Exhibit 10.2

EMPLOYMENT, CONFIDENTIALITY AND NON-COMPETE AGREEMENT

     This EMPLOYMENT, CONFIDENTIALITY AND NON-COMPETE AGREEMENT (the
“Agreement”) is made and entered into by and between MEDCATH INCORPORATED, a
North Carolina corporation (the “Company”) and THOMAS K. HEARN (“Employee”), a
resident of North Carolina, and is effective the 3rd day of December 1999 (the
“Effective Date”).

     WHEREAS, the Company and the Employee desire to continue Employee’s
employment in accordance with the terms hereof, which provides to Employee new
and additional consideration which was not previously provided to the Employee
by the Company;

     NOW, THEREFORE, it is agreed as follows:

     1.     Employment. Employee shall continue to be employed as President,
Diagnostics Division for the Company.

     2.     Duties. Employee shall be a full-time employee of the Company and,
accordingly, shall devote a commensurate amount of time and effort in the
performance of Employee’s duties as assigned by the Company.

     While employed by the Company, Employee shall not be engaged in any other
business activity whether or not such business activity is pursued for gain,
profit, or other pecuniary advantage.

     3.     Compensation. For and in consideration of the services to be
rendered by Employee hereunder, the Company shall pay to Employee an annual
salary of One Hundred Eighty-Five Thousand Dollars ($185,000.00), which shall be
paid on a bi-weekly basis unless otherwise agreed to by the parties hereto.
While Employee remains employed by the Company, Employee’s salary shall be
reviewed by the Company on an annual basis.

     Employee shall be eligible to participate in an annual bonus compensation
plan each year of employment under the terms, conditions and guidelines
established for eligible employees’ participation. The bonus plan will be based
on factors relating to the success of the Company and the Employee’s
performance. Performance includes the accomplishment of certain objectives
outlined by the Company at the beginning of the annual bonus compensation plan
year. Employee understands that in order to be eligible for any bonus, Employee
must be actively employed by the Company at the time the bonus is paid and/or
satisfy all eligibility criteria imposed by applicable state law.

     4.     Miscellaneous Benefits. During Employee’s employment with the
Company, Employee shall be eligible for additional benefits, including life
insurance, medical insurance, paid time off, etc., under the same terms and
conditions as those which apply to similar employees of the Company, as they may
be changed from time to time.

 

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     With regard to business expenses, the Company shall reimburse Employee for
reasonable business related expenses incurred in the course of Employee’s
employment with the Company, provided those expenses are consistent with the
policies established from time to time by the Company. Employee must submit
acceptable documentation of the expenses in order to receive reimbursement.

     5.     Termination of Employment.

     (a)     By the Company for Cause. The Company shall have the right to
terminate Employee’s employment immediately and without prior notice in the
event that the Company believes it has cause to terminate employment. “Cause”
includes, but is not limited to, fraud; dishonesty; disloyalty; conviction of
criminal conduct; conduct which is or threatens significant injury to the
Company monetarily; conduct which may have a significant or threatened negative
impact upon the image of the Company; failure to fulfill the duties assigned to
Employee by the Company; violation of this Agreement; submission of a notice of
resignation to the Company; engaging in or condoning sexual harassment; failure
to abide by applicable laws, rules, regulations and work rules; or actions or
omissions which the Company considers to be of a similar nature or degree.

     In the event that Employee is terminated for cause, Employee shall not be
entitled to receive any further salary, bonus or benefit following the date of
termination of the Employee’s employment, except as provided by applicable law
or company policy.

     (b)     By the Company Without Cause. The Company may terminate Employee’s
employment at any time without cause by giving Employee written notice thereof.

     In the event the Company terminates Employee’s employment without cause,
the Company will continue to pay Employee his/her current bi-weekly salary, less
applicable lawful deductions, for a period of nine (9) months following the date
of notice of termination of employment, or until Employee secures other
substantially full-time employment or earns, on a monthly basis, at least 75% of
Employee’s monthly salary hereunder, whichever occurs first. Employee shall be
entitled to receive pro-rata vacation if terminated without cause, plus other
benefits as provided by applicable law or by Company policy.

     (c)     By Employee. Employee may terminate Employee’s employment with the
Company at any time by providing the Company with thirty (30) days written
notice. In the event of such termination, Employee shall not be entitled to
receive any further salary, bonus or benefit following Employee’s actual
termination, except as provided either by applicable law or Company. The Company
reserves the right to elect to provide pay in lieu of allowing Employee to work
during the notice period.

     6.     Confidentiality and Non-Disclosure Agreements. During the course of
Employee’s employment with the Company, it is understood that Employee will be
exposed and/or have access to substantial quantities of confidential information
relating to the Company’s business (including the business of all affiliates and
operations of the Company), such as customer information, vendors, operations
and operating procedures, pricing, financial

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information, technology, marketing strategies, design of facilities, employment
practices, contractual agreements, and possibly trade secrets (the “Confidential
Information”).

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

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

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

     Upon termination of Employee’s employment with the Company, Employee 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.

     7.     Non-Competition Agreement. Recognizing the fact that Employee will
be given or have access to the Confidential Information described in Section 6
above, and that the employee owes a duty of full loyalty to the Company and it’s
name, reputation and operational interests, Employee agrees that during the
period of Employee’s employment with the Company, Employee will not engage in or
have an interest in, either directly or indirectly, in any manner, whether as a
partner, owner, investor, officer, director, advisor, employee, consultant, or
in any other capacity, any Competitive Business.

     Employee further agrees that in the event that Employee’s employment with
the Company is terminated for any reason by either party, for a period of
eighteen (18) months from the date of termination of employment. Employee will
not seek, accept, or engage in any employment or work of a similar or related
nature to the work Employee performed for the Company where the employment or
work will be with a Competitive Business which is located or operates within
seventy-five (75) miles of:

       (i)       any one of the Company or its affiliates’ facilities or a
location where the Company or one of its affiliates has provided services during
the term of Employee’s employment with the Company, or

       (ii)      any location where the Company was derively developing a
facility or service before the termination of Employee’s employment with the
Company.

     For purposes of this section, “Competitive Business” shall be defined as a
hospital or any other health care employer, facility, or service providing
primarily cardiology related facilities or services.

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     8.     Non-Solicitation Agreement. Employee acknowledges and agrees that
during the course of Employee’s employment with the Company, Employee will
become familiar with many of the Company’s employees, their knowledge, skills,
abilities, compensation, benefits, and other matters with respect to such
employees not generally known to the public. Employee further acknowledges and
agrees that any solicitation, luring away or hiring of the employees of the
Company, or other direct or indirect participation in such activities, would be
highly detrimental to the business of the Company and would cause the Company
great and irreparable harm. Consequently, Employee agrees that for a period of
one (1) year following the end of Employee’s employment with the Company,
Employee will not, directly or indirectly, solicit, lure, or hire any employees
of the Company or assist or aid in any such activity.

     9.     Enforcement. In the event that there is a breach of this Agreement
by either party, it is understood and agreed that the other party can seek
damages and other remedies available to it at law or in equity. In addition to
those remedies, however, in the event that Employee breaches Section 6,
Section 7 or Section 8 of this Agreement, or in the event that there is a threat
of such a breach of either of those sections, the Company shall have the right
to seek and shall be entitled to injunctive relief and attorney’s fees and court
costs. The parties desire and intend that the provisions of Sections 6, 7, and 8
be enforced to the fullest extent permissible under the law.

     In the event that any provision of Section 6, Section 7 or Section 8 of
this Agreement is found by any applicable authority to be invalid or
unenforceable, the parties agree that either:

       (i)       the court shall at the time the provision is declared invalid
or unenforceable, if permissible by law, modify the invalid or unenforceable
provision to reflect, in a lawful manner, the objectives of the parties in
entering into these agreements in Section 6, Section 7 and Section 8 or, in the
alternative.

       (ii)      the parties or their representatives shall meet within one (1)
week of the applicable decision and shall agree to modify that provision which
was found to be invalid or unenforceable in order to allow the Company to obtain
the objectives, to the extent allowed by law, of the provisions found to be
invalid or unenforceable. Should Employee fail or refuse to meet within the one
(1) week period, or should no agreement be reached by the parties during the
meeting, Employee agrees that the Company may unilaterally modify the
provision(s) declared to be invalid or unenforceable to comply with the law,
provided that the Company notifies Employee of the change in the language of the
Agreement within three (3) weeks of the decision of the Court and pays to
Employee the sum of One Hundred Dollars ($100.00). In no event may language
unilaterally selected by the Company expand the scope of the Confidentiality,
the Non-Competition, or the Non-Solicitation Agreement beyond that originally
agreed upon.

     10.     Notices. Any written notice required or permitted to be given under
this Agreement shall be given to the Company by hand-delivering said notice
directly to Employee’s supervisor or by mailing by registered mail or by other
reasonable means of delivery providing overnight service, such notice to the
Company at the following address:

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  Mr. Roger Simpson
Vice President Human Resources
MedCath Incorporated
7621 Little Avenue, Suite 106
Charlotte, North Carolina 28226

     Notice to Employee may be given by hand delivering said notice or by
mailing such notice to the last address Employee provided the Company in
writing. Notice shall be deemed to have been given one day after depositing said
notice with the postal service or other delivery service or, if hand-delivered,
when received by the addressee.

     11.     Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by the waiving party.

     12.     Assignment. The rights and obligations of the Company under this
Agreement shall insure to the benefit of and shall be binding upon the
successors and assigns of the Company. As a personal service contract the rights
and obligations of Employee under this agreement may not be assigned by him/her.

     13.     Entire Agreement. This Agreement sets forth the entire
understanding between the parties with respect to the subject matter hereof and
cannot be amended orally, but may only be amended by a writing signed by
Employee and either the individual executing the Agreement on behalf of the
Company or an individual in a higher position with the Company.

     14.     Applicable Law. This Agreement shall be construed in accordance
with the laws of the State of North Carolina applicable to contracts made and to
be performed in North Carolina, without reference to choice of laws principles,
and that law shall be applied in connection with its enforcement in other states
and jurisdictions to the fullest extent possible.

     15.     Counterpart, Executions; Facsimiles. This Agreement may be executed
in any number of counterparts with the same effect as if all of the parties had
signed the same document. Such executions may be transmitted to the parties by
facsimile and such facsimile execution shall have the full force and effect of
an original signature. All fully executed counterparts, whether original
executions or facsimile executions or a combination, shall be construed together
and shall constitute one and the same agreement.

     16.     It is understood and agreed that Employee will not disclose or
release the existence or the terms of this Agreement.

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     IN WITNESS WHEREOF, the parties herein execute this Agreement.

      COMPANY: MEDCATH INCORPORATED   By:   /s/ Joan McCanless

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  Title:   CVP

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  Date:   12/7/99

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    EMPLOYEE:   /s/ Thomas K. Hearn

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  Date:   12/7/99

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