Document:

Ex-10.52

 

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made as of September 30, 2005 by and between
MEDCATH CORPORATION, a Delaware corporation (the “Company”), and JAMES E. HARRIS (“Executive”).

RECITALS

     Executive and MedCath Incorporated, a wholly-owned subsidiary of the Company, are parties to
an Employment Agreement dated as of October 8, 1999 (the “Initial Employment Agreement”) that
expired in December, 2004. The Company and Executive desire to enter into a new employment
agreement and to set forth in this Agreement the terms and conditions applicable to Executive’s
continued employment as Executive Vice President and Chief Financial Officer of the Company.

     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 continue to employ Executive during the term hereof as its Executive Vice President and
Chief Financial Officer. In such capacity, Executive shall report to the 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
agrees to continue employment with the Company 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 12(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 Board none of the activities described in clauses (i) or (ii)
interferes with his duties and responsibilities hereunder.

     2. Term of Employment. Subject to the terms and conditions of this Agreement, the
Company hereby agrees to continue to employ Executive, and Executive hereby accepts such
employment, for a period commencing on the date of this Agreement and ending on the third
anniversary of the date of this Agreement; provided, however, that this Agreement
shall be automatically renewed and the term extended for additional one-year periods commencing on
the third anniversary of the date of this Agreement 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. From and after the date of this Agreement, the Company shall pay
Executive a base salary (“Base Salary”) at the rate of $360,000 per annum. Base Salary shall be
adjusted annually at the discretion of the Board but 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 normal payroll practices of
the Company but no less frequently than monthly.

          3.2 Bonus. For each fiscal 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 (the “Target Bonus”). 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 and the maximum bonus opportunity for Executive under the plan. Bonuses shall be paid within
2-1/2 months following 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

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senior executives of
the Company on terms and conditions that are comparable to those applicable to such other senior
executives.

     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 no less than the
number of business days paid vacation in each calendar year which have historically been provided
to Executive, 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 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

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termination described in the immediately preceding sentence, Executive
shall be entitled to receive the following:

     (i) an amount equal to (A) one and one-half times Executive’s Base Salary if
such termination occurs prior to a Change in Control (as defined in Section 6.1(c)
hereof) or more than 12 months after a Change in Control, or (B) if such
termination 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) 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
18 months after the date of termination under this Section 6.1(a) or, if earlier,
the date on which Executive becomes covered under comparable benefit plans of a new
employer.

          (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 Vacation
Payment, 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 by the Company of Executive’s duties or
responsibilities, 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.

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,

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corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity (a “Person”) who is not an affiliate
of Kohlberg Kravis Roberts & Co., LLC (“KKR”) or Welsh, Carson, Anderson & Stowe,
VII, L.P. (“WCAS”);

     (ii) A sale by KKR or WCAS or any of its respective affiliates resulting in
more than 50% of the voting stock of the Company, MedCath Holdings Corp. or MedCath
Incorporated being held by a person or group that does not include KKR or WCAS or
any of their respective affiliates; or

     (iii) A merger or consolidation of the Company, MedCath Holdings Corp. or
MedCath Incorporated into another Person which is not an affiliate of KKR or WCAS;

if and only if any such event results in the inability of KKR or WCAS, or any of their
respective affiliates (collectively, the “Partnerships”) to elect a majority of the Board
of Directors of the Company (or the resulting entity); provided, however, that in the event
that the Company, MedCath Holdings Corp. or MedCath Incorporated is merged with another
company controlled by the Partnerships or their affiliates and, if the chief executive
officer of the surviving entity (or the ultimate parent) is not a person who has held the
position of chief executive officer of the Company for at least six months, such an event
shall be deemed a Change in Control.

          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 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.

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          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;

     (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, 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 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.

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     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 Corporation

10720 Sikes Place, Suite 300

Charlotte, North Carolina 28277

Attn: Chief Executive Officer

with a copy to:

MedCath Corporation

c/o Kohlberg Kravis Roberts & Co.

2800 Sand Hill Road, Suite 200

Menlo Park, California 94025

(Attn: Edward A. Gilhuly)

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:

James E. Harris

[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
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 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.

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     10. 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.

     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 12(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
(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). 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:

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     (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 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 12 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.

          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 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) which:

     (i) is located or operates within 50 miles of:

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

     (B) any location where the Company was actively developing a facility
or service before the termination of Executive’s employment with the
Company; or

     (ii) is located in the United States.

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          Executive further 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 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.

          For purposes of this Section 12, “Competitive Business” shall be defined as a hospital or any
other health care employer, facility, or service providing cardiology related facilities or
services.

          (c) 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 12 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.

     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

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such rights and obligations, including the provisions of Section 12 herein. The
provisions of this Section 14 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 the Initial Employment Agreement and any
other prior agreement or understanding between the Company or any affiliate of the Company and
Executive.

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

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

	 	 	 	 	 
	 	 	MEDCATH CORPORATION
	 
	 	 	 	 
	 

	 	By
	 	      /s/ John T. Casey
	 

	 	 	 	 
	 

	 	Title
	 	      Chairman/CEO
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 
	 	      /s/ James E. Harris
	 	 	 
	 	 	     James E. Harris

11Ex-10.53

 

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made as of September 30,
2005 by and between MEDCATH CORPORATION, a Delaware corporation (the “Company”), and THOMAS K.
HEARN (“Executive”).

RECITALS

     Executive and MedCath Incorporated, a wholly-owned subsidiary of the Company, are parties to
an Employment Agreement dated as of December 3, 1999 (the “Initial Employment Agreement”). The
Company and Executive desire to amend and restate the Initial Employment Agreement and to set forth
in this Agreement the terms and conditions applicable to Executive’s continued employment as
President, Diagnostic Division and Chief Development Officer of the Company.

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree that the Initial Employment Agreement is amended and
restated in its entirety to consist of the following terms and provisions:

     1. Employment.

          1.1 Position. Subject to the terms and conditions of this Agreement, the Company
agrees to continue to employ Executive during the term hereof as its President, Diagnostic Division
and Chief Development Officer. In such capacity, Executive shall report to the President of the
Company (the “President”) 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 President.

          1.2 Duties. Subject to the terms and conditions of this Agreement, Executive hereby
agrees to continue employment with the Company 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 President 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 12(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 Board none of the activities described in clauses (i) or (ii)
interferes with his duties and responsibilities hereunder.

     2. Term of Employment. Subject to the terms and conditions of this Agreement, the
Company hereby agrees to continue to employ Executive, and Executive hereby accepts such
employment, for a period commencing on the date of this Agreement and ending on the third
anniversary of the date of this Agreement; provided, however, that this Agreement
shall be automatically renewed and the term extended for additional one-year periods commencing on
the third anniversary of the date of this Agreement 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. From and after the date of this Agreement, the Company shall pay
Executive a base salary (“Base Salary”) at the rate of $280,000 per annum. Base Salary shall be
adjusted annually at the discretion of the Board but 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 normal payroll practices of
the Company but no less frequently than monthly.

          3.2 Bonus. For each fiscal 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 (the “Target Bonus”). 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 and the maximum bonus opportunity for Executive under the plan. Bonuses shall be paid within
2-1/2 months following the fiscal year to which they relate, and

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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.

     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 no less than the
number of business days paid vacation in each calendar year which have historically been provided
to Executive, 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 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

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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 (A) one times Executive’s Base Salary if such
termination occurs prior to a Change in Control (as defined in Section 6.1(c)
hereof) or more than 12 months after a Change in Control, or (B) if such
termination 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) 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) the first anniversary of the date of termination under this
Section 6.1(a) or (B) the date on which Executive becomes covered under comparable
benefit plans of a new employer.

          (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 Vacation
Payment, 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 by the Company of Executive’s duties or
responsibilities, 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

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     (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.

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”) who is not an affiliate
of Kohlberg Kravis Roberts & Co., LLC (“KKR”) or Welsh, Carson, Anderson & Stowe,
VII, L.P. (“WCAS”);

     (ii) A sale by KKR or WCAS or any of its respective affiliates resulting in
more than 50% of the voting stock of the Company, MedCath Holdings Corp. or MedCath
Incorporated being held by a person or group that does not include KKR or WCAS or
any of their respective affiliates; or

     (iii) A merger or consolidation of the Company, MedCath Holdings Corp. or
MedCath Incorporated into another Person which is not an affiliate of KKR or WCAS;

if and only if any such event results in the inability of KKR or WCAS, or any of their respective
affiliates (collectively, the “Partnerships”) to elect a majority of the Board of Directors of the
Company (or the resulting entity); provided, however, that in the event that the Company, MedCath
Holdings Corp. or MedCath Incorporated is merged with another company controlled by the
Partnerships or their affiliates and, if the chief executive officer of the surviving entity (or
the ultimate parent) is not a person who has held the position of chief executive officer of the
Company for at least six months, such an event shall be deemed a Change in Control.

          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;

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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.

          6.3 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;

     (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, 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 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

6

 

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. 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 Corporation

10720 Sikes Place, Suite 300

Charlotte, North Carolina 28277

Attn: Chief Executive Officer

with a copy to:

MedCath Corporation

c/o Kohlberg Kravis Roberts & Co.

2800 Sand Hill Road, Suite 200

Menlo Park, California 94025

(Attn: Edward A. Gilhuly)

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:

Thomas K. Hearn

[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
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.

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     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 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 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.

     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 12(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
(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). Confidential Information further includes

8

 

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 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 12 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.

          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 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) which:

9

 

     (i) is located or operates within 50 miles of:

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

     (B) any location where the Company was actively developing a facility
or service before the termination of Executive’s employment with the
Company; or

     (ii) is located in the United States.

          Executive further 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 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.

          For purposes of this Section 12, “Competitive Business” shall be defined as a hospital or any
other health care employer, facility, or service providing cardiology related facilities or
services.

          (c) 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 12 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.

     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

10

 

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 12 herein. The
provisions of this Section 14 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 the Initial Employment Agreement and any
other prior agreement or understanding between the Company or any affiliate of the Company and
Executive.

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

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

	 	 	 	 	 
	 	 	MEDCATH CORPORATION
	 
	 	 	 	 
	 

	 	By
	 	      /s/ John T. Casey
	 

	 	 	 	 
	 

	 	Title
	 	      Chairman/CEO
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 
	 	      /s/ Thomas K. Hearn
	 	 	 
	 	 	       Thomas K. Hearn

11

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