities for the two organizations;
transition planning for AHI; etc.

Chairman: Jacque J. Sokolov, MD

5685 N. Scottsdale Rd., Ste E-100, Scottsdale, AZ 85250

Tel: 480-707-4521 - JJSPSO@aol.com

	 	 	 	 	 	 	 
	President: Mike Treacy

	 	Managing Consultant: Chris Schaefer
	 	Managing Consultant: Ted Schwab
	 	Sr. Admin Consultant: Martha Valverde
	1287 Tressler Drive

	 	8006 North Bridge Way
	 	16 A - Dudley Avenue
	 	15 Venezia
	Fort Washington, PA 19034

	 	Maumee, Ohio 43537
	 	Venice, California 90291
	 	Newport Coast, CA
	Tel: 215-542-2412

	 	Tel: 419-865-1948
	 	Tel: 310-401-0068
	 	Tel: 562-595-9595 Ext: 8
	miketreacy@att.net

	 	adbeckcons@worldnet.att.net
	 	tjschwab@earthlink.net
	 	hcca@pacbell.net

 

 

Addendum to MedCath Engagement Letter

February 5, 2004

Page 2

The purpose of this Addendum is to address the first two items. The third item
will be addressed in a separate “joint” Engagement Letter addressed to you and
Ted Diethrich, MD.

Addendum Terms

Additional Strategic Planning Activities

For this category of consulting services, we discussed the following
guidelines:

	•	 	For additional planning sessions along the lines of the four
that have already taken place (and that were contemplated by the
original Engagement Letter), our fee arrangement will be the same as
described in that letter—$12,500 per session, which covers
preparation, attendance at the session, and documentation of next
steps, assignments, etc.
	 
	•	 	For other activities, we will charge on a time and materials
basis. For this purpose, we will use hourly consulting rates
consistent with our original Engagement Letter. These hourly rates
range from $95 for analyst support to $350 for Mike Treacy to $495
for me.

Leadership Retreat

For the leadership retreat, we will charge on a time and materials basis.
Hourly rates for people who could potentially be involved in this activity
include $75 for Sue Pearce (administrative assistant), $95 for analyst support,
$350 for Mike Treacy, and $495 for myself.

Once we get a more defined plan for the retreat, including a more precise
indication of the role that you wish SSB to play, and the resources you wish to
draw on from SSB, we can provide you with a budget estimate encompassing all
activities for the retreat.

Other Terms

All other terms are the same as those set forth in the October 30, 2003,
Engagement Letter.

 

 

Addendum to MedCath Engagement Letter

February 5, 2004

Page 3

Closing

If you agree to the terms of this Addendum, please sign both enclosed copies
and return one to me as soon as possible.

On behalf of SSB, let me thank you for this opportunity to continue our work
with MedCath. We have greatly enjoyed the strategic planning project and are
looking forward to the additional activities outlined in this letter.

Sincerely,

SOKOLOV, SOKOLOV, BURGESS

By: Jacque J. Sokolov, MD

Chairman

The undersigned agrees to the engagement of Sokolov, Sokolov, Burgess according
to the terms described in this Engagement Letter.

	 	 	MEDCATH CORPORATION

	 	 	 	 	 	 	 
	By:

	 	/s/ John T. Casey

	 	Date:
	 	4/19/04

	

	 	John T. Casey	 	 	 	 
	

	 	President and CEOEx-10.57

 

Healthcare Management Consulting • Project Development • Ventures

February 17, 2004

	 	 	 
	Mr. John T. Casey

	 	Mr. Ken Howell
	President and CEO

	 	President
	MedCath Corporation

	 	Arizona Heart Hospital
	10720 Sikes Place, Suite 300

	 	1930 East Thomas Road
	Charlotte, NC 28277

	 	Phoenix, AZ 86016-7711
	

Edward B. Diethrich, MD
	 	 
	Medical Director
	 	 
	Arizona Heart Institute
	 	 
	2632 North 20th Street
	 	 
	Phoenix, AZ 85006
	 	 

     Re: SSB Engagement Letter

Dear John, Ken and Ted:

As I have recently discussed with each of you, MedCath has asked Sokolov,
Sokolov Burgess (“SSB”) to submit a “joint proposal” to work with MedCath
Corporation, the Arizona Heart Hospital (“AHH”) and the Arizona Heart Institute
(“AHI”) on several matters of interest to all three organizations. These
include:

	1.	 	Determination of timely issues and priorities for each organization
relative to the existing and future relationship between all three
parties.
	 
	2.	 	Evaluation of options for getting greater value out of the
relationship (for all three organizations). These options will include
(among other ideas):

	•	 	How to leverage AHI expertise throughout the MedCath
organization;
	 
	•	 	How to enhance AHI’s, AHH’s and MedCath’s reputation
nationally as “centers of excellence” for heart and vascular
care; and
	 
	•	 	How to improve the financial performance of the Arizona
Heart Hospital.

Chairman: Jacque J. Sokolov, MD

5685 N. Scottsdale Rd., Ste E-100, Scottsdale, AZ 85250

Tel: 480-707-4521 - JJSPSO@aol.com

	 	 	 	 	 	 	 
	President: Mike Treacy

	 	Managing Consultant: Chris Schaefer
	 	Managing Consultant: Ted Schwab
	 	Sr. Admin Consultant: Martha Valverde
	1287 Tressler Drive

	 	8006 North Bridge Way
	 	16 A - Dudley Avenue
	 	15 Venezia
	Fort Washington, PA 19034

	 	Maumee, Ohio 43537
	 	Venice, California 90291
	 	Newport Coast, CA
	Tel: 215-542-2412

	 	Tel: 419-865-1948
	 	Tel: 310-401-0068
	 	Tel: 562-595-9595 Ext: 8
	miketreacy@att.net

	 	adbeckcons@worldnet.att.net
	 	tjschwab@earthlink.net
	 	hcca@pacbell.net

 

 

Joint MedCath-AHH-AHI Engagement Letter

February 17, 2004

Page 2

	3.	 	Completion of an inventory of all intellectual property created out
of the relationship between AHI, AHH and MedCath.
	 
	4.	 	Examination of succession issues at AHI and consideration of
strategies for transitioning AHI to an organization less dependent on
any single individual.
	 
	5.	 	Consideration of additional clinical research partnerships that
could leverage the research activities at AHI and take advantage of
MedCath’s ability to deliver high patient volume and numerous clinical
settings for focused clinical trials.
	 
	6.	 	Evaluation of collaborative opportunities for obtaining additional
research grants for AHI that would benefit all three parties.

Proposal for SSB Consulting Engagement

Definition of Total Project

SSB is proposing a two-phase approach to achieve the goals outlined above:

	 	 	 	 	 
	

	 	o
	 	Phase 1—Issues, Analysis and Solutions
	 
	 	 	 	 
	

	 	o
	 	Phase 2—Implementation

This Engagement Letter addresses only Phase 1. Should SSB’s services be
desired for Phase 2, a separate engagement letter can be developed at the
conclusion of Phase 1.

Proposed Approach for Phase 1

SSB proposes the following steps for Phase 1:

	 	 	 	 	 
	 

	 	o
	 	Step 1—Initial Interviews. SSB will interview key individuals
at all three organizations to start the process of ascertaining each
organization’s perspective, and will use that information to prepare a
constructive agenda for Step 2. Interviews will focus on:

	•	 	Each organization’s perspective on the current situation;
	 
	•	 	The issues and priorities that are important to each organization;
	 
	•	 	Each organization’s views on the potential for
enhancing the existing relationship;
	 
	•	 	Each party’s thoughts about opportunities that ought to
be pursued.

 

 

Joint MedCath-AHH-AHI Engagement Letter

February 17, 2004

Page 3

Proposed Approach to Phase 1 (cont’d)

	 	 	 	 	 
	 

	 	o
	 	Step 2—Joint Meetings. SSB will facilitate several meetings
between senior MedCath management, AHH leadership and the leadership of
AHI. The focus of these meetings will be a joint exploration of the
following:

	•	 	The potential that could be realized from the MedCath-AHH-AHI relationship;
	 
	•	 	A future vision for that relationship;
	 
	•	 	Specific opportunities that merit further exploration;
	 
	•	 	Near-term issues that need to be addressed;
	 
	•	 	A roadmap for moving the relationship toward
fulfillment of the jointly developed vision.

	 	 	 	 	 
	 

	 	o
	 	Step 3—Documentation and Commitment. SSB will record the
conclusions from the joint meetings and prepare a “Term Sheet”
outlining the decisions and agreements that have been reached as well
as an “Action Plan” for moving forward. SSB will review drafts of
these documents with all three parties and facilitate a joint meeting
to discuss any open issues. Step 3 will conclude with the parties
making formal commitments to each other to adopt the Term Sheet and the
Action Plan, and to move forward as outlined in those documents.

Timing

SSB is prepared to begin Phase 1 immediately. The initial interviews could be
completed within one month. The joint meeting process would probably take
another 2-3 months, depending on how fast a pace the parties wish to pursue.
At this time, we are assuming that Phase 1 in its entirety will take 3-4
months.

SSB Consulting Team

The SSB consulting team that will work on this project is well-suited to this
assignment, in part because of our qualifications and in part because of our
familiarity with MedCath and with AHI. The team members are listed below, and
bios for them are set forth, along with other relevant background information
about SSB, on our website at www.ssbsolutions.com.

Consulting Team for Phase 1

	 	 	 
	Jacque J. Sokolov, MD

	 	Overall project leader; lead consultant
	Michael E. Treacy, JD

	 	Project manager; senior consultant

 

 

Joint MedCath-AHH-AHI Engagement Letter

February 17, 2004

Page 4

Project Budget

Consulting Fees

Based on our initial conversations, we are assuming that SSB’s fees for this
project will be shared 1/3-1/3-1/3 by MedCath Corporation, the Arizona Heart
Hospital, and the Arizona Heart Institute.

At this stage, prior to more detailed discussions with the parties, it is
impossible to know the level of SSB time commitment that will be required to
achieve the Phase 1 goals. Accordingly, SSB is proposing that we begin the
engagement on a time and materials basis, using SSB’s standard hourly rates
(consistent with the other work that SSB has done for MedCath). These hourly
rates range from $75 for executive administrative support to $95 for analyst
support to $350 for Mike Treacy to $495 for me.

After we complete the initial interviews, SSB will prepare an estimated project
budget for review and approval by all parties. Based on our previous
discussions with you, and our experience with similar engagements, we estimate
today that the total fee budget for Phase 1 will be in the range of $30,000 -
$50,000.

Expenses

Our normal expense policies are as follows. Travel expenses are billed at
cost, including airfare (coach), auto rental and other transportation (taxi,
etc.). Mileage for driving personal cars is charged at the IRS allowable rate.
All invoices will also include a standard charge equal to 2.5% of fees for
miscellaneous costs expended on our client’s behalf, such as facsimile
transmissions, overnight express, photocopies, on-line research, and
long-distance and mobile telephone usage. Experience has shown this to be the
most fair and practical way of recognizing expenses of this type.

Travel Time

There will be no charge for “travel-time” in connection with this engagement.

Invoicing Policies

SSB will submit invoices for our services, including expenses, twice per month.
We will split the charges for the billing period into thirds, but each invoice
will include documentation for all the work performed during that period. If,
for any reason, any of you has questions about our billings, please contact us
at the earliest possible time after receipt of our statement. Accordingly, if
we do not hear from you shortly after your receipt of our statement, we will
assume there are no questions.

 

 

Joint MedCath-AHH-AHI Engagement Letter

February 17, 2004

Page 5

Closing

If you agree to the terms of this Letter of Engagement, please sign both
enclosed copies and return one to me as soon as possible.

On behalf of SSB, let me thank you for this opportunity to work with MedCath
Corporation, the Arizona Heart Hospital and AHI on this important assignment.
We are looking forward to getting started, and to working with you and your
teams.

Sincerely,

SOKOLOV, SOKOLOV, BURGESS

By: Jacque J. Sokolov, MD

Chairman

The undersigned agrees to the engagement of Sokolov, Sokolov, Burgess according
to the terms described in this Engagement Letter.

     MEDCATH CORPORATION

	 	 	 	 	 	 	 
	By:

	 	

	 	Date:
	 	

	

	 	John T. Casey	 	 	 	 
	

	 	President and CEO	 	 	 	 

The undersigned agrees to the engagement of Sokolov, Sokolov, Burgess according
to the terms described in this Engagement Letter.

     ARIZONA HEART HOSPITAL

	 	 	 	 	 	 	 
	By:

	 	

	 	Date:
	 	

	

	 	Ken Howell	 	 	 	 
	

	 	President	 	 	 	 

Note: Signature line for AHI follows on next page.

 

 

Joint MedCath-AHH-AHI Engagement Letter

February 17, 2004

Page 6

The undersigned agrees to the engagement of Sokolov, Sokolov, Burgess according
to the terms described in this Engagement Letter.

     ARIZONA HEART INSTITUTE

	 	 	 	 	 	 	 
	By:

	 	

	 	Date:
	 	

	

	 	Edward B. Diethrich, MD	 	 	 	 
	

	 	Medical Director

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