Document:

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                                                                   EXHIBIT 10.40

                              EMPLOYMENT AGREEMENT

         AGREEMENT, made as of December 16, 1998 by and between MEDCATH
INCORPORATED a North Carolina corporation (the "Company") and DENNIS I. KELLY
("Executive").

                                    RECITALS

         In order to induce Executive to serve as the Senior Vice President -
Development of the Company, the Company desires to provide Executive with
compensation and other benefits on the terms and conditions set forth in this
Agreement.

         Executive is willing to accept such employment and perform services for
the Company, on the terms and conditions hereinafter set forth.

         It is therefore hereby agreed by and between the parties as follows:

         1.       Employment.

         1.1      Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the term hereof as its Senior Vice
President - Development. In his capacity as the Senior Vice President -
Development of the Company, Executive shall report to the Chief Executive
Officer ("CEO") of the Company and shall have the customary powers,
responsibilities and authorities of a senior vice president - development 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      Subject to the terms and conditions of this Agreement,
Executive hereby accepts employment with the Company commencing on January 15,
1999, 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

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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      Nothing in this Agreement shall preclude Executive from
engaging, so long as, in the reasonable determination of the Board, such
activities do not interfere with his duties and responsibilities hereunder, 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, without prior
notice to the Board and 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.

         2.       Term of Employment. Executive's term of employment under this
Agreement shall commence on January 15, 1999 and, subject to the terms hereof,
shall terminate on the earlier of (i) September 30, 2002 (the "Termination
Date") or (ii) termination of Executive's employment pursuant to this Agreement;
provided, however, that, unless earlier terminated as a result of Executive's
termination of employment, this Agreement shall automatically renew for one
additional year following the Termination Date unless, at least 90 days prior to
the Termination Date, Executive provides written notice to the Company of his
intention not to continue his employment with the Company for such additional
year; provided, further, that (A) any other termination of employment by
Executive (other than for death, Permanent Disability or Good Reason) may only
be made upon 90 days prior written notice to the Company and any termination of
employment by Executive for Good Reason may only be made upon 30 days prior
written notice to the Company and (B) any termination of employment by the
Company for any reason may only be made upon 30 days prior written notice to
Executive.

         3.       Compensation.

         3.1      Salary. The Company shall pay Executive a base salary ("Base
Salary") at the rate of $200,000 per annum for the year commencing on the
beginning of Executive's term of employment hereunder. Base Salary shall be
adjusted annually at the discretion of the Board but

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in no event shall Base Salary be reduced nor be less than the median base salary
for a comparable position at corporations of similar size and character as the
Company, as it exists from time to time, and, as increased, shall constitute
"Base Salary" hereunder. Base Salary shall be payable in accordance with the
ordinary payroll practices of the Company.

         3.2      Annual Bonus. In addition to his Base Salary, the Company
shall pay to Executive an annual cash bonus (the "Bonus") during the term of his
employment hereunder equal to a percentage of Executive's Base Salary (the
"Target Bonus"). The Bonus for each fiscal year of the Company will be tied to
either the Company's earnings per share as reported in its annual financial
statements excluding any extraordinary or nonrecurring items set forth therein
(the "EPS") and the annual EPS target for that year (the "EPS Target"), or such
other applicable performance targets as are established by the Board (or a
committee thereof). On or before the beginning of each fiscal year, the Board
(or a committee thereof) shall establish an EPS Target or other applicable
performance target (the "Target") for that year. At the end of each fiscal year,
Executive shall be paid a Target Bonus based upon the following formula:

                  If the Company's actual performance results equal
         80% of the Target or greater (e.g., actual EPS is 80% of the
         EPS Target or greater) (the comparative percentage of the
         actual performance results to the Target is referred to
         herein as the "Bonus Growth Percentage"), then Executive's
         Target Bonus shall be the Bonus Growth Percentage multiplied
         by 50% of Executive's Base Salary for the fiscal year then
         ended, subject to a maximum Bonus Growth Percentage of 120%.
         If the Bonus Growth Percentage is less than 80%, no Bonus
         will be earned or paid.

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

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         4.       Employee Benefits.

         4.1      Employee Benefit Programs, Plans and Practices. The Company
shall provide Executive during the term of his employment hereunder with
coverage under all employee pension and welfare benefit programs, plans and
practices (commensurate with his positions in the Company from time to time and
to the extent permitted under any employee benefit plan) in accordance with the
terms thereof, which the Company makes available to its senior executives and
which employee pension and welfare benefit programs, plans and practices that
are intended to be comparable to those currently maintained by the Company.

         4.2      Vacation and Fringe Benefits. Executive shall be entitled to
no less than the number of business days paid vacation in each calendar year to
which Executive is currently entitled, which shall be taken at such times as are
consistent with Executive's responsibilities hereunder. 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.

         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 at any time
for any reason. If Executive's employment is terminated by the Company without
Cause (as defined in Section 6.4 hereof) (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
(d) hereof) prior to the Termination Date, Executive shall receive such
payments, if

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any, under applicable plans or programs, including but not limited to those
referred to in Section 3.4 hereof, to which he is entitled pursuant to the terms
of such plans or programs. In addition, in connection with such termination
Executive shall be entitled to receive the following: (i) an amount equal to (A)
one times the Executive's Base Salary, provided that (B) if such termination
occurs at the time of and in connection with a Change of Control (as defined in
Executive's Non-Qualified Stock Option Agreement dated as of the date hereof)
which Change of Control occurs after the first anniversary of the date hereof,
then an amount equal to two times the Executive's Base Salary, in either case at
the annual rate as of the date of termination under this Section 6.1(a), payable
over the twelve month period following the Termination Date in substantially
equal installment payments and in accordance with the normal payroll practices
of the Company; (ii) a cash lump sum payment in respect of (x) accrued but
unused vacation days (the "Vacation Payment"), (y) compensation earned but not
yet paid (including any awarded but deferred Bonus payments) (the "Compensation
Payment") and (z) reasonable expenses incurred under Section 5 but not yet
reimbursed (the "Expense Payment"); and (iii) continued coverage under any
employee medical, disability and life insurance plans in accordance with the
respective terms thereof for a period ending on the earlier of (A) 12 months
after the date of termination under this Section 6.1(a) or (B) the date on which
the Executive becomes covered under comparable benefit plans of a new employer.

                  (b)      The Vacation Payment, the Compensation Payment, and
the Expense Payment shall be paid by the Company to Executive within 30 days
after the termination of Executive's employment by check payable to the order of
Executive or by wire transfer to an account specified by Executive.

                  (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 by the Company of Executive's
         duties or responsibilities, other than (x) as approved by the current
         CEO of the Company (namely, Stephen R. Puckett) and (y) in connection
         with the termination of

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         Executive's employment by the Company for Cause, by Executive without
         Good Reason or as a result of Permanent Disability or Executive's
         death;

                  (ii)     A reduction by the Company in Executive's Base Salary
         or an amendment to the terms of the bonus plan in effect for senior
         executives and in which Executive participates on the date hereof which
         would adversely effect the ability of Executive to receive a Bonus
         (except that the establishment of the EPS or other performance targets
         to be set by the Board annually shall be deemed not to constitute such
         an amendment);

                  (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; or

                  (iv)     Any relocation to a primary workplace that is more
         than fifty (50) miles from the Executive's workplace in effect as of
         the date of this Agreement.

                  (d)      With respect to (i) the payments Executive could
receive under this Section 6.1 and (ii) the provisions of the options for
capital stock of the Company granted as of the date of this Agreement (whether
as new or replacement options), the Company represents that it has received from
Welsh, Carson, Anderson & Stowe VII, L.P. and MedCath 1998 L.L.C. (holders of
more than 75% of all outstanding shares of capital stock of the Company and its
parent entities), after adequate disclosure, stockholder approval in a separate
vote to make such payments and provide for such acceleration, both of which are
made on the terms of the agreements presented to such stockholders.

                  6.2      Permanent Disability. If the 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 on 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;

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

                  (iv)     such payments under applicable plans or programs,
         including but not limited to those referred to in Section 3.4 hereof,
         to which he is entitled pursuant to the terms of such plans or
         programs.

                  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)      the 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;

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

                  (iv)     such payments under applicable plans or programs,
         including but not limited to those referred to in Section 3.4 hereof,
         to which Executive's estate or designated beneficiaries are entitled
         pursuant to the terms of such plans or programs.

                  6.4      Termination By the Company for Cause or By Executive
without Good Reason. (a) The Company shall have the right to terminate the
employment of Executive for Cause. In the event that Executive's employment is
terminated by the Company for Cause, as hereinafter defined, or by Executive
without Good Reason (other than as a result of the Executive's Permanent
Disability or death), prior to the Termination Date, notwithstanding any other
provision in this Agreement, the Executive shall be entitled only to the
Compensation

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Payment, the Vacation 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.

                  (b)      As used herein, the term "Cause" shall be limited to
(i) willful misconduct by Executive involving dishonesty or breach of trust in
connection with his employment 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) the Executive's conviction of, or plea of nolo
contendere to, a felony. Termination of Executive pursuant to this Section 6.4
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.       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.

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

                  To the Company:

                           MedCath Incorporated
                           7621 Little Avenue
                           Suite 106
                           Charlotte, North Carolina 28226
                           Attention: President

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                  with a copy to:

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

                  with a copy to:

                           Alvin H. Brown, Esq.
                           Simpson Thacher & Bartlett
                           425 Lexington Avenue
                           New York, New York 10017

                  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:

                           Dennis I. Kelly
                           3 Hodge Drive
                           Bridgewater, New Jersey 08807

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 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.

                  9.       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

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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.

                  10.      Assignment. This contract 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.

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

                  12.      Nondisclosure of Confidential Information;
Non-Competition. (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, its subsidiaries,
Kohlberg Kravis Roberts & Co., Welsh, Carson, Anderson & Stowe VII, L.P., or
their respective affiliates as in existence as of the date of Executive's
termination of employment

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(collectively, the "Restricted Group") that, in any case, is not otherwise
available to the public (other than by Executive's breach of the terms hereof).

                  (b)      During the period of his employment hereunder and for
one year thereafter, Executive agrees that, without the prior written consent of
the Company, (A) he will not, directly or indirectly, either as principal,
manager, agent, consultant, officer, stockholder, partner, investor, lender or
employee or in any other capacity, carry on, be engaged in or have any financial
interest in (other than an ownership position of less than 5 percent in any
company whose shares are publicly traded), any business, which is in Competition
(as hereinafter defined) with the existing business of the Company or its
subsidiaries (which business shall consist of owning or managing cardiac care
hospitals, centers or clinics, and any such business in which the Company or any
of its subsidiaries has taken concrete steps toward engaging) and (B) he 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.

                  (c)      For purposes of this Section 13, a business shall be
deemed to be in Competition with the Company or its subsidiaries if it is
engaged in or has taken concrete steps toward engaging in the business of owning
or managing cardiac care hospitals, centers or clinics in the United States.

                  (d)      Executive and the Company agree that this covenant
not to compete is a reasonable covenant 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 this
covenant as to the court shall appear not reasonable and to enforce the
remainder of the covenant 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

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any court having jurisdiction over the matter restraining any further violation
of this Agreement by Executive.

                  13.      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.

                  14.      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 15
are in addition to the survivorship provisions of any other section of this
Agreement.

                  15.      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.

                  16.      Effect on Prior Agreements. This Agreement contains
the entire understanding between the parties hereto and supersedes in all
respects any prior or other agreement or understanding between the Company or
any affiliate of the Company and Executive other than the agreements referred to
in Section 7 hereof.

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

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

                                       MEDCATH INCORPORATED

                                       By /s/ Stephen Puckett
                                         --------------------------------------
                                        Name:
                                        Title:

                                          /s/ Dennis I. Kelly
                                       ----------------------------------------
                                          Dennis I. Kelly

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                                                                   EXHIBIT 10.41

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into by
and between MEDCATH INCORPORATED, a North Carolina corporation (the "Company")
and R. WILLIAM MOORE, JR. ("Employee") and is effective the 1st day of August,
1999 (the "Effective Date").

                                    RECITALS:

         1.       Employee has been employed by the Company prior to the date
hereof;

         2.       Employer and Employee desire to continue Employee's employment
in accordance with the terms of this Employment Agreement which provides to
Employee new and additional consideration which was not previously provided to
Employee by the Company;

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

         1.       Employment. Employee shall be employed as the President of the
Hospital Division of the Company. For new and very valuable consideration
described herein, the Company shall continue to employ Employee and Employee
accepts employment upon the terms and conditions hereinafter set forth, with
such employment to commence on the Effective Date.

         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 hereunder. Employee shall be the President of
the Hospital Division of the Company. Employee shall also have such other duties
as assigned to Employee from time to time by the President and other executive
officers of the Company. Employee shall remain a full-time resident of the
Charlotte, North Carolina metropolitan area.

         During the term of employment hereunder, 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 Two Hundred Twenty Five Thousand Dollars ($225,000.00) ("Annual Base
Compensation") which shall be paid on a monthly basis unless otherwise agreed to
by the parties hereto. Employee's salary shall be reviewed by either the
President of the Company or other executive officers of the Company as
designated by the President from time to time. Employee shall also be eligible
to participate in an annual bonus compensation plan each year of employment. The
bonus plan will be based on factors relating to the success of the Company and
the Employee's performance. The award
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of any such bonus shall be subject to the discretion of the Company. Employee
will only be eligible for the bonus award if Employee is employed by the Company
on October 31 following the end of the year for which the bonus applies.

         4.       Miscellaneous Benefits. During Employee's employment, the
Company shall provide Employee with additional benefits substantially equivalent
to those which are generally provided to other similar employees of the Company.
The Company shall reimburse Employee for reasonable expenses incurred by
Employee in the course of Employee's employment with the Company provided those
expenses are consistent with reasonable policies established from time to time
by the Company.

         5.       Termination of Employment.

                  (a)      By the Company for Cause. The Company shall have the
         right to terminate Employee's employment for cause as provided herein
         by giving written notice thereof. "Cause" shall mean that Employee
         commits a willful act of fraud, dishonesty or disloyalty toward the
         Company; is convicted of criminal conduct resulting in a jail sentence
         (whether or not such sentence is suspended); engages in conduct
         significantly injurious to the Company monetarily; violates a material
         term of this Agreement including, but not limited to, failure to
         fulfill the duties assigned to Employee by the Company; becomes
         disabled; or submits a notice of resignation to the Company. Employee
         shall be deemed disabled if he has been unable, by reason of physical
         or mental infirmity to perform on a full-time basis his assigned
         responsibilities. The existence of disability shall be reasonably
         determined by the Board of Directors of the Company.

                  (b)      By the Company Without Cause. Subject to Section (d)
         below, the Company may terminate Employee's employment at any time
         without cause by giving Employee written notice thereof.

                  (c)      By Employee. Employee may terminate Employee's
         employment upon at least thirty (30) days' written notice either (i)
         for Good Reason, or (ii) for any other reason.

                           For purposes of this Agreement, "Good Reason" shall
         mean any of the following (without Employee's express prior written
         consent):

                           (i)      A substantial reduction by the Company of
                  Employee's duties or responsibilities, other than (a) as
                  approved by the current chief executive officer of the Company
                  (namely, Stephen R. Puckett) and (b) in connection with the
                  termination of Employee's employment by the Company for Cause,
                  by Employee without Good Reason or as a result of the
                  disability or death of Employee;

                           (ii)     A reduction by the Company in Employee's
                  Annual Base Compensation or an amendment to the terms of the
                  bonus plan in effect for senior

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                  executives of the Company in which Employee participates on
                  the date hereof which would adversely affect the ability of
                  Employee to receive a bonus (except that the establishment of
                  the earnings per share or other performance targets to be set
                  by the Board annually shall not be deemed to constitute such
                  an amendment);

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

                           (iv)     Any relocation to a primary workplace that
                  is more than fifty (50) miles from Employee's workplace in
                  effect as of the date of this Agreement.

                  (d)      Salary and Benefits.

                           (i)      Only if (x) the Company terminates
                  Employee's employment under this Agreement for any reason
                  other than Cause, or (y) the Employee terminates his
                  employment under this Agreement for Good Reason, then the
                  Company will continue to be liable for Employee's Annual Base
                  Compensation to be paid on a monthly basis for a period of
                  twelve (12) months following the date of termination, as long
                  as and only if Employee is not otherwise in default hereunder
                  during that period; provided, however, that Employee's salary
                  shall not be payable once Employee becomes employed
                  substantially full-time or otherwise earns, on a monthly
                  basis, at least 75% of Employee's monthly salary hereunder.

                           (ii)     Upon any termination of Employee's
                  employment for cause, Employee shall not be entitled to any
                  further salary, bonuses or benefits following the date of
                  termination of Employee's employment.

                           (iii)    Upon termination of Employee's employment
                  for any reason, Employee shall be entitled to receive only
                  such additional benefits which have accrued or become payable
                  to Employee prior to the end of Employee's actual employment.

                           (iv)     Upon termination, Employee shall not be
                  entitled to any additional salary or benefits other than those
                  accrued prior to the date of termination or as provided in
                  Section 5(d)(i) above, if any. Notwithstanding anything in
                  this Agreement to the contrary, no further salary or benefits
                  shall be due to Employee once Employee begins to receive the
                  proceeds of any disability insurance policy.

         6.       Confidentiality, Non-Disclosure and Non-Competition.

                  (a)      In General. For purposes of this Section 6, all
         references to the Company shall include all legal entities directly or
         indirectly affiliated with the Company, including but not limited to,
         its wholly-owned subsidiaries and the limited partnerships and limited

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         liability companies which are owned all or in part by the Company or
         its subsidiaries and which in turn own or are developing the Company's
         affiliated heart hospitals. During the course of Employee's employment,
         Employee will be exposed and have access to substantial quantities of
         information (which information may be in any form whatsoever, including
         but not limited to information stored on a computer hard and floppy
         discs, compact discs, on electromagnetic tape, or electronically
         recorded) and technology (the "Confidential Information") relating to
         the Company's business that are valuable trade secrets or confidential
         information, including, but not limited to, information concerning
         customers, operations, pricing, technology, marketing strategies,
         methods of operations, management procedures and methods, design of
         facilities and terms of agreements to which the Company and its
         affiliates are a party, and the number of procedures, the types of
         procedures and the charges for the procedures performed at the heart
         hospitals or any other hospital or medical facility operated or managed
         by any legal entities directly or indirectly affiliated with the
         Company.

                  The Confidential Information was developed, compiled and/or
         tested by the Company at considerable amounts of money in building upon
         and expanding that Confidential Information. The Confidential
         Information enables the Company to conduct its business with success
         and with a competitive advantage as long as the Confidential
         Information remains not generally known to others, whether those others
         operate in direct competition with the Company or its customers or
         begin operations in geographical areas which are of interest to the
         Company, specifically within the United States.

                  Employee, by reason of Employee's role as an employee of the
         Company, is familiar with and has access to the Company's partners,
         customers and affiliated physicians and their needs and to the
         marketing and pricing pursued by the Company with respect to those
         partners, customers and affiliated physicians and the Company's
         products and services.

                  This Section is designed to prohibit Employee from using the
         Confidential Information and knowledge and relationships developed as
         an insider of the Company for Employee's own benefit or for the benefit
         of parties other than the Company. The Company would not give Employee
         access to the Confidential Information and authority without Employee's
         execution of this Agreement and Employee willingly signs this Agreement
         because Employee has received additional consideration to do so and
         because Employee believes Employee's relationship with the Company is
         and will be in Employee's own best interest. Both parties agree that
         the provisions of this Section 6 should be construed broadly in favor
         of the Company. In light of the foregoing, Employee agrees to the terms
         of subsection (b) and (c) below.

                  (b)      Confidential Information.  Employee promises that:

                           (i)      During or after termination of Employee's
                  relationship with the Company, Employee will not, directly or
                  indirectly, use, or disclose or make available to anyone
                  outside the Company, any Confidential Information; and

                                       4
<PAGE>   5

                           (ii)     He will take all reasonable precautions to
                  safeguard all Confidential Information at all times so that it
                  is not exposed to, or taken by, unauthorized persons, and,
                  when entrusted to Employee, will exercise Employee's best
                  efforts to assure its safekeeping.

                  (c)      Competition.

                           (i)      Employee agrees that:

                                    (A)      Employee will not, during the
                           period of Employee's employment with the Company,
                           engage or be interested, directly or indirectly, in
                           any manner, as a partner, shareholder, owner,
                           officer, director, advisor, consultant, agent,
                           employee or in any other capacity in any Competitive
                           Business; and

                                    (B)      In the event Employee's employment
                           with the Company ceases for any reason, Employee will
                           not engage in, for a period of eighteen (18) months
                           after that termination (the "Restrictive Period"), in
                           any manner directly or indirectly, whether as an
                           employee, officer, owner, partner, shareholder,
                           consultant, agent or in any other capacity, any
                           Competitive Business within the territory (the
                           "Restricted Territory") defined as within
                           seventy-five (75) miles of any of the following:

                                    (x)      the offices of the Company in
                           Charlotte, North Carolina;

                                    (y)      any hospital which is owned all or
                           in part or managed by the Company or its affiliates
                           during Employee's employment with the Company or
                           which the Company or its affiliates were actively
                           attempting to develop during such period of
                           employment;

                                    (z)      any medical practice,
                           catheterization laboratory or other medical facility
                           or service in each case owned (all or in part) or
                           managed by Company or its affiliates or to which the
                           Company or its affiliates provides consulting
                           services during Employee's employment with the
                           Company or which were actively being developed or
                           negotiated during such period of employment.

                           (ii)     For purposes of this subsection (c), a
                  "Competitive Business" shall include any of the following:

                                    (v)      any hospital which provides any
                           cardiology care or cardiovascular surgery services;

                                       5
<PAGE>   6

                                    (w)      any hospital which initiates a
                           cardiology care or cardiovascular surgery service or
                           program within one (1) year following Employee's
                           termination of employment with the Company;

                                    (x)      any business which operates, owns
                           or manages a cardiac catheterization laboratory or
                           any other cardiology or cardiovascular diagnostic or
                           therapeutic facility;

                                    (y)      any medical practice whose
                           physicians include, among others, cardiologists or
                           cardiovascular surgeons; and

                                    (z)      any physician practice management
                           company which has relationships or affiliations with
                           any medical practice that includes a cardiologist or
                           cardiovascular surgeon.

                  (d)      Non-Solicitation. Employee agrees that he will not,
         during the period of his employment with the Company, and for a period
         of twelve (12) months thereafter, directly or indirectly induce or
         solicit any employee of Company to leave his or her employment with
         Company during the term of such employee's employment and for a period
         of twelve (12) months thereafter.

         7.       Enforcement. If there is a breach or threatened breach of the
provisions of Section 6 of this Agreement, in addition to other remedies at law
or equity, the Company shall be entitled to injunctive relief. The parties
desire and intend that the provisions of Section 6 shall be enforced to the
fullest extent permissible under the law and public policies applied. If any
court of competent jurisdiction shall at any time deem or find any term of this
Agreement or any particular restrictive covenant contained in Section 6 too
broad, extensive or lengthy, such court is hereby authorized to "blue pencil"
this Agreement so that the other provisions of Section 6 shall nevertheless
stand, the Restricted Period shall be deemed to be the longest period
permissible by law under the circumstances and the Restricted Territory shall be
deemed to comprise the largest territory permissible by law under the
circumstances. The court in each case shall reduce the Restricted Period and/or
Restricted Territory and/or the scope of any Competitive Business to the maximum
permissible size, length or scope.

         8.       Notices. Any notice required or permitted to be given under
this Agreement shall be in writing and shall be sent by registered mail, by
other reasonable means of delivery providing overnight service, or by hand to
Employee at 9740 Providence Road West, Charlotte, North Carolina 28277; to the
Company at 7621 Little Avenue, Suite 106, Charlotte, NC 28226, Attention: David
Crane. Notice shall be deemed to have been given when deposited with the Postal
Service or other delivery service or, if delivered by hand, when received by the
addressee. A party may change the address to which notice it must be given by
advising the other parties in writing of the new address.

                                       6
<PAGE>   7

         9.       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.

         10.      Assignment. The rights and obligations of the Company under
this Agreement shall inure 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
Employee.

         11.      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 only by a writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.

         12.      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.

         13.      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.

         14.      Attorneys Fees And Expenses. In the event either party hereto
makes or institutes a claim, demand, action, litigation, arbitration or other
proceeding relating to or arising out of the matters or relationships set forth
in or contemplated by this Agreement, (any such occurrence being referred to as
a "Dispute"), then the prevailing party in such Dispute shall be entitled to
recover from the other party hereto all reasonable attorneys fees and other
costs and expenses reasonably incurred by the prevailing party during the course
of such Dispute. Such amount shall be due and payable in full within three (3)
days following written demand therefore made by the prevailing party to the
other party hereto. A party hereunder shall be deemed to be a prevailing party
once a favorable finding, ruling, order, judgment, decision or other such action
is taken or entered in favor of one party which becomes unappealable. Without
limiting any other rights of the prevailing party hereunder, in the event that
in connection with a Dispute, the defending party makes a settlement offer which
is, in all material respects equal to or more valuable or favorable than the
terms upon which any such Dispute is ultimately decided, resolved or settled,
then the defending party shall be deemed to be a prevailing party under this
paragraph with respect to all of its reasonable attorneys' fees, costs and
expenses which it incurs after it makes such offer in writing to the other party
hereto.

                                       7
<PAGE>   8

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the following execution page(s) effective as of the day and year first above
written.

                                    MEDCATH INCORPORATED

  August 23, 1999                   By:    /s/ David Crane
-----------------                       ---------------------------------------
  Date
                                    Title: Executive Vice President
                                           ------------------------------------

  August 26, 1999                          /s/ R. William Moore, Jr.      (SEAL)
-----------------                   -------------------------------------
  Date                                     R. WILLIAM MOORE, JR.

                                       8

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