Document:

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                                                                   EXHIBIT 10.44

                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

         AGREEMENT, made as of January 1, 2000 by and between MEDCATH
INCORPORATED, a North Carolina corporation (the "Company") and DAVID CRANE
("Executive").

                                    RECITALS

         Executive has previously been employed by the Company as its Executive
Vice President and Chief Operating Officer and the Company now desires to amend
and restate in its entirety the terms and conditions of Executive's employment
in order to induce him to serve as the President and Chief Executive Officer of
the Company.

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

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

         1. Employment.

         1.1 Subject to the terms and conditions of this Agreement, the Company
agrees to employ Executive during the term hereof as its President and Chief
Executive Officer. In his capacity as the President and Chief Executive Officer
of the Company, Executive shall report to the board of directors of the Company
(the "Board") and shall have the customary powers, responsibilities and
authorities of a president and chief executive officer for corporations of the
size and character of the Company, as it exists from time to time, and as are
assigned by the Board.

         1.2 Subject to the terms and conditions of this Agreement, Executive
hereby accepts employment with the Company commencing on the date hereof, 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 Board shall
from time to time delegate to him on such terms and conditions and subject to
such restrictions as the Board may reasonably from time to time impose.
Executive also agrees to serve, if elected, as a member of the Board.

         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

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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 the date hereof and, subject to the terms hereof,
shall terminate on the earlier of (i) December 31, 2004 (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 $400,000 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 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.

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         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.

         4. Employee Benefits.

         4.1 Employee Benefit Programs, Plans and Practice. 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 any,
under applicable plans or programs, including but not limited to those referred
to in Section 3.3 hereof, to which he is entitled pursuant to the terms of such
plans or programs. In addition, Executive shall be entitled to receive the
following: (i) an amount equal to (A) one times the Executive's Base Salary (for
employment termination occurring on or before the first anniversary of the
Purchase Date as defined in the Management Stockholder's Agreement attached
hereto) or (B) two times the Executive's Base Salary (for termination occurring
after the

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first anniversary of the Purchase Date), 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 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 second anniversary of 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 in connection with the
         termination of 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.

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         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;

                  (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 3.3 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 3.3 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
                           c/o Kohlberg Kravis Roberts & Co.
                           3 St. James Square
                           London SW1Y 4JU
                           United Kingdom
                           Attn:  Edward A. Gilhuly

                  with a copy to:

                           Hal A. Levinson
                           Moore & Van Allen, PLLC
                           100 N. Tryon Street, Floor 47
                           Charlotte, North Carolina 28202-4003

                  with a copy to:

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

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                  To Executive:

                           David Crane
                           8329 Providence Road
                           Charlotte, North Carolina 28277

                  with a copy to Executive's attorney:

                           C. Richard Rayburn, Jr., Esq.
                           Rayburn, Moon & Smith, P.A.
                           227 West Trade Street, Suite 1200
                           Charlotte, North Carolina 28202

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.

         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

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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 (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 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

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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.

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

                                        MEDCATH INCORPORATED

                                        By:
                                           -------------------------------------
                                             Stephen R. Puckett, Chairman

                                             /s/ David Crane
                                        ----------------------------------------
                                             David Crane

                                       9<PAGE>   1
                                                                  EXHIBIT 10.45

                              EMPLOYMENT AGREEMENT

         This Employment Agreement (the "Agreement") is made as of May 26, 2000
by and between MEDCATH INCORPORATED a North Carolina corporation (the
"Company"), and MICHAEL SERVAIS ("Executive").

                                    RECITALS

         In order to induce Executive to serve as the Chief Operating Officer 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 Chief Operating
Officer. In his capacity as the Chief Operating Officer 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 Chief
Operating Officer 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 a date to be
agreed upon by Executive and the Company which shall be no later than July 5,
2000 (the "Commencement Date") 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

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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      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 the Commencement Date and, subject to the terms
hereof, shall terminate on the earlier of the fourth anniversary of the
Commencement Date (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 90
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 $300,000 per annum for the year commencing on the
beginning of Executive's term

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of employment hereunder. 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 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 employee 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
20 business days paid vacation in each calendar year, 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 any, under applicable plans or programs, including but not limited
to those referred to in Section

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3.3 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), then an
amount equal to two times the Executives 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 in connection with
         the termination of Executive's employment by the Company for Cause, by
         Executive without Good Reason or as a result of Permanent Disability or
         Executive's death;

                                       5
<PAGE>   6
                  (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;

                  (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;

                                       6
<PAGE>   7
                  (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 3.3 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 3.3 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 Payment, the Vacation Payment, and the Expense Payment, and shall
not be entitled to any

                                       7
<PAGE>   8
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
                           10720 Sikes Place
                           Suite 300
                           Charlotte, North Carolina 28277
                           Attention: President

                                       8
<PAGE>   9
                  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:

                           Michael Servais

                           ---------------------------------------
                           ---------------------------------------

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

                                       9
<PAGE>   10
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
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, its parent
corporations, 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

                                       10
<PAGE>   11
otherwise available to the public (other than by Executive's breach of the terms
hereof). Confidential Information further includes without limitation customer
information, vendors, operations and operating procedures, pricing, financial
information, technology, marketing strategies, design of facilities, employment
practices, contractual agreements, and trade secrets.

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

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

                  (ii)     Executive will exercise Executive's 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)      Non-Competition Agreement. Recognizing the fact that
Executive will be given or have access to the Confidential Information described
in this Section 12 above, and that the Executive owes a duty of full loyalty to
the Company and it's 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 partner, owner, investor, officer,
director, advisor, employee, consultant, or in any other capacity, any
Competitive Business.

                  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 (1) year from the

                                       11
<PAGE>   12

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 partner,
owner, investor, officer, director, advisor, employee, consultant, or in any
other capacity, any Competitive Business which is located or operates within
fifty (50) miles of:

                  (i)      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

                  (ii)     any location where the Company was actively
         developing a facility or service before the termination of Executive's
         employment with the Company.

                  For purposes of this Section 12, "Competitive Business" shall
be defined as a hospital or any other health care employer, facility, or service
providing material amounts of 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 13 would irreparably injure the Company.
Accordingly, Executive agrees that the Company may, in addition to pursuing any
other remedies it may have in law or in equity, cease making any payments
otherwise required by this Agreement and obtain an injunction against Executive
from any court having jurisdiction over the matter restraining any further
violation of this Agreement by Executive.

         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

                                       12
<PAGE>   13
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.

                                       13
<PAGE>   14
       18.      Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.

                                   MEDCATH INCORPORATED

                                   By           /s/ David Crane
                                     -----------------------------------------
                                     Name:
                                     Title: CEO

                                      /s/ Michael Servais
                                     -----------------------------------------
                                          Michael Servais

                                       14

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