Document:

exv10w1

Exhibit
10.1

SIXTH AMENDMENT AND WAIVER

TO AMENDED AND RESTATED CREDIT AGREEMENT

     THIS SIXTH AMENDMENT AND WAIVER, dated as of August 12, 2009 (this “Amendment” or this
“Sixth Amendment”), to the Existing Credit Agreement (as defined below) is entered into
among CHAMPION HOME BUILDERS CO., a Michigan corporation (the “Borrower”), CHAMPION
ENTERPRISES, INC., a Michigan corporation (the “Parent”), certain of the Lenders (such
capitalized term and other capitalized terms used in this preamble and the recitals below to have
the meanings set forth in, or are defined by reference in Article I below), CREDIT SUISSE,
CAYMAN ISLANDS BRANCH, as the Administrative Agent (in such capacity, the “Administrative
Agent”), and, solely for purposes of Articles VI and VII, each Obligor
signatory hereto.

WITNESSETH:

     WHEREAS, the Borrower, the Parent, the Lenders and the Administrative Agent are all parties to
the Amended and Restated Credit Agreement, dated as of April 7, 2006 (as amended or otherwise
modified prior to the date hereof, the “Existing Credit Agreement” and, as amended by this
Amendment and as the same may be further amended, supplemented, amended and restated or otherwise
modified from time to time, the “Credit Agreement”); and

     WHEREAS, the Borrower has requested that the Lenders waive and amend certain provisions of the
Existing Credit Agreement and the Lenders are willing, but only on the terms and subject to the
conditions hereinafter set forth, to modify the Existing Credit Agreement, all as set forth below.

     NOW, THEREFORE, the parties hereto hereby covenant and agree as follows:

ARTICLE I

DEFINITIONS

     SECTION 1.1. Certain Definitions. The following terms when used in this Amendment
shall have the following meanings (such meanings to be equally applicable to the singular and
plural forms thereof):

     “Amendment” is defined in the preamble.

     “Borrower” is defined in the preamble.

     “Credit Agreement” is defined in the first recital.

     “Existing Credit Agreement” is defined in the first recital.

 

 

     “Sixth Amendment Effective Date” is defined in Article IV.

     SECTION 1.2. Other Definitions. Terms for which meanings are provided in the
Existing Credit Agreement are, unless otherwise defined herein or the context otherwise requires,
used in this Amendment with such meanings.

ARTICLE II

AMENDMENTS TO EXISTING CREDIT AGREEMENT

     Effective on (and subject to the occurrence of) the Sixth Amendment Effective Date, the
provisions of the Existing Credit Agreement referred to below are hereby amended in accordance with
this Article II. Except as expressly so amended, the Existing Credit Agreement shall
continue in full force and effect in accordance with its terms.

     SECTION 2.1. Amendments to Section 1.1. Section 1.1 of the Existing Credit Agreement
is hereby amended by inserting the following definitions in the appropriate alphabetical order:

     “Sixth Amendment” means the Sixth Amendment and Waiver
to Amended and Restated Credit Agreement, dated as of August 12,
2009, among the Borrower, the Parent, certain other Obligors, the
Lenders party thereto and the Administrative Agent.

     “Sixth Amendment Effective Date” means the Sixth
Amendment Effective Date as that term is defined in Article IV of
the Sixth Amendment.

     SECTION 2.2. Amendment to Section 7.1. Section 7.1 of the Existing Credit Agreement
is hereby amended by (a) deleting the word “and” immediately following clause (k) thereof, (b)
replacing the period (“.”) following clause (l) thereof with a semi-colon (“;”) and (c) inserting
new clauses (m) through (p) immediately following clause (l), which new clauses shall read as
follows:

     (m) commencing after the Sixth Amendment Effective Date, within
ten Business Days of the end of each of the Borrower’s fiscal
months, financial results by business segment, prepared in
reasonable detail, together with such other information as the
Administrative Agent may reasonably request, in each case in form
reasonably acceptable to the Administrative Agent;

     (n) commencing after the Sixth Amendment Effective Date, prior
to 9:00 a.m. on the third Business Day of each calendar week, a copy
of the Borrower’s sales and backlog flash reports provided to
management during the preceding week, such reports to be in the same
form and to contain the same information as supplied to management
of the Parent and its Subsidiaries; provided,
however, the requirements of this paragraph (n) may be

 

 

satisfied if the Parent provides such reports to the financial
advisor referred to in Section 6.6;

     (o) commencing after the Sixth Amendment Effective Date, prior
to 9:00 a.m. on the third Business Day of each calendar week, an
adjusted 13-week cash flow forecast consistent with the forecast
currently being provided by the Parent to the Lenders, but breaking
down both “Beginning Cash” and “Ending Cash” under the column “Week
1” by cash at each country where the Parent and its Subsidiaries
currently have operations; and

     (p) commencing after the Sixth Amendment Effective Date, prior
to 9:00 a.m. on the third Business Day of each calendar week, a true
and complete in all material respects progress report setting forth
an update on capital raising and restructuring efforts and
discussions, asset sale efforts and discussions and the then current
plans for debt retirement; provided, however, the
requirements of this paragraph (p) may be satisfied if the Parent
provides such report to the Administrative Agent for distribution to
those Lenders operating as a steering committee.

ARTICLE III

LIMITED WAIVERS TO EXISTING CREDIT AGREEMENT

     Subject to the occurrence of the Sixth Amendment Effective Date, certain limited provisions of
the Existing Credit Agreement are hereby waived in accordance with this Article III. Except as
expressly so waived, the Existing Credit Agreement shall continue in full force and effect.

     SECTION 3.1. Limited Waivers as to Section 8.4(d) and (e). The Required Lenders
hereby waive, until September 11, 2009, the requirement that the Parent and the Borrower comply
with the provisions of Sections 8.4(d) and 8.4(e) of the Credit Agreement for the second Fiscal
Quarter of 2009.

ARTICLE IV

CONDITIONS TO EFFECTIVENESS

     SECTION 4.1. Conditions to Effectiveness. This Amendment shall become effective upon
the prior or simultaneous satisfaction of each of the following conditions in a manner reasonably
satisfactory to the Administrative Agent (the date when all such conditions are so satisfied being
the “Sixth Amendment Effective Date”):

     SECTION 4.2. Counterparts. The Administrative Agent shall have received counterparts
hereof executed on behalf of the Borrower, each other Obligor, the Required Lenders and the
Administrative Agent.

 

 

     SECTION 4.3. Costs and Expenses, etc. The Administrative Agent shall have received
all fees, costs and expenses due and payable pursuant to Sections 3.3 and 12.3 of the Existing
Credit Agreement (including without limitation the fees and expenses of Willkie Farr & Gallagher
LLP (“Willkie”), special New York restructuring counsel to the Administrative Agent), if
then invoiced. The Borrower shall further have paid an initial (and to be replenished from time to
time at the request of the Administrative Agent) retainers in the amount of $250,000 to Willkie,
and in the amount of $150,000 to Loughlin Meghji + Company (“LM+Co”), advisor to Willkie in
connection with Willkie’s services to the Administrative Agent, in each case, to cover fees, costs
and expenses to the extent invoiced and unpaid after the Sixth Amendment Effective Date, but not in
lieu of the Borrower’s obligations to make separate prompt payment of invoices from each thereof.

     SECTION 4.4. LM+Co Engagement Letter. The Borrower shall have executed and delivered
the engagement letter from LM+Co to Willkie dated on or about August 12, 2009.

     SECTION 4.5. Certificate of Authorized Officer. The Borrower shall have delivered a
certificate of an Authorized Officer, solely in his or her capacity as an Authorized Officer of the
Borrower and not in his or her individual capacity, certifying that, both immediately before and
after giving effect to this Amendment on the Sixth Amendment Effective Date, the statements set
forth in Article V hereof are true and correct.

     SECTION 4.6. Satisfactory Legal Form. The Administrative Agent and its counsel shall
have received all information, and such counterpart originals or such certified or other copies of
such materials, as the Administrative Agent or its counsel may reasonably request, and all legal
matters incident to the effectiveness of this Amendment shall be satisfactory to the Administrative
Agent and its counsel. All documents executed or submitted pursuant hereto or in connection
herewith shall be reasonably satisfactory in form and substance to the Administrative Agent and its
counsel.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

     To induce the Lenders to enter into this Amendment, the Obligors represent and warrant to the
Lenders as set forth below.

     SECTION 5.1. Validity, etc. This Amendment and the Credit Agreement (after giving
effect to this Amendment) each constitutes the legal, valid and binding obligation of such
applicable Obligor enforceable in accordance with its terms subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors’ rights generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

     SECTION 5.2. Representations and Warranties, etc. Both before and after giving
effect to this Amendment, the statements set forth in clause (a) of Section 5.3.1, and after giving
effect to this Amendment, the statements set forth in clause (b) of Section 5.3.1, in each case of
the Existing Credit Agreement, are true and correct.

 

 

     SECTION 5.3. Amount of Obligations. Each Obligor acknowledges, represents and agrees
that, (a) as of the close of business on August 12, 2009, the Obligations include, without
limitation, the amounts set forth on Schedule 5.3 attached hereto on account of the outstanding
unpaid amount of principal of, accrued and unpaid interest on, and fees and other obligations with
respect to or in connection with, the Loans and outstanding Letters of Credit and (b) such Obligor
is not disputing, and shall not dispute, the amount of such Obligations and has no right of setoff,
counterclaim or other defense with respect to its obligations to repay such Obligations in full in
cash.

ARTICLE VI

CONFIRMATIONS AND COVENANTS

     SECTION 6.1. Guarantees, Security Interest, Continued Effectiveness. Each Obligor
hereby reaffirms, as of the Sixth Amendment Effective Date, that immediately after giving effect to
this Amendment (a) the covenants and agreements made by such Obligor contained in each Loan
Document to which it is a party, (b) with respect to each Obligor party to a Guaranty, its
guarantee of payment of the Obligations pursuant to such Guaranty and (c) with respect to each
Obligor party to the Pledge and Security Agreement or a Mortgage, its pledges and other grants of
Liens in respect of the Obligations pursuant to any such Loan Document, in each case, as such
covenants, agreements and other provisions may be modified by this Amendment.

     SECTION 6.2. Validity, etc. Each Obligor (other than the Borrower) hereby represents
and warrants, as of the Sixth Amendment Effective Date, that immediately after giving effect to the
Amendment, each Loan Document, in each case as modified by this Amendment (where applicable and
whether directly or indirectly), to which it is a party continues to be a legal, valid and binding
obligation of such Obligor, enforceable against such party in accordance with its terms subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors’ rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied covenant of good faith and
fair dealing.

     SECTION 6.3. Representations and Warranties, etc. Each Obligor (other than the
Borrower) hereby represents and warrants, as of the Sixth Amendment Effective Date, that before and
after giving effect to the Amendment, the representations and warranties set forth in each Loan
Document to which such Obligor is a party are, in each case, true and correct (a) in the case of
representations and warranties not qualified by references to “materiality” or a Material Adverse
Effect, in all material respects and (b) otherwise, in all respects, in each case with the same
effect as if then made (unless stated to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct in all material respects as of such
earlier date).

     SECTION 6.4. Default Interest. Each Obligor acknowledges and agrees that, for the
period from and after the Sixth Amendment Effective Date, the Borrower shall pay, in addition to
the interest rate otherwise applicable to the Loans, additional interest in an amount equal to the
amount of additional interest that would have been payable as set forth in Section 3.2.2. of the
Credit Agreement (the “Additional Interest”) if the principal amount of the Loans had
become

 

 

due and payable, on each date that interest is otherwise payable under the Credit Agreement,
by adding each such amount of Additional Interest to the principal amount of the applicable Loans,
to bear interest and be treated as other principal of the Loans, and payable in cash together with
the final installment due on the Loans or, if earlier, by acceleration or otherwise.

     SECTION 6.5. Retention and Cooperation with Financial Advisor. The Obligors shall,
and shall cause their advisors to, cooperate promptly and fully with (including without limitation
by making members of senior management available for discussion and follow up), and hereby confirm
their obligation to pay and agree to pay promptly from time to time upon demand the reasonable fees
and expenses of, LM+Co and, in addition to the reporting requirements set forth in this Amendment,
the Credit Agreement and the other Loan Documents, shall promptly provide to such advisor such
other information (including without limitation, more detailed reporting) regarding the operations,
business affairs and financial condition of any Obligor, as reasonably requested by such advisor.

     SECTION 6.6. Restrictions on Permitted Actions. Each Obligor understands and agrees
that, notwithstanding the waiver granted pursuant to Article III hereof, the Borrower’s right to
obtain Borrowings pursuant to Article II of the Credit Agreement is suspended during the period
that the waiver under Article III hereof is in effect.

ARTICLE VII

MISCELLANEOUS

     SECTION 7.1. Cross-References. References in this Amendment to any Article or
Section are, unless otherwise specified, to such Article or Section of this Amendment.

     SECTION 7.2. Loan Document Pursuant to Existing Credit Agreement. This Amendment is
a Loan Document executed pursuant to the Existing Credit Agreement and shall (unless otherwise
expressly indicated therein) be construed, administered and applied in accordance with all of the
terms and provisions of the Existing Credit Agreement, as amended hereby, including Articles X and
XII thereof.

     SECTION 7.3. Successors and Assigns. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns.

     SECTION 7.4. Counterparts. This Amendment may be executed by the parties hereto in
several counterparts, each of which when executed and delivered shall be an original and all of
which shall constitute together but one and the same agreement. Delivery of an executed
counterpart of a signature page to this Amendment by facsimile (or other electronic transmission)
shall be effective as delivery of a manually executed counterpart of this Amendment.

     SECTION 7.5. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK IN THE SAME MANNER AS PROVIDED FOR IN
THE CREDIT AGREEMENT.

 

 

     SECTION 7.6. Full Force and Effect; Limited Amendment. Except as expressly amended
hereby, all of the representations, warranties, terms, covenants, conditions and other provisions
of the Existing Credit Agreement and the Loan Documents shall remain unchanged and shall continue
to be, and shall remain, in full force and effect in accordance with their respective terms. The
amendments set forth herein shall be limited precisely as provided for herein to the provisions
expressly amended herein and shall not be deemed to be an amendment to, waiver of, consent to or
modification of any other term or provision of the Existing Credit Agreement or any other Loan
Document or of any transaction or further or future action on the part of any Obligor which would
require the consent of the Lenders under the Existing Credit Agreement or any of the Loan
Documents.

     SECTION 7.7. No Waiver. This Amendment is not, and shall not be deemed to be, a
waiver or a consent to any Event of Default, event with which the giving of notice or lapse of time
or both may result in an Event of Default, or other non-compliance now existing or hereafter
arising under the Credit Agreement and the other Loan Documents, except as expressly provided for
in Article III hereof.

     SECTION 7.8. Obligor Releases/Damages and Liability Limitations. Although each
Lender and the Administrative Agent each regards its conduct as proper and does not believe that
any Obligor has any claim, right, cause of action, offset or defense against such Lender, the
Administrative Agent, any Issuer or any other Lender Party (for purposes of this paragraph, defined
as, “each Lender, the Administrative Agent, any Issuer and each of their present or former
subsidiaries, affiliates, advisors, employees, attorneys, agents, officers, directors and
representatives and their respective predecessors, successors, transferees and assigns”) in
connection with the execution, delivery, performance and ongoing administration of, or the
transactions contemplated by, the Credit Agreement and the other Loan Documents, each Lender, the
Administrative Agent and each Obligor agree to eliminate any possibility that any past conduct,
conditions, acts, omissions, events, circumstances or matters of any kind whatsoever could impair
or otherwise affect any rights, interests, contracts or remedies of the Lenders, the Administrative
Agent or any other Lender Party. Therefore, each Obligor, on behalf of itself and its employees,
agents, officers, directors, representatives, predecessors, successors, transferees and assigns,
unconditionally, freely, voluntarily and, after consultation with counsel and becoming fully and
adequately informed as to the relevant facts, circumstances and consequences, knowingly releases,
waives and forever discharges (and further agrees not to allege, claim or pursue) (a) any and all
liabilities, indebtedness and obligations, whether known or unknown, of any kind whatsoever of any
Lender Party to any Obligor, except for any obligations remaining to be respectively performed by
the Lenders as expressly set forth in this Amendment, the Credit Agreement and the other Loan
Documents, (b) any legal, equitable or other obligations of any kind whatsoever, whether known or
unknown, of any Lender Party to any Obligor (and any rights of any Obligor against any Lender
Party) other than any such obligations expressly set forth in this Amendment, the Credit Agreement
and the other Loan Documents, (c) any and all claims, whether known or unknown, under any oral or
implied agreement with (or obligation or undertaking of any kind whatsoever of) any Lender Party
which is different from or in addition to the express terms of this Amendment, the Credit Agreement
and the other Loan Documents and (d) all other claims, rights, causes of action, counterclaims or
defenses of any kind whatsoever, in contract or in tort, in law or in equity, whether known or
unknown, direct or derivative, which such Obligor or any predecessor, successor or assign might

 

 

otherwise have or may have against any Lender Party on account of any conduct, condition, act,
omission, event, contract, liability, obligation, demand, covenant, promise, indebtedness, claim,
right, cause of action, suit, damage, defense, circumstance or matter of any kind whatsoever which
existed, arose or occurred at any time prior to the Sixth Amendment Effective Date. The Obligors
further understand and agree that none of the Lenders, the Administrative Agent, any Issuer or any
other Lender Party shall at any time, whether heretofore, on or as of the Sixth Amendment Effective
Date or thereafter, be liable or responsible for any special, consequential, punitive, incidental,
exemplary or other similar damages or claims arising in any way out of the Loan Documents, the
transactions contemplated thereby or any action taken or not taken in connection therewith. Each
Lender Party hereby further agrees that the Administrative Agent shall not have any liability or
responsibility whatsoever, and shall be fully protected and exculpated from and against, any action
taken or not taken by it at the direction of the Required Lenders.

[signature pages follow]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this Sixth Amendment as of the
date first above written.

	 	 	 	 	 
	 	CHAMPION HOME BUILDERS CO.

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CHAMPION ENTERPRISES, INC.

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	Solely for purposes of Articles VI and
VII, each of the undersigned Obligors:

CHAMPION ENTERPRISES MANAGEMENT CO.

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CHAMPION RETAIL, INC.

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	HIGHLAND ACQUISITION CORP.

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Signature Pages to Sixth Amendment

 

 

	 	 	 	 	 
	 	HIGHLAND MANUFACTURING COMPANY LLC

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	HOMES OF MERIT, INC.

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	NEW ERA BUILDING SYSTEMS, INC.

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	NORTH AMERICAN HOUSING CORP.

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	REDMAN HOMES, INC.

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	SAN JOSE ADVANTAGE HOMES, INC.

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Signature Pages to Sixth Amendment

 

 

	 	 	 	 	 
	 	STAR FLEET, INC.

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	WESTERN HOMES CORPORATION

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Signature Pages to Sixth Amendment

 

 

	 	 	 	 	 
	 	CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as 

Administrative Agent

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as a Lender

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Signature Pages to Sixth Amendment

 

 

	 	 	 	 	 
	 	 	 
	 	
 	 
	 	[INSERT NAME OF LENDER] 	 
	 	 	 
	 
	 	 	 
	 	By  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Signature Pages to Sixth Amendmentexv10w1

Exhibit 10.1

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made as of September 1, 2009, by and
between MEDCATH CORPORATION, a Delaware corporation (the “Company”), and DAVID BUSSONE
(“Executive”).

RECITALS

     The Company desires to employ Executive to serve as Executive Vice President and President,
Operations Division, and Executive is willing to accept such employment and perform services for
the Company, all on the terms and conditions hereinafter set forth.

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:

     1. Employment.

          1.1 Position. Subject to the terms and conditions of this Agreement, the Company
agrees to employ Executive during the term hereof as an Executive Vice President and President,
Operations Division. In such capacity, Executive shall report to the President and Chief Executive
Officer of the Company (the “CEO”) and shall have the customary powers, responsibilities
and authorities of such position and office for corporations of the size and character of the
Company, as it exists from time to time and as are assigned by the CEO.

          1.2 Duties. Subject to the terms and conditions of this Agreement, Executive hereby
accepts employment with the Company commencing on September 1, 2009 and agrees to devote his full
working time and efforts, to the best of his ability, experience and talent, to the performance of
services, duties and responsibilities in connection therewith. Executive shall perform such duties
and exercise such powers, commensurate with his position, as the CEO shall from time to time
delegate to him on such terms and conditions and subject to such restrictions as the board of
directors of the Company (the “Board”) may reasonably from time to time impose.

          1.3 Outside Activities. Nothing in this Agreement shall preclude Executive (i) from
engaging in charitable and community affairs, from managing any passive investment made by him in
publicly traded equity securities or other property (provided that no such investment

 

 

may exceed 5% of the equity of any entity) or (ii) subject to Section 13(b) hereof, from serving as
a member of boards of directors or as a trustee of any other corporation, association or entity, so
long as in the reasonable determination of the CEO and none of the activities described in clauses
(i) or (ii) interferes with his duties and responsibilities hereunder.

     2. Term of Employment. Executive’s term of employment under this Agreement shall
commence on the Commencement Date and, subject to the terms hereof, shall terminate on the third
anniversary of the Commencement Date; provided, however, that the term of this
Agreement and Executive’s employment hereunder shall be automatically renewed and extended for
additional one-year periods commencing on the third anniversary of the Commencement Date and on
each anniversary date thereafter, unless the Company or Executive provides written notice to the
other party, at least 90 days prior to the expiration of the initial term or any renewal term, of
the non-renewal of this Agreement.

     3. Compensation.

          3.1 Salary. The Company shall pay Executive a base salary (“Base Salary”) at
the rate of $425,000 per annum commencing as of the Commencement Date. Base Salary shall be
adjusted annually at the discretion of the Board but in no event shall Base Salary be reduced but,
as increased, shall constitute “Base Salary” hereunder. Base Salary shall be payable in accordance
with the normal payroll practices of the Company but no less frequently than monthly. The first
review date for Executive’s potential adjustment will be coincident with executive salary review
occurring around November, 2010, and provided at the same time as other executives.

          3.2 Bonus. For each fiscal year of Executive’s employment hereunder, Executive shall
participate in the bonus plan established for the Company’s senior executives. Executive’s target
bonus with respect to each such fiscal year shall be equal to 50% of Executive’s Base Salary for
such fiscal year (“target”) with a “stretch” incentive consistent with an approved plan. The Board
(or a committee thereof) shall have complete authority to establish all other terms and provisions
of the bonus plan, including the performance goals for the bonus plan, the threshold performance
required for the payment of any bonus under the plan, the maximum bonus opportunity for Executive
under the plan, and the total cash compensation consistent with its exercise of discretion..
Bonuses shall be paid within 2-1/2 months following

2

 

the fiscal year to which they relate, and Executive must be employed by the Company on the day the
bonus is payable to be eligible to receive the bonus.

          3.3 Compensation Plans and Programs. Executive shall be eligible to participate in
any other compensation plan or program maintained by the Company from time for senior executives of
the Company on terms and conditions that are comparable to those applicable to such other senior
executives.

          3.4 Stock.  Upon date of commencing work Executive shall be awarded Restricted Shares
under the Company’s Stock Award Plan in the amount of $425,000 with vesting and all other terms as
applicable under the Plan authorizing the issuance. Executive will also receive Restricted Shares
in an amount equaling $75,000 in recognition of a pro-rated bonus forfeited due to early departure
from his previous employer.

     4. Employee Benefits.

          4.1 Employee Benefit Programs, Plans and Practices. The Company shall provide
Executive during the term of his employment hereunder with participation in or coverage under all
employee pension and welfare benefit programs, plans and practices (commensurate with his position
in the Company from time to time and to the extent permitted under any employee benefit plan) which
the Company makes available to its senior executives.

          4.2 Vacation and Fringe Benefits. Executive shall be entitled to five (5) weeks of
paid vacation in each calendar year, which shall be taken at such times as are consistent with
Executive’s responsibilities hereunder but which shall not have any year-to-year carryover,
consistent with the Executive PDO and Continuation Policy annexed hereto as Exhibit “A”. In
addition, Executive shall be entitled to the perquisites and other fringe benefits currently made
available to senior executives of the Company, commensurate with his position with the Company.

          4.3 Relocation Expenses. Executive shall become a full-time resident of the
Charlotte, North Carolina area no later than the Commencement Date and shall relocate his family to
the Charlotte, North Carolina area as soon as practicable thereafter, consistent with the terms,
conditions, and parameters of the Relocation Costs Agreement executed by Executive, and made a part
hereof. Executive shall utilize the Company’s retained relocation firm (Xonex) for all relocation
efforts. Company shall be responsible for reimbursement of the real estate brokerage commission on
the sale of Executive’s current principal residence in Las Vegas,

3

 

Nevada, provided that Executive utilizes the services of Xonex in listing and selling Executive’s
home, and ensures that the maximum economic benefit of Xonex is realized in the transaction.
Additionally, should the sale price of Executive’s Las Vegas, NV principal residence be less than
$500,000, Company agrees to reimburse Executive for an amount equal to $500,000 less the sale
price, up to a maximum amount of $75,000 provided Executive has used best efforts to have his bank
write-off a ‘short sale’ amount. Any expenses incurred by Executive in the relocation process which
are not covered by the Company’s agreement with Xonex are the sole responsibility of Executive,
absent prior written approval from the Company. Any reasonable and customary expenses incurred by
Executive and reimbursed by Company shall be treated as after tax income.

     5. Expenses. Executive is authorized to incur reasonable expenses in carrying out his
duties and responsibilities under this Agreement, including, without limitation, expenses for
travel and similar items related to such duties and responsibilities. The Company will reimburse
Executive for all such expenses upon presentation by Executive from time to time of appropriately
itemized and approved (consistent with the Company’s policy) accounts of such expenditures.

     6. Termination of Employment.

          6.1 Termination By the Company Without Cause or By Executive for Good Reason. (a) The
Company may terminate Executive’s employment under this Agreement at any time for any reason,
provided that any such termination other than for Cause (as defined in Section 6.4 hereof)
may only be made upon 30 days prior written notice to Executive. If Executive’s employment under
this Agreement is terminated by the Company without Cause (other than as a result of Executive’s
death or Permanent Disability (as defined in Section 6.2 hereof) or if Executive terminates his
employment for Good Reason (as defined in Section 6.1(c) hereof), Executive shall receive any
payments to which he is entitled under any applicable compensation or employee benefit plan or
program in which he participates, including but not limited to those referred to in Section 3.3
hereof. In addition, in the event of any such termination described in the immediately preceding
sentence, Executive shall be entitled to receive the following:

     (i) an amount equal to the sum of (A) one times Executive’s Base Salary if
such termination occurs prior to a Change in Control (as defined in 6.1(c) hereof)
or more than 12 months after a Change in Control or (B) if such

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termination without cause occurs upon a Change in Control or at any time
within 12 months after a Change in Control, the sum of two times Executive’s Base
Salary and one times Executive’s Target Bonus (such amount, the “Severance
Payment”);

     (ii) a cash lump sum payment in respect of (x) compensation earned but not
yet paid (including any awarded but deferred Bonus payments) (the “Compensation
Payment”), and (y) reasonable expenses incurred under Section 5 but not yet
reimbursed (the “Expense Payment”); and

     (iii) after waiver period for health coverage in 4.1, continued coverage under
the Company’s group medical plan in accordance with the terms thereof for a period
ending on the earlier of (A) the second anniversary of the date of termination
under this Section 6.1(a) or (B) the date on which Executive becomes eligible to be
covered under comparable benefit plans of a new employer (the “Coverage
Period”), provided that Executive shall be required to contribute an
amount toward the cost for such coverage during the Coverage Period that is equal
to the cost paid by active employees of the Company for coverage under the
Company’s group medical plan during the Coverage Period, and for purposes of
applying the group health plan coverage continuation requirements of Section 4980B
of the Internal Revenue Code of 1986 and Section 601 et seq. of the
Employee Retirement Income Security Act of 1974, as amended, the “qualifying event”
shall be the termination of the Executive’s employment with the Company.

          (b) The Severance Payment shall be paid by the Company to Executive over the 12 month period
following the date of termination in substantially equal installment payments and in accordance
with the normal payroll practices of the Company but no less frequently than monthly. The
Compensation Payment and the Expense Payment shall be paid by the Company to Executive in a cash
lump sum payment within 30 days after the date of termination.

          (c) For purposes of this Agreement, “Good Reason” shall mean any of the following
(without Executive’s express prior written consent):

     (i) A substantial reduction or elimination of Executive’s management
responsibility for the financial operations of the Company, other than in connection
with the termination of Executive’s employment by the Company for Cause, by
Executive without Good Reason or as a result of Executive’s Permanent Disability or
death;

     (ii) A reduction by the Company in Executive’s Base Salary or Target Bonus; or

     (iii) A reduction or elimination of Executive’s eligibility to participate in
any of the Company’s employee benefit plans that is inconsistent with the
eligibility of similarly situated executives of the Company to participate therein;

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     (iv) A required relocation of Executive’s principal place of
employment that is more than 25 miles from his initial place of
employment.

     (v) The Company provides Executive written notice of the
non-renewal of this agreement pursuant to Section 2

For purposes of this Agreement, “Change in Control” shall mean:

     (i) Sales of all or substantially all of the assets of the Company, MedCath
Holdings Corp. or MedCath Incorporated to an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity (a “Person”) or;

     (ii) A merger or consolidation of the Company, MedCath Holdings
Corp. or MedCath Incorporated into another Person;

          6.2 Permanent Disability. If Executive becomes totally and permanently disabled (as
defined in the Company’s Long-Term Disability Benefit Plan applicable to senior executive officers
as in effect on the date hereof) (“Permanent Disability”), the Company or Executive may
terminate Executive’s employment under this Agreement upon 30 days prior written notice thereof,
and Executive shall receive or commence receiving, as soon as practicable:

     (i) amounts payable pursuant to the terms of a disability insurance policy or
similar arrangement which the Company maintains during the term hereof;

     (ii) Executive’s Target Bonus in respect of the fiscal year in which his
termination occurs, prorated by a fraction, the numerator of which is the number of
days of the fiscal year until termination and the denominator of which is 365;

     (iii) the Compensation Payment, and the Expense Payment; and

     (iv) any payments to which he is entitled under any applicable compensation or
employee benefit plan or program in which he participates, including but not limited
to those referred to in Section 3.3 hereof.

          6.3 Death. In the event of Executive’s death during the term of his employment
hereunder, Executive’s estate or designated beneficiaries shall receive or commence receiving, as
soon as practicable:

     (i) Executive’s Target Bonus in respect of the fiscal year in which his death
occurs, prorated by a fraction, the numerator of which is the number of days of the
fiscal year until his death and the denominator of which is 365;

     (ii) any death benefits provided under the employee benefit programs, plans and
practices referred to in Section 4.1 hereof, in accordance with their terms;

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     (iii) the Vacation Payment, the Compensation Payment, and the Expense Payment;
and

     (iv) any payments to which he is entitled under any applicable compensation or
employee benefit plan or program in which he participates, including but not limited
to those referred to in Section 3.3 hereof.

          6.4 Termination By the Company for Cause or By Executive without Good Reason.

          (a) The Company shall have the right to immediately terminate the employment of Executive
under this Agreement for Cause, and Executive shall have the right to terminate his employment
under this Agreement without Good Reason upon 90 days prior written notice to the Company. In the
event that Executive’s employment is terminated by the Company for Cause or by Executive without
Good Reason, notwithstanding any other provision in this Agreement, Executive shall be entitled
only to the Compensation Payment, and the Expense Payment, and shall not be entitled to any
further compensation or benefits hereunder including, without limitation, the payment of any bonus
in respect of all or any portion of the fiscal year in which such termination occurs. Nothing
herein shall be construed to limit, abolish, or otherwise interfere with benefits accrued by
Executive at time of termination, including but not limited to accrued vacation, 401(k) benefits,
etc.

          (b) As used herein, the term “Cause” shall mean and be limited to (i) willful
misconduct by Executive which results in a demonstrable injury (which is other than de minimis or
insignificant) to the Company, (ii) willful and continued failure by Executive 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 Executive by
the Company, or (iii) Executive’s conviction of, or plea of nolo contendere to, a
felony or to a misdemeanor involving moral turpitude. Termination of Executive for Cause pursuant
to Section 6.4(a) shall be made by delivery to Executive of written notice that, in the reasonable
judgment of the Board, Executive was guilty of conduct set forth in any of clauses (i) through
(iii) above and specifying the particulars thereof.

     7. Release. Notwithstanding anything to the contrary contained herein, the Company
shall not be obligated to pay Executive the Severance Payment pursuant to Section 6.1 in the event
Executive’s employment is terminated by the Company without Cause (other than as a result of
Executive’s death or Permanent Disability) or by Executive for Good Reason and any options held by
Executive to purchase the Company’s common stock shall not be exercisable

7

 

after the termination of the Executive’s employment hereunder unless the Executive executes and
delivers to the Company a release, dated the date of his termination of employment, to the effect
that: for good and valuable consideration, the Executive unconditionally releases and covenants not
to sue the Company and its subsidiaries and affiliates and directors, officers, employees and
stockholders thereof, from any and all claims, liabilities and obligation of any nature pertaining
to termination of employment other than those explicitly provided for by this Agreement including,
without limitation, any claims arising out of alleged legal restrictions on the Company’s right to
terminate its employees, such as any implied contract of employment or termination contrary to
public policy or to laws prohibiting discrimination (including, without limitation, the Age
Discrimination in Employment Act); and containing such other provisions as the Company may request
to effect the purposes of the foregoing release. Said release shall not affect or abrogate the
Company’s obligations under the herein agreement, any vested benefit, or any rights granted to the
Executive under the Company’s by-laws, charter, or applicable law.

     8. Mitigation of Damages. Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other employment or otherwise
after the termination of his employment hereunder.

     9. Notices. All notices or communications hereunder shall be in writing, addressed as
follows:

          To the Company:

MedCath Corporation

10720 Sikes Place, Suite 300

Charlotte, North Carolina 28277

Attn: Chief Executive Officer

with a copy to:

Hal A. Levinson, Esq.

Moore & Van Allen, PLLC

100 N. Tryon Street, Floor 47

Charlotte, North Carolina 28202-4003

          To Executive:

David Bussone

[the most recent address

on the Company’s employment

records for Executive]

Any such notice or communication shall be delivered by hand, by telecopy (with machine
confirmation) or by courier or sent certified or registered mail, return receipt requested, postage

8

 

prepaid, addressed as above (or to such other address as such party may designate in a notice duly
delivered as described above), and the third business day after the actual date of mailing shall
constitute the time at which notice was given.

     10. Separability; Legal Fees. If any provision of this Agreement shall be declared to
be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not
affect the remaining provisions hereof which shall remain in full force and effect. Each party
shall bear the costs of any legal fees and other fees and expenses which may be incurred in respect
of enforcing its respective rights under this Agreement.

     11. Assignment. This Agreement shall be binding upon and inure to the benefit of the
heirs and representatives of Executive and the assigns and successors of the Company, but neither
this Agreement nor any rights or obligations hereunder shall be assignable or otherwise subject to
hypothecation by Executive (except by will or by operation of the laws of intestate succession) or
by the Company, except that the Company may assign this Agreement to any successor (whether by
merger, purchase or otherwise) to all or substantially all of the stock, assets or businesses of
the Company, if such successor expressly agrees to assume the obligations of the Company hereunder.

     12. Amendment. This Agreement may only be amended by written agreement of the parties
hereto.

     13. Nondisclosure of Confidential Information; Non-Competition; Non-Disparagement.
(a) At any time during or after Executive’s employment with the Company, Executive shall not,
without the prior written consent of the Company, use, divulge, disclose or make accessible to any
other person, firm, partnership, corporation or other entity any Confidential Information (as
hereinafter defined) pertaining to the business of the Company or any of its subsidiaries, except
(i) while employed by the Company, in the business of and for the benefit of the Company, or (ii)
when required to do so by a court of competent jurisdiction, by any governmental agency having
supervisory authority over the business of the Company, or by any administrative body or
legislative body (including a committee thereof) with jurisdiction to order Executive to divulge,
disclose or make accessible such information. For purposes of this Section 13(a),
“Confidential Information” shall mean non-public information concerning the financial data,
strategic business plans, and other non-public, proprietary and confidential information of the
Company and/or its subsidiaries, as in existence as of the date of Executive’s

9

 

termination of employment that, in any case, is not otherwise available to the public (other than
by Executive’s breach of the terms hereof). Confidential Information further includes without
limitation customer information, vendors, operations and operating procedures, pricing, financial
information, technology, marketing strategies, design of facilities, employment practices,
contractual agreements, and trade secrets.

          Executive agrees that both while employed by the Company and following termination of
Executive’s employment with the Company at any time in the future:

     (i) Executive will take all reasonable precautions to safeguard all
Confidential Information at all times so that it is not communicated to, exposed to,
available to, or taken by any unauthorized person and will personally use or
disclose such information; and

     (ii) Executive will exercise Executive’s reasonable best efforts to assure the
safekeeping of the Company’s Confidential Information.

          Upon termination of Executive’s employment with the Company, Executive agrees to immediately
return to the Company all Confidential Information and other Company property, including without
limitation all originals, copies, computer data, or other records or information. It is understood
and agreed that Confidential Information and other property of the Company shall remain at all
times the property of the Company.

          (b) Recognizing the fact that Executive will be given or have access to the Confidential
Information described in this Section 13 above, and that Executive owes a duty of full loyalty to
the Company and its name, reputation and operational interests, Executive agrees that during the
period of Executive’s employment with the Company, Executive will not engage in or have an interest
in, either directly or indirectly, in any manner, whether as a shareholder, partner, owner,
investor, officer, director, advisor, employee, consultant, or in any other capacity, any
Competitive Business other than an ownership position of less than 5 percent in any company whose
shares are publicly traded.

10

 

          In addition, Executive agrees that in the event that Executive’s employment with the Company
is terminated for any reason by either party, for a period of one (1) year from the date of
termination of employment, Executive will not, either directly or indirectly, whether as a
shareholder, partner, owner, investor, officer, director, advisor, employee or consultant with
responsibilities which are the same or similar as those which Executive had with the Company,
associate with, participate in or have an interest in any Competitive Business (other than an
ownership position by Executive of less than 5% in any company whose shares are publicly traded)
which is located or which operates within 50 miles of:

     (i) any hospital, hospital cardiology or cardiovascular surgery program
or fixed site cardiac catheterization lab in each case which the Company
owns, whether all or in part, or manages or the Company’s corporate
headquarters, or

     (ii) any location with respect to which the Company was actively
developing or negotiating as of the Separation Date to own or manage a
hospital, cardiac catheterization lab or a hospital’s cardiology or
cardiovascular surgery program (for purposes of this section, the term
“actively developing or negotiating” means either definitive documents, a
letter of intent, memorandum of understanding or other comparable document
had been executed or the material terms thereof were being actively
negotiated).

          For purposes of this Section 13, the term “Competitive Business” means any entity that
owns or manages hospitals, cardiac catheterization labs or any portion thereof and that derives,
directly or indirectly, more than 10% of its gross annual revenue from providing cardiology or
cardiovascular-related healthcare services.

          (c) Executive further agrees that in the event Executive’s employment with the Company is
terminated for any reason by either party, for a period of one year from the date of termination of
employment, Executive shall not, on his own behalf or on behalf of any person, firm or company,
directly or indirectly, solicit or offer employment to any person who has been employed by the
Company or its subsidiaries at any time during the 12 months immediately preceding such
solicitation.

          (d) Executive further agrees that in the event Executive’s employment with the Company is
terminated for any reason by either party, he will not communicate orally, in writing or
electronically (through, for example, the internet), including but not limited to, at healthcare,
financial or other conferences, seminars or meetings or at any other place or time, generally,
specifically or by implication to any person or entity any opinions or comments

11

 

regarding the prospects, competence or skills of the Company or any facts, opinions or
comments that could reasonably be expected to reflect adversely upon the other or disparage,
degrade, malign or harm the reputation of the Company.

          (e) Executive and the Company agree that the covenants in this Section 13 are reasonable
covenants under the circumstances, and further agree that if in the opinion of any court of
competent jurisdiction such restraint is not reasonable in any respect, such court shall have the
right, power and authority to excise or modify such provision or provisions of the covenants as to
the court shall appear not reasonable and to enforce the remainder of the covenants as so amended.
Executive agrees that any breach of the covenants contained in this Section 13 would irreparably
injure the Company. Accordingly, Executive agrees that the Company may, in addition to pursuing
any other remedies it may have in law or in equity, cease making any payments otherwise required by
this Agreement and obtain an injunction against Executive from any court having jurisdiction over
the matter restraining any further violation of this Agreement by Executive.

     14. Compliance with Code Section 409A. Notwithstanding anything in this Agreement to
the contrary, if (a) Executive is a specified employee as of the date of his separation from
service and (b) any amount or benefit that the Company determines would constitute non-exempt
“deferred compensation” for purposes of Section 409A of the Internal Revenue Code of 1986 (the
“Code”) would otherwise be payable or distributable under this Agreement by reason of
Executive’s separation from service, then to the extent necessary to comply with Code Section 409A:
(i) if the payment or distribution is payable in a lump sum, Executive’s right to receive payment
or distribution of such non-exempt deferred compensation will be delayed until the earlier of
Executive’s death or the first day of the seventh month following Executive’s separation from
service, and (ii) if the payment, distribution or benefit is payable or provided over time, the
amount of such non-exempt deferred compensation or benefit that would otherwise be payable or
provided during the six (6) month period immediately following Executive’s separation from service
will be accumulated, and Executive’s right to receive payment or distribution of such accumulated
amount or benefit will be delayed until the earlier of Executive’s death or the first day of the
seventh month following Executive’s separation from service and paid or provided on the earlier of
such dates, without interest, and

12

 

the normal payment or distribution schedule for any remaining payments, distributions or
benefits will commence.

          For purposes of this Agreement, the term “separation from service” shall be defined as
provided in Code Section 409A and applicable regulations, and Executive shall be a “specified
employee” during the twelve (12) month period beginning April 1 each year if Executive met the
requirements of Section 416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in accordance with the
regulations thereunder and disregarding Section 416(i)(5) of the Code) at any time during the
twelve (12) month period ending on the December 31 immediately preceding his separation from
service.

          Notwithstanding anything herein, the parties desire that this agreement is meant and
constructed to comply with Section 409A in its entirety.

     15. Beneficiaries; References. Executive shall be entitled to select (and change, to
the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any
compensation or benefit payable hereunder following Executive’s death, and may change such
election, in either case by giving the Company written notice thereof. In the event of Executive’s
death or a judicial determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal
representative. Any reference to the masculine gender in this Agreement shall include, where
appropriate, the feminine.

     16. Survivorship. The respective rights and obligations of the parties hereunder
shall survive any termination of this Agreement to the extent necessary to the intended
preservation of such rights and obligations, including the provisions of Section 13 herein. The
provisions of this Section 16 are in addition to the survivorship provisions of any other section
of this Agreement.

     17. Governing Law. This Agreement shall be construed, interpreted and governed in
accordance with the laws of the State of North Carolina without reference to rules relating to
conflicts of law.

     18. Withholding. The Company shall be entitled to withhold from payment any amount of
withholding required by law.

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

	 	 	 	 	 
	 	
MEDCATH CORPORATION

 	 
	 	By:  	 	 
	 	 	Title:  President and Chief Executive Officer 	 
	 	 	 	 
	 
	 	
David Bussone

 	 

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