EMPLOYMENT AGREEMENT

     THIS  EMPLOYMENT  AGREEMENT dated as of the 1st day of December 2000 by and
between VASOMEDICAL,  INC., a Delaware  corporation  (hereinafter the "Company")
and D. Michael  Deignan,  an individual  residing at 6 Wax Myrtle Court,  Hilton
Head Island, South Carolina 29926 (hereinafter called "Deignan").

                              W I T N E S S E T H:

     WHEREAS,  the Company  desires to enter into an Employment  Agreement  with
Deignan; and

     WHEREAS,  Deignan  desires to enter into an Employment  Agreement  with the
Company;

     NOW, THEREFORE, it is agreed as follows:

     1. Prior Agreements  Superseded.  This Agreement supersedes any employment,
consulting or other  agreements,  oral or written,  entered into between Deignan
and the Company  prior to the date of this  Agreement  except for stock  options
previously granted to Deignan,  which stock options shall continue in full force
and effect.

     2.  Employment.  The Company  hereby  agrees to employ  Deignan and Deignan
hereby agrees to serve as President and Chief  Executive  Officer of the Company
with responsibility for the overall supervision, direction and administration of
all  activities  and  affairs  of the  Company  and  performance  of such  other
executive  duties  on  behalf  of the  Company  as the  Board of  Directors  may
determine.  Deignan's duties shall also include general  supervision and control
over all subsidiaries of the Company,  if any.  Deignan's  employment  hereunder
shall be on a  full-time  basis  and  Deignan  shall  not  engage  in any  other
business,  including directorships,  except with the prior approval of the Board
of Directors of the Company.
 Deignan  shall  serve  in  similar   capacities  of  such  of  the   subsidiary
corporations of the Company as may be selected by the Board of Directors without
additional  compensation.  Notwithstanding the foregoing,  it is understood that
the  duties  of  Deignan  during  the  performance  of  employment  shall not be
inconsistent  with his  position  and title as  President  and  Chief  Executive
Officer of the Company.

     3.  Term.  Subject  to  earlier  termination  on the terms  and  conditions
hereinafter  provided,  the  term  of this  Employment  Agreement  shall  end on
November 30, 2001,  provided  that this  agreement  shall extend for  additional
one-year  periods unless Deignan  receives  written notice from the Company each
year on or before  September 1 of said year that the Company will be terminating
the agreement. In no event, however, shall this agreement extend beyond November
30, 2005.

     4. Compensation. For all services rendered by Deignan under this Agreement,
compensation shall be paid to Deignan as follows:

          (a)  Deignan  shall be paid at the annual  rate of Two  Hundred  Forty
     Thousand ($240,000) Dollars.

          (b) During the  period of  employment  Deignan  shall be  eligible  to
     participate  in the Company's  stock option and stock purchase plans to the
     extent  determined  in the  discretion  of the  Board of  Directors  of the
     Company or committee thereof.

          (c) Deignan  shall be entitled to  participate  in any  short-term  or
     long-term incentive plan which the Company has in existence or which may be
     adopted.
<PAGE>
          (d) During the period of  employment,  Deignan shall be furnished with
     office space and secretarial  service and facilities  commensurate with his
     position and adequate for the performance of his duties.

          (e)  Deignan  shall be entitled  to fully  participate  in all benefit
     programs  available to executive  employees of the Company  throughout  the
     term of this Agreement.

          (f) Deignan  shall be entitled to four (4) weeks of vacation  and sick
     leaves consistent with current practice of the Company.

     5.  Expenses.  Deignan shall be reimbursed for all  out-of-pocket  expenses
reasonably  incurred by him in the performance of his duties hereunder.  Expense
reports, with receipts and justifications,  must be submitted to the Chairman of
the Board for approval.

     6. Severance Benefits.  Deignan shall be entitled to the severance benefits
provided for in  subsection  (c) hereof in the event of the  termination  of his
employment  by  the  Company  without  cause  or in  the  event  of a  voluntary
termination  of  employment by Deignan for good reason.  In such event,  Deignan
shall  have no duty to  mitigate  damages  hereunder.  Deignan  and the  Company
acknowledge that the foregoing provisions of this paragraph 6 are reasonable and
are  based  upon the  facts  and  circumstances  of the  parties  at the time of
entering into this Agreement,  and with this  Agreement,  and with due regard to
future expectations.

          (a) The term "cause" shall mean:

          (i) Deignan's willful and continued  failure to substantially  perform
     his duties under this Agreement (other than any such failure resulting from
     his  incapacity  due to  physical  or  mental  illness)  after  demand  for
     substantial  performance  is  delivered  to Deignan by the  Chairman of the
     Board of the Company which specifically  identifies the manner in which the
     Board believes Deignan has not substantially performed his duties.

          (ii)  Deignan's  failure  to  refuse  to  follow  directions  from the
     Company's Board of Directors  provided that (a) Deignan is provided written
     notice of such  directions  and a reasonable  period in which to comply and
     (b) Deignan's  compliance  with any such direction  would not be illegal or
     unlawful.

          (iii) Any act or fraud,  embezzlement  or theft  committed  by Deignan
     whether  or not in  connection  with his  duties  or in the  course  of his
     employment.

          (iv) Any willful disclosure by Deignan of confidential  information or
     trade secrets of the Company or its affiliates.

          For purposes of this paragraph,  no act or failure to act on Deignan's
     part shall be considered  "willful"  unless done, or omitted to be done, by
     Deignan not in good faith and without  reasonable belief that his action or
     omission  was in the best  interest  of the  Company.  Notwithstanding  the
     foregoing,  Deignan shall not be deemed to have been  terminated  for cause
     unless and until there shall have been  delivered to him a copy of a notice
     of  termination  from  the  Chairman  of the  Board  of the  Company  after
     reasonable  notice to  Deignan  and an  opportunity  for  Deignan  with his
     counsel to be heard before the Board of  Directors  of the Company  finding
     that in the good  faith  opinion  of such Board of  Directors  Deignan  was
     guilty of the  conduct  set  forth in  clauses  (i),  (ii) or (iii) of this
     paragraph and specifying the particulars thereof in detail.
<PAGE>

          (b) For these purposes,  Deignan shall have "good reason" to terminate
this Agreement if:


          (i) the Company  removes  Deignan from the  position of President  and
     Chief Executive Officer at any time during the term of this Agreement;

          (ii)  Deignan's  place of  employment  is moved beyond a  hundred-mile
     radius, as the crow flies, from 180 Linden Avenue, Westbury, New York 11590
     (or the Company's then current  business  address) as a direct result of an
     event described in Section 14(a) or (b) hereof.

     (c) The severance  benefits  under this section in the event of termination
without  cause or by Deignan for "good  reason",  shall consist of the continued
payment to Deignan for a period of one year from the date of termination, of the
annual salary provided in Section 4(a) hereof plus the immediate  vesting of the
options that would normally vest in that year.

     7.  Death.  In the  event  of  Deignan's  death  during  the  term  of this
Agreement,  Deignan's legal  representative shall be entitled to receive his per
annum base salary as provided in  paragraph  4(a) of this  Agreement to the last
day of the calendar  quarter  following the calendar  quarter in which Deignan's
death shall have occurred and  thereafter to receive  one-half (1/2) of the base
salary  provided  in  paragraph  4(a) of this  Agreement  for the balance of the
period covered by this Employment Agreement.

     8. Non-Competition.

     (a) Deignan agrees that,  during the term of this  Agreement,  he will not,
without the prior  written  approval of the Board of  Directors  of the Company,
directly or indirectly,  through any other  individual or entity,  (a) become an
officer or employee of, or render any services [including  consulting  services]
to, any  competitor  of the  Company,  (b) solicit,  raid,  entice or induce any
customer of the Company to cease  purchasing  goods or services from the Company
or to become a customer of any  competitor of the Company,  and Deignan will not
approach any  customer for any such purpose or authorize  the taking of any such
actions by any other  individual  or entity,  or (c)  solicit,  raid,  entice or
induce any  employee of the  Company,  and Deignan  will not  approach  any such
employee for any such purpose or authorize  the taking of any such action by any
other individual or entity. However, nothing contained in this paragraph 8 shall
be construed as  preventing  Deignan from  investing  his assets in such form or
manner as will not require  him to become an officer or  employee  of, or render
any services (including consulting services) to, any competitor of the Company.

          (b) During the term hereof and at all times thereafter,  Deignan shall
not disclose to any person, firm or corporation other than the Company any trade
secrets, trade information,  techniques or other confidential information of the
business of the Company, its methods of doing business or information concerning
its customers learned or acquired by Deignan during Deignan's  relationship with
the Company and shall not engage in any unfair trade  practices  with respect to
the Company.
<PAGE>
     9. Enforcement.

     (a) The  necessity  for  protection  of the  Company  and its  subsidiaries
against  Deignan's  competition,  as  well  as the  nature  and  scope  of  such
protection,  has been carefully considered by the parties hereto in light of the
uniqueness of Deignan's  talent and his importance to the Company.  Accordingly,
Deignan agrees that, in addition to any other relief to which the Company may be
entitled,  the Company  shall be entitled to seek and obtain  injunctive  relief
(without the  requirement  of any bond) for the purpose of  restraining  Deignan
from any actual or threatened  breach of the covenants  contained in paragraph 8
of this Agreement.

     (b) If for any  reason  a court  determines  that  the  restrictions  under
paragraph 8 of this Agreement are not reasonable or that consideration  therefor
in adequate,  the parties  expressly  agree and covenant that such  restrictions
shall be interpreted,  modified or rewritten by such court to include as much of
the duration and scope identified in paragraph 8 as will render the restrictions
valid and enforceable.

     10.  Notices.  Any notice to be given to the  Company or Deignan  hereunder
shall be deemed given if delivered personally,  telefaxed or mailed by certified
or registered mail, postage prepaid,  to the other party hereto at the following
addresses:

     To the Company:     Vasomedical, Inc.
                         180 Linden Avenue
                         Westbury, New York  11590

     To Deignan:         D. Michael Deignan
                         6 Wax Myrtle Court
                         Hilton Head Island, South Carolina  29926

Either  party may change the address to which  notice may be given  hereunder by
giving notice to the other party as provided herein.

     11.  Successors and Assigns.  This Agreement  shall inure to the benefit of
and be binding upon the Company,  its successors and assigns,  and upon Deignan,
his heirs, executors, administrators and legal representatives.

     12. Entire  Agreement.  This  Agreement  constitutes  the entire  agreement
between the parties except as specifically otherwise indicated herein.

     13. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York.

     14. In the event (a) the  Company has been  consolidated  or merged into or
with any other  corporation  or all or  substantially  all of the  assets of the
Company  have been sold to another  corporation,  with or without the consent of
Employee,  in his sole  discretion;  or (b) the  Company  undergoes  a Change of
Control, as hereinafter defined below, without prior Board approval; then

Employee is entitled to the following settlement benefits:

(i)  a lump-sum  payment for the greater of (A) twelve (12) months of the annual
     salary  provided in section 4(a) hereof or (B) the balance of  compensation
     for the term of this  Employment  Agreement;  and
<PAGE>
(ii) any and all stock  options  and  warrants  held by  Employee  shall  become
     immediately vested and exercisable; if

          (A)  Employee  voluntarily and unilaterally  resigns his position with
               the Company within 30 days of an event described in Section 14(a)
               or (b) hereof, or
          (B)  Employee is given notice of  termination  directly as a result of
               such  Change  in  Control  within  six  (6)  months  of an  event
               described in Section 14(a) or (b) hereof, or
          (C)  Employee's  place of  employment  is moved beyond a  hundred-mile
               radius, as the crow flies, from 180 Linden Avenue,  Westbury, New
               York 11590 (or the Company's then current business  address) as a
               direct  result  of an event  described  in  Section  14(a) or (b)
               hereof.

     A  "Change  of  Control"  of the  Company,  or in any  person  directly  or
indirectly controlling the Company, shall mean:

     (i) a change of control  as such term is  presently  defined in  Regulation
240.12b-2 under the Securities Exchange Act of 1934 (the "Exchange Act");

     (ii) if during the Term of employment any "person" (as such term is used in
Section  13(d) and 14(d) of the  Exchange  Act)  other  than the  Company or any
person who on the date of this Employment  Agreement is a director or officer of
the Company,  becomes the  "beneficial  owner" (as defined in Rule 13(d)03 under
the  Exchange  Act),  directly  or  indirectly,  of  securities  of the  Company
representing  20%  of  the  voting  power  of  the  Company's  then  outstanding
securities; or

     (iii) if during the Term of employment the individuals who at the beginning
of such  period  constitute  the Board  cease for any reason  other than  death,
disability or retirement to constitute at least a majority thereof."

     IN WITNESS  WHEREOF,  the parties  hereto  have  executed  this  Employment
Agreement as of the day and year first above written.


                    VASOMEDICAL, INC.

                    By:  /S/ Abraham E. Cohen
                         ---------------------------------
                         Abraham E. Cohen
                         Chairman of the Board


                         /S/ D. Michael Deignan
                         ---------------------------------
                         D. Michael Deignan
                         Employee