EMPLOYMENT
AGREEMENT


    


    THIS EMPLOYMENT AGREEMENT (the
“Agreement”), dated the
31st
day of July, 2009, amends and restates that certain employment agreement dated
as of December 15, 2008 (the “Prior Agreement”), by and
between NovaMed Management Services, LLC, a Delaware limited liability company
(the “Company”) and a
wholly owned subsidiary of NovaMed, Inc. (the “Parent”), and Graham
Cherrington (“Employee”).

    


    PRELIMINARY
RECITALS

    


    A.           The
Company is engaged in the business of:  (i) owning, operating and/or
managing ambulatory surgery centers and other outpatient surgical facilities,
optical dispensaries, wholesale optical laboratories, an optical supplies and
equipment purchasing organization and a marketing services and products company
that provides marketing services and products to eye care providers as well as
marketing and lead-tracking software, websites, call center services and other
marketing services to health care providers and manufacturers; and (ii)
providing comprehensive eye care services to eye care providers and businesses
ancillary thereto, including, without limitation, providing financial,
administrative, information technology, marketing and managed care services and
ophthalmic surgical equipment to ophthalmic and optometric providers
(collectively, the “Business”).

    


    B.           The
Company currently employs Employee as Executive Vice President Operations of the
Company on the terms and conditions contained in the Prior
Agreement.

    


    C.           In
consideration for the continued employment of Employee, the parties hereto
desire to modify the Prior Agreement, all on the terms and conditions set forth
herein.

    


    NOW, THEREFORE, in
consideration of the premises, the mutual covenants of the parties hereinafter
set forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as
follows:

    


    ARTICLE
I

    Employment

     

    1.1.           Engagement of
Employee.  The Company agrees to continue to employ Employee,
and Employee accepts such continued employment by the Company, under the terms
and conditions set forth herein for the period beginning July 31, 2009 (the
“Effective Date”) and
ending on March 18, 2010 (the “Initial Employment
Period”).  THE INITIAL EMPLOYMENT PERIOD AND ANY RENEWAL PERIOD
(AS HEREINAFTER DEFINED) SHALL AUTOMATICALLY BE RENEWED AND EXTENDED ON THE SAME
TERMS AND CONDITIONS CONTAINED HEREIN FOR CONSECUTIVE ONE-YEAR PERIODS (THE
“RENEWAL PERIODS”),
UNLESS NOT LATER THAN SIXTY (60) DAYS PRIOR TO THE END OF THE INITIAL EMPLOYMENT
PERIOD OR ANY RENEWAL PERIOD, EITHER PARTY SHALL GIVE WRITTEN NOTICE TO SUCH
OTHER PARTY ELECTING TO TERMINATE THIS AGREEMENT.  The Initial
Employment Period and the Renewal Periods are hereinafter referred to as the
“Employment
Period.”  For purposes of this Agreement, any notice of
termination electing not to renew this Agreement pursuant to this Section 1.1 shall be deemed:
(i) a termination without Cause if such notice is delivered by the Company and
Employee were willing and able to continue performing services under
substantially similar terms and conditions; or (ii) a voluntary termination of
employment if such notice is delivered by Employee; provided, however, that if
the Employment Period is terminated pursuant to this Section 1.1 by Employee
(except as provided in Section
3.4), then notwithstanding Article III, the Company shall
have no further obligations hereunder or otherwise with respect to Employee’s
employment from and after the expiration of the Employment Period (except
payment of Employee’s Base Salary accrued through the expiration of the
Employment Period).  Notwithstanding anything to the contrary
contained herein, the Employment Period is subject to termination pursuant to
Article III
below.


    
      
         


      

      
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    1.2.           Duties and
Powers.  During the Employment Period, Employee will have such
responsibilities, duties and authorities, and will render such services or act
in such other capacity for the Company and its affiliates as the Board of
Directors (the “Board”) of the Parent, the manager and parent of the Company (or
any designated officer of the Parent or the Company), may from time to time
direct.  Employee will devote his best efforts, energies and abilities
and his full business time, skill and attention (except for permitted vacation
periods and reasonable periods of illness or other incapacity) to the business
and affairs of the Company, and shall perform the duties and carry out the
responsibilities assigned to him, to the best of his ability, in a diligent,
trustworthy, businesslike and efficient manner for the purpose of advancing the
Company.  Employee acknowledges that his duties and responsibilities
will require his full-time business efforts and agrees that during the
Employment Period he will not engage in any other business activity or have any
business pursuits or interests except activities or interests which do not
conflict with the business of the Company, the Parent and any of their
affiliated entities or interfere with the performance of Employee’s duties
hereunder.

     

    1.3.           No
Violation.  Employee represents and warrants that the execution
of this Agreement by Employee and the performance by Employee of his duties as
an employee of the Company will not violate, conflict with or result in a breach
or default under any agreements, arrangements or understandings to which
Employee is or was a party, or by which he is or was bound, nor will the
performance of Employee’s duties as an employee of the Company be limited,
restricted or impaired in any manner as a result of any agreements, arrangements
or understandings to which Employee is or was a party.

     

    ARTICLE
II

    Compensation

     

    2.1.           Base
Salary.  During the Employment Period, the Company will pay
Employee a base salary at the rate of $275,000 per annum (which annual base
salary, as increased from time to time in accordance with this Section 2.1, shall be referred
to herein as the “Base
Salary”), payable in regular installments in accordance with the
Company’s general payroll practices for salaried employees.  If the
Employment Period is terminated pursuant to Section 3 (subject to any
severance provisions in Section
3.3 or Section
3.4), Employee’s Base Salary for any partial year will be prorated based
upon the number of days elapsed in such year during which services were actually
performed by Employee.  The Board or any designated officer shall perform an annual
review of Employee’s Base Salary based on Employee’s performance of his duties
and the Company’s other compensation policies; provided that any increase in the
Base Salary shall require approval of the Board or its Compensation
Committee.


    
      
         


      

      
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    2.2.         Discretionary
Bonus.  Following the end of each fiscal year, the Board or its
Compensation Committee, in its sole discretion, may elect to cause the Company
to award to Employee a bonus for such year, in an amount to be determined by the
Board or its Compensation Committee, based on such performance targets as shall
be established, and adjusted from time to time, by the Board or its Compensation
Committee.  The Company shall pay Employee the discretionary bonus, if
at all, during the taxable year following the fiscal year with respect to which
the discretionary bonus applies.

     

    2.3.         Benefits.  In
addition to the Base Salary payable to Employee hereunder, Employee will be
entitled to the following benefits during the Employment Period, unless
otherwise altered by the Board with respect to all management employees of the
Company (collectively, the “Benefits”):

     

    (a)           hospitalization,
disability, life and health insurance, to the extent offered by the Company and
subject to the Company’s policies in effect from time to time, and in amounts
consistent with Company policy, for all management employees, as reasonably
determined by the Board;

     

    (b)           four
(4) weeks paid vacation each year with salary, consistent with Company policy
for all management employees;

     

    (c)           reimbursement
for reasonable out-of-pocket business expenses incurred by Employee in the
ordinary course of his duties, subject to the Company’s policies in effect from
time to time with respect to travel, entertainment and other expenses, including
without limitation, requirements with respect to reporting and documentation of
such expenses, payable by no later than the last day of Employee’s taxable year
following the taxable year in which the expense was incurred;

     

    (d)           other
benefit arrangements to the extent made generally available by the Company to
its management employees; and

     

    (e)           participation
in the Parent’s Stock Incentive Plan or an equivalent plan such that Employee is
granted options to purchase an amount of the common equity interest in the
Parent consistent with the determination of the Board or its Compensation
Committee pursuant to such plan.

     

    2.4.         Taxes,
etc.  All compensation payable to Employee hereunder is stated
in gross amount and shall be subject to all applicable withholding taxes, other
normal payroll and any other amounts required by law to be
withheld.

     

    ARTICLE
III

    Termination

     

    3.1.         Termination By Employee or
the Company.  The Employment Period (i) shall automatically
terminate immediately upon Employee’s resignation or death, or (ii) may be
terminated immediately by the Company as set forth herein for Cause or without
Cause, or by reason of Employee’s Permanent Disability.


    
      
         


      

      
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    “Cause” as used herein means
the occurrence of any of the following events:

    


    (a)           a
material breach by Employee of any of the terms and conditions of this
Agreement; provided that Employee shall have a reasonable period of time during
which to cure such material breach following the date on which Employee receives
the Company’s written notice of such material breach;

     

    (b)           Employee’s
material failure or willful refusal to substantially perform his duties;
provided that Employee shall have a reasonable period of time during which to
cure such failure following the date on which Employee receives the Company’s
written notice of such failure;

     

    (c)           Employee’s
failure, as notified by the Company in writing, to comply with any of the
Company’s written guidelines or procedures promulgated by the Company and
furnished to Employee; provided that Employee shall have a reasonable period of
time during which to cure such failure following the date on which Employee
receives the Company’s written notice of such failure; or

     

    (d)           the
determination by the Board in the exercise of its reasonable judgment that
Employee has committed an act or acts constituting a felony or other act
involving dishonesty, disloyalty or fraud against the Company.

     

    “Permanent Disability” as used
herein shall mean that Employee is unable to perform, with or without reasonable
accommodation, by reason of physical or mental incapacity, the essential
functions of his or her position.  The Board shall determine,
according to the facts then available, whether and when a Permanent Disability
has occurred.  Such determination shall not be arbitrary or
unreasonable, and shall be final and binding on the parties hereto.

    


    3.2.       
 Termination by
Employee.  Employee has the right to terminate his employment
under this Agreement at any time, for any or no reason, upon ninety (90) days
written notice to the Company; provided, however, that such ninety (90) day
notice is not required for a termination of employment during the Window Period
(as defined in Section
3.4(g)).

     

    3.3.         Compensation After
Termination.

     

    (a)           Except
as described in Section
3.4 hereof, or except as may be specifically required by law, if the
Employment Period is terminated (i) by the Company for Cause or due to the death
or Permanent Disability of Employee, or (ii) by Employee (including a
termination resulting from Employee’s election not to renew this Agreement under
Section 1.1 hereof),
then the Company shall have no further obligations hereunder or otherwise with
respect to Employee’s employment from and after the termination or expiration
date (except payment of Employee’s Base Salary accrued through the date of
termination or expiration), and the Company shall continue to have all other
rights available hereunder (including, without limitation, all rights under
Article IV hereof) at
law or in equity;


    
      
         


      

      
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    (b)           Except
as described in Section
3.4 hereof, if the Employment Period is terminated by the Company without
Cause (including a termination resulting from the Company’s election not to
renew this Agreement under Section 1.1
hereof):  (i) Employee shall be entitled to receive all items
described in Section
3.3(a) above; and (ii) subject to the conditions hereinafter set forth,
Employee shall be entitled to receive as severance compensation, the following
(collectively, the “Severance
Pay”):  (A) Employee’s then-current monthly Base Salary
hereunder for a period of fourteen (14) months (such time period to be
hereinafter referred to as the “Severance Period” (unless
modified by Section
3.4)), payable, beginning 30 days following the Termination Date, in
regular installments in accordance with the Company’s general payroll practices
for salaried employees; (B) the bonus, if any, to which Employee would have been
entitled under Section
2.2 hereof at the end of the year during which the termination without
Cause occurs had such termination not occurred, which bonus shall be (1)
prorated based on the amount of time that Employee was employed by the Company
during the year (not including the Severance Period) for which such bonus is
being calculated, and (2) determined and paid to Employee contemporaneously with
the determination and payment of bonuses for comparable employees of the Company
during the calendar year next following the year in which the Termination Date
occurs; and (C) continuation of the welfare benefits described in Section 2.3(a) for the
Severance Period, to the extent permissible under the terms of the relevant
benefit plans.  The bonus described in subclause (B) above shall not
be the “Target Bonus” (as defined in Section 3.4(b)), but rather
the bonus that would have been payable pursuant to Section 2.2 hereof, as
modified by this Section
3.3(b).  Employee’s right to receive Severance Pay hereunder is
conditioned upon: (x) Employee executing and delivering to the Company, before
any payment is due or scheduled to begin, a written separation agreement and
general release of all claims, in form and substance acceptable to the Company,
which shall among other things, contain a general release by Employee of all
claims arising out of his employment and termination of employment by the
Company (a “Release
Agreement”); and (y) Employee’s compliance with all of his obligations
which survive termination of this Agreement, including without limitation those
described in Article IV
below.  The Severance Pay is intended to be in lieu of all other
payments to which Employee might otherwise be entitled in respect of his
termination without Cause.  The Company shall have no further
obligations hereunder or otherwise with respect to Employee’s employment from
and after the date of termination of employment with the Company for any reason
(the “Termination
Date”), and the Company shall continue to have all other rights available
hereunder (including without limitation, all rights hereunder (including without
limitation, all rights under Article IV hereof) at law or
in equity.  For purposes of this Section 3.3(b) only and to the
extent Employee continues to be employed by the Company, on March 15, 2010 the
Severance Period shall increase by one additional month to fifteen (15) months
due to an additional year of service by Employee, provided that in no event
shall the Severance Period payable under this Section 3.3(b) be greater than
fifteen (15) months.

     

    3.4.         Compensation After
Termination Following a Change in Control.

     

    (a)           If
the Employment Period is terminated following a Change in Control (as defined
below) (i) by the Company for Cause or due to the death or Permanent Disability
of Employee or (ii) by Employee (including a termination resulting from
Employee’s election not to renew this Agreement under Section 1.1 hereof) other than
for Good Reason (as defined below) or during the Window Period (as defined
below), then the Company shall have no further obligations hereunder or
otherwise with respect to Employee’s employment from and after the termination
or expiration date (except payment of Employee’s Base Salary accrued through the
date of termination or expiration), and the Company shall continue to have all
other rights available hereunder (including without limitation, all rights under
Article IV hereof) at
law or in equity.


    
      
         


      

      
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    (b)           If
the Employment Period is terminated following a Change in Control (i) by the
Company without Cause (including a termination resulting from the Company’s
election not to renew this Agreement under Section 1.1 hereof) or (ii) by
Employee for Good Reason, then subject to the conditions described in Section 3.4(d) below, Employee
shall be entitled to receive the following as Severance Pay in lieu of any
amounts payable under Section
3.3: (A) one hundred fifty percent (150%) times the sum of Employee’s
Base Salary and Target Bonus, payable in either a lump sum within 30 days
following the Termination Date, if the Termination Date occurs no later than the
second anniversary of the effective date of the Change in Control, or in regular
installments beginning within 30 days following the Termination Date in
accordance with the Company’s general payroll practices for salaried employees,
if the Termination Date occurs after the second anniversary of the effective
date of the Change in Control; and (B) continuation of the welfare benefits
described in Section
2.3(a) for eighteen (18) months (the “Severance Period”) to the
extent permissible under the terms of the relevant benefit plans.  For
purposes of this Agreement, “Target Bonus” shall mean the
greater of (x) an amount equal to the bonus that would have been payable to
Employee following the calendar year in which the Termination Date occurs
pursuant to the Company’s Executive Compensation Plan (the “Executive Plan”), based on
attaining one hundred percent (100%) of Employee’s applicable target measure
established pursuant to the Executive Plan or (y) fifty percent (50%) of Base
Salary.  The Target Bonus shall not be adjusted based on whether the
Company anticipates attaining such target measure as of the Termination Date,
whether the target measure is ultimately attained or whether any bonus amounts
payable under the Executive Plan would have ultimately been approved by either
the Compensation Committee or the Board.

     

    (c)           If
the Employment Period is terminated following a Change in Control by Employee
for any reason or no reason during the Window Period, then subject to the
conditions described in Section
3.4(d) below, Employee shall be entitled to receive the following as
Severance Pay in lieu of any amounts payable under Section 3.3: (i) fifty percent
(50%) of the product of:  (x) one hundred fifty percent (150%);
multiplied by (y) the sum of Employee’s Base Salary and Target Bonus, payable
within thirty (30) days following the Termination Date and (ii) continuation of
the welfare benefits described in Section 2.3(a) for nine (9)
months (the “Severance
Period”) to the extent permissible under the terms of the relevant
benefit plans.

     

    (d)           Employee’s
right to receive any Severance Pay under Section 3.4(b) or Section 3.4(c) above is
conditioned upon (i) Employee executing and delivering to the Company, before
any payment is due or scheduled to begin, a Release Agreement, which shall,
among other things, contain a general release by Employee of all claims arising
out of his employment and termination of employment by the Company; (ii)
Employee’s compliance with all terms of that separation agreement and general
release; and (iii) Employee’s compliance with all of his obligations which
survive termination of this Agreement, including without limitation those
described in Article IV
below.  The Severance Pay is intended to be in lieu of all other
payments to which Employee might otherwise be entitled in respect of his
termination without Cause.  The Company shall have no further
obligations hereunder or otherwise with respect to Employee’s employment from
and after the Termination Date, and the Company shall continue to have all other
rights available hereunder (including without limitation, all rights under Article IV hereof) at law or
in equity.

     

    
      
         


      

      
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    (e)           For
the purpose of this Agreement, a “Change in Control” means the
first to occur of any of the following, construed in accordance with Section
409A of the Internal Revenue Code of 1986, as amended (the “Code”):

     

    (i)           the
date any Person or Group (as defined below) acquires (or has acquired during the
12-month period ending on the date of the most recent acquisition by the Person
or Group), other than from the Parent, ownership of 30% or more of the combined
voting power of the then outstanding voting securities of the Parent entitled to
vote generally in the election of directors; provided, however, that any
acquisition by the Parent or any of its subsidiaries, or any corporation with
respect to which, following such acquisition, more than 50% of the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners of the voting securities of the
Parent in substantially the same portion as their ownership, immediately prior
to such acquisition, of the combined voting power of the then outstanding voting
securities of the Parent entitled to vote generally in the election of directors
shall not constitute a Change in Control.  “Person” means any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934), other than any employee benefit plan (or
related trust) of the Parent or its subsidiaries, or any underwriter of the
capital stock of the Parent in a registered public offering.  Persons
will be considered to be acting as a group (a “Group”) if they are owners of
a corporation that enters into a merger, consolidation, purchase or acquisition
of stock, or similar business transaction with the corporation.  If a
Person owns stock in both corporations that enter into a merger, consolidation,
purchase or acquisition of stock, or similar transaction, such shareholder is
considered to be acting as a Group with other shareholders only with respect to
the ownership in that corporation before the transaction giving rise to the
change and not with respect to the ownership interest in the other
corporation.  Persons will not be considered to be acting as a Group
solely because they purchase assets of the same corporation at the same time or
purchase or own stock of the same corporation at the same time, or as a result
of the same public offering;

     

    (ii)           the
date that any Person or Group acquires ownership of more than 50% of the then
outstanding voting securities entitled to vote generally in the election of
directors of the corporation; or

     

    (iii)           the
date that any Person or Group acquires (or has acquired during the 12-month
period ending on the date of the most recent acquisition by the Person or Group)
assets from the Parent that have a total gross fair market value equal to or
more than 40% of the total gross fair market value of all of the assets of the
Parent immediately before such acquisition or acquisitions; provided that such
acquisition is required to be approved by the Parent’s stockholders under the
Delaware General Corporation Law.  For this purpose, gross fair market
value means the value of the assets of the Parent, or the value of the assets
being disposed of, determined without regard to any liabilities associated with
these assets.


    
      
         


      

      
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    (f)         
“Good Reason” shall mean
without the written consent of Employee:

     

    (i)           a
material change in Employee’s duties or responsibilities which results in or
reflects a material diminution of the scope or importance of Employee’s
position;

     

    (ii)          a
material reduction in Employee’s Base Salary;

     

    (iii)         a
material reduction in the level of Benefits available or awarded to
Employee;

     

    (iv)          a
relocation by the Company of Employee’s primary employment location to a
location which is more than 50 miles from Employee’s primary employment location
before the Change in Control; or

     

    (v)           any
material failure by the Company to comply with Section 3.5 of this
Agreement;

     

    so long
as Employee notifies the Company within 90 days after the existence of any of
these conditions and the Company fails to cure the condition within 30 days
after receipt of the notice.  Notwithstanding the foregoing, no Good
Reason exists unless the termination of employment occurs by no later than two
years after the initial existence of any condition provided in this Section 3.4(f).

    


    (g)           “Window Period” shall mean the
30-day period following the first anniversary of a Change in
Control.

     

    3.5.         Special Tax
Payments.

     

    (a)           Anything
in this Agreement to the contrary notwithstanding, if it is determined that any
payment or distribution by the Company to or for the benefit of Employee,
whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise (any such payment or distribution being referred to
herein individually as a “Payment”), would constitute an
“excess parachute payment” within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the “Code”) (or any successor
provision), the Company will pay Employee an additional amount (the “Gross-Up Payment”) such that
the net amount retained by Employee after deduction of any excise tax imposed
under Section 4999 of the Code (or any successor provision), and any Federal,
state and local income, employment and excise tax imposed upon any Gross-Up
Payment shall be equal to the Payment.  For purposes of determining
the amount of the Gross-Up Payment, Employee shall be deemed to pay Federal
income tax and employment taxes at the highest marginal rate of Federal income
and employment taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of Employee’s residence on the Termination
Date, net of the maximum reduction in Federal income taxes that may be obtained
from the deduction of such state and local taxes.


    
      
         


      

      
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    (b)           All
determinations to be made under this Section 3.5 will initially be
made, at the Company’s expense, by the Company’s independent public accountant
immediately prior to the Change in Control (the “Accounting
Firm”).  The Accounting Firm shall provide detailed supporting
legal authorities, calculations and documentation both to the Company and
Employee.  If the Accounting Firm makes the initial determination that
no excise tax is payable by Employee with respect to any Payment, Employee will
have the right to dispute the determination (a “Dispute”) within 20 business
days after receipt by Employee of the Accounting Firm’s determination and the
related supporting information.  The Company will pay the Gross-Up
Payment, if any, as determined by the Accounting Firm, to Employee within five
business days after Employee’s receipt of the Accounting Firm’s initial
determination.  The existence of a Dispute will in no way affect
Employee’s right to receive the Gross-Up Payment in accordance with the
Accounting Firm’s initial determination.  If there is no Dispute, the
Accounting Firm’s initial determination will be binding, final and conclusive
upon the Company and Employee, subject in all respects, however, to the
provisions of Sections 3.5(c)
and 3.5(d),
below.  As a result of the uncertainty in the application of Sections
4999 and 280G of the Code, it is possible that a Gross-Up Payment (or portion
thereof) should have been made by the Company and was not made (an “Underpayment”).  If
upon any reasonable written request by Employee or the Company to the Accounting
Firm, or upon the Accounting Firm’s own initiative, the Accounting Firm (at the
Company’s expense) thereafter determines that Employee is required to make
payment of any excise tax or any additional excise tax, as the case may be, the
Accounting Firm will determine the amount of the Underpayment that has occurred
and the Company will pay any such Underpayment to Employee
promptly.  If (i) Employee delivers to the Company a notice from the
Internal Revenue Service stating in effect that an excise tax is due with
respect to any Payment, or (ii) Employee delivers to the Company an opinion of
tax counsel selected by Employee and acceptable to the Company (and such
acceptance may not be unreasonably withheld) that all or a portion of a Payment
is subject to excise tax and the applicable amount of excise tax, in each case,
together with a written claim based upon such notice or such opinion that there
has been an Underpayment (a “Notice of Underpayment”), the
Company will promptly, but in no event later than five business days after
receipt of the Notice of Underpayment, pay to Employee in cash the amount of the
Underpayment set forth in the Notice of Underpayment.

     

    (c)           The
Company will defend, hold harmless and indemnify Employee on a fully grossed-up
after tax basis from and against any and all claims, losses, liabilities,
obligations, damages, interest, penalties, impositions, assessments, demands,
judgments, settlements, costs and expenses (including reasonable attorneys’,
accountants’ and experts’ fees and expenses) (collectively, “Damages”) with respect to any
tax liability of Employee resulting from any Underpayment, and will promptly,
but in no event later than five business days after receipt of any reasonable
notice from Employee to the Company of any claim for Damages, pay to Employee in
cash the amount of Damages set forth in such notice.

     

    (d)           If
any Underpayment or Damages are ultimately determined to be less than the
applicable amount previously paid by the Company to Employee, Employee will
promptly pay to the Company the amount of any overpayment previously paid by the
Company to Employee with respect to such purported Underpayment or
Damages.


    
      
         


      

      
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    (e)           Notwithstanding
the foregoing, the Company shall pay Employee any amount due under this Section 3.5 by no later than
the end of Employee’s taxable year next following the taxable year in which
Employee remits the related taxes.

     

    3.6.         Code Section
409A.

     

    (a)           This
Agreement is intended to comply with, or otherwise be exempt from, Section 409A
of the Code.

     

    (b)           The
Company shall undertake to administer, interpret, and construe this Agreement in
a manner that does not result in the imposition on Employee of any additional
tax, penalty, or interest under Section 409A of the Code.

     

    (c)           If
the Company determines in good faith that any provision of this Agreement would
cause Employee to incur an additional tax, penalty, or interest under
Section 409A of the Code, the Company and Employee shall use reasonable
efforts to reform such provision, if possible, in a mutually agreeable fashion
to maintain to the maximum extent practicable the original intent of the
applicable provision without violating the provisions of Section 409A of the
Code or causing the imposition of such additional tax, penalty, or interest
under Section 409A of the Code.

     

    (d)           The
preceding provisions, however, shall not be construed as a guarantee by the
Company of any particular tax effect to Employee under this
Agreement.  The Company shall not be liable to Employee for any
payment made under this Agreement that is determined to result in an additional
tax, penalty, or interest under Section 409A of the Code, nor for reporting in
good faith any payment made under this Agreement as an amount includible in
gross income under Section 409A of the Code.

     

    (e)           For
purposes of Section 409A of the Code, the right to a series of installment
payments under this Agreement shall be treated as a right to a series of
separate payments.

     

    (f)           With
respect to any reimbursement of expenses of, or any provision of in-kind
benefits to, Employee, as specified under this Agreement, such reimbursement of
expenses or provision of in-kind benefits shall be subject to the following
conditions: (1) the expenses eligible for reimbursement or the amount of in-kind
benefits provided in one taxable year shall not affect the expenses eligible for
reimbursement or the amount of in-kind benefits provided in any other taxable
year, except for any medical reimbursement arrangement providing for the
reimbursement of expenses referred to in Section 105(b) of the Code; (2) the
reimbursement of an eligible expense shall be made no later than the end of the
year after the year in which such expense was incurred; and (3) the right to
reimbursement or in-kind benefits shall not be subject to liquidation or
exchange for another benefit.

     

    (g)           “Termination
of employment,” “resignation,” or words of similar import, as used in this
Agreement means, for purposes of any payments under this Agreement that are
payments of deferred compensation subject to Section 409A of the Code,
Employee’s “separation from service” as defined in Section 409A of the
Code.


    
      
         


      

      
        10

        
          

        

      

      
         


      

    


    (h)           If
a payment obligation under this Agreement arises on account of Employee’s
separation from service while Employee is a “specified employee” (as defined
under Section 409A of the Code and determined in good faith by the Compensation
Committee), any payment of “deferred compensation” (as defined under Treasury
Regulation Section 1.409A-1(b)(1), after giving effect to the exemptions in
Treasury Regulation Sections 1.409A-1(b)(3) through (b)(12)) that is scheduled
to be paid within six months after such separation from service (the aggregate
of such scheduled payments, the “Delayed Payment”) shall, in
lieu thereof, be paid, as adjusted for earnings or losses thereon, within 15
days after the end of the six-month period beginning on the date of such
separation from service or, if earlier, within 15 days after the appointment of
the personal representative or executor of Employee’s estate following his
death.  In the event that the provisions of this Section 3.6(h) shall apply to
any payment obligation under this Agreement and provided the Employee executes a
Release Agreement, the Company shall make an irrevocable contribution of an
amount equal to the Delayed Payment to a grantor trust established consistent
with the terms of Revenue Procedure 92-64, 33 I.R.B. 11 (8/17/92) (the “Rabbi Trust”) with a financial
institution approved by the Employee, which approval will not be withheld
unreasonably, serving as the third-party trustee thereof, under the terms of
which the assets of the trust may be used, in the absence of the Company’s
insolvency, solely for purposes of fulfilling the Company’s obligation to pay
the Delayed Payment to Employee in compliance with Section 409A(a)(2)(B)(i) of
the Code.  The Company’s obligation to make the contribution to the
Rabbi Trust under the immediately preceding sentence shall arise on the date
that the Release Agreement required under Section 3.3 or Section 3.4 becomes effective
and such contribution shall be made by no later than the tenth business day
(excluding federal holidays) after such effective date.  Employee
shall be permitted to direct the trustee how to invest the trust assets held on
Employee’s behalf.  The Company shall bear all costs, expenses and
fees, including legal and trustee fees, of establishing and maintaining the
Rabbi Trust; provided, however, that all brokerage fees, investment transaction
fees and applicable taxes shall be paid from the trust assets.


     

    ARTICLE
IV

    Restrictive
Covenants

     

    4.1.         Employee’s
Acknowledgment.  Employee acknowledges that:

     

    (a)           the
Company is and will be engaged in the Business during the Employment Period and
thereafter;

     

    (b)           Employee
is one of a limited number of persons who will be developing the
Business;

     

    (c)           Employee
will occupy a position of trust and confidence with the Company after the date
of this Agreement, and during such period and Employee’s employment under this
Agreement, Employee will become familiar with the Company’s trade secrets and
with other proprietary and confidential information concerning the Company and
the Business;


    
      
         


      

      
        11

        
          

        

      

      
         


      

    


    (d)           the
agreements and covenants contained in this Article IV are essential to
protect the Company and the goodwill of the Business and are a condition
precedent to the Company entering into this Agreement;

     

    (e)           Employee’s
employment with the Company has special, unique and extraordinary value to the
Company and the Company would be irreparably damaged if Employee were to provide
services to any person or entity in violation of the provisions of this
Agreement;

     

    (f)           Employee
has means to support himself and his dependents other than by engaging in the
Business, or a business similar to the Business, and the provisions of this
Article IV will not
impair such ability; and

     

    (g)           for
purposes of this Article
IV, the term “Company” shall include the Company, the Parent and any of
their respective subsidiaries and affiliates.

     

    4.2.         Non-Compete.  Employee
hereby agrees that for a period commencing on the date hereof and ending on the
Termination Date, and thereafter, through the later of (a) the period ending on
the first anniversary of the Termination Date or (b) the period ending at the
conclusion of the Severance Period (collectively, the “Restrictive Period”), he shall
not, directly or indirectly, as employee, agent, consultant, stockholder,
director, co-partner or in any other individual or representative capacity, own,
operate, manage, control, engage in, invest in or participate in any manner in,
act as a consultant or advisor to, render services for (alone or in association
with any person, firm, corporation or entity), or otherwise assist any person or
entity (other than the Company) that engages in or owns, invests in, operates,
manages or controls any venture or enterprise that directly or indirectly
engages or proposes to engage in any element of the Business anywhere within a
100-mile radius of the Chicago metropolitan area or within a 100-mile radius of
any area (or in the event such area is a major city, the metropolitan area
relating to such city) in which the Company on the Termination Date engages in
any element of the Business (the “Territory”); provided,
however, that nothing contained herein shall be construed to prevent Employee
from investing in the stock of any competing corporation listed on a national
securities exchange or traded in the over-the-counter market, but only if
Employee is not involved in the business of said corporation and if Employee and
his associates (as such term is defined in Regulation 14(A) promulgated under
the Securities Exchange Act of 1934, as in effect on the date hereof),
collectively, do not own more than an aggregate of 3% of the stock of such
corporation.  With respect to the Territory, Employee specifically
acknowledges that the Company intends to expand the Business into and throughout
the United States.


    
      
         


      

      
        12

        
          

        

      

      
         


      

    


    4.3.         Interference with
Relationships.  Without limiting the generality of the
provisions of Section 4.2
hereof, Employee hereby agrees that, during the Restrictive Period, he
will not, directly or indirectly, solicit or encourage, or participate as
employee, agent, consultant, stockholder, director, partner or in any other
individual or representative capacity, in any business which solicits or
encourages (a) any person, firm, corporation or other entity which has executed,
or proposes to execute, a management services agreement or other services
agreement with the Company at any time during the term of this Agreement, or
from any successor in interest to any such person, firm, corporation or other
entity, for the purpose of securing business or contracts related to any element
of the Business, or (b) any present or future customer or patient of the Company
or any of its affiliated practices or facilities to terminate or otherwise alter
his, her or its relationship with the Company or such affiliated practice or
facility; provided, however, that nothing contained herein shall be construed to
prohibit or restrict Employee from soliciting business from any such parties on
behalf of the Company in performance of his duties as an employee of the Company
required under and as specifically contemplated by Section 1.2
above.  In addition, at all times from and after the
Termination Date, Employee shall not contact or communicate in any manner with
any of the Company’s suppliers or vendors, or any other third party providing
services to the Company, regarding the Company or any Company-related matter
(which suppliers, vendors or third party service providers will include, without
limitation, any third party with whom the Company was, during the term of
Employee’s employment with the Company, contemplating engaging, or negotiating
with, for the future provision of products or services).

     

    4.4.         Nonsolicitation.  Other
than in the performance of his duties hereunder, during the Restrictive Period,
Employee shall not, directly or indirectly, as employee, agent, consultant,
stockholder, director, co-partner or in any other individual or representative
capacity, employ or engage, recruit or solicit for employment or engagement, any
person who is or becomes employed or engaged by the Company or any of its
affiliated practices during the Restrictive Period, or otherwise seek to
influence or alter any such person’s relationship with the Company.

     

    4.5.         Confidential
Information.  Other than in the performance of his duties
hereunder, during the Restrictive Period and thereafter, Employee shall keep
secret and retain in strictest confidence, and shall not, without the prior
written consent of the Company, furnish, make available or disclose to any third
party or use for the benefit of himself or any third party, any Confidential
Information.  As used in this Agreement, “Confidential Information”
shall mean any information relating to the business or affairs of the Company or
the Business, including but not limited to any technical or non-technical data,
formulae, compilations, programs, devices, methods, techniques, designs,
processes, procedures, improvements, models, manuals, financial data,
acquisition strategies and information, information relating to operating
procedures and marketing strategies, and any other proprietary information used
by the Company in connection with the Business, irrespective of its form;
provided, however, that Confidential Information shall not include any
information which is in the public domain or becomes known in the industry
through no wrongful act on the part of Employee.  Employee
acknowledges that the Confidential Information is vital, sensitive, confidential
and proprietary to the Company.

     

    4.6.         Inventions
and Discoveries.

     

    (a)           Employee
understands and agrees that all inventions, discoveries, ideas, improvements,
whether patentable, copyrightable or not, pertaining to the Business of the
Company or relating to the Company’s actual or demonstrably anticipated
research, development or inventions (collectively, “Inventions and Discoveries”)
that result from any work performed by Employee solely or jointly with others
for the Company which Employee, solely or jointly with others, conceives,
develops, or reduces to practice during the course of Employee’s employment with
the Company, are the sole and exclusive property of the
Company.  Employee will promptly disclose all such matters to the
Company and will assist the Company in obtaining legal protection for Inventions
and Discoveries.  Employee hereby agrees on behalf of himself, his
executors, legal representatives and assignees that he will assign, transfer and
convey to the Company, its successors and assigns the Inventions and
Discoveries.


    
      
         


      

      
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    (b)           THE
COMPANY AND EMPLOYEE ACKNOWLEDGE AND AGREE THAT SECTION 4.6(a) SHALL NOT APPLY
TO AN INVENTION OF EMPLOYEE FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY OR TRADE
SECRET INFORMATION OF THE COMPANY WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON
EMPLOYEE’S OWN TIME, UNLESS (A) THE INVENTION RELATED (I) TO THE BUSINESS OF THE
COMPANY OR (II) TO THE COMPANY’S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR
DEVELOPMENT, OR (B) THE INVENTION RESULTS FROM ANY WORK PERFORMED BY EMPLOYEE
FOR THE COMPANY.  EMPLOYEE AND THE COMPANY FURTHER ACKNOWLEDGE AND
AGREE THAT SECTION
4.6(a) SHALL NOT APPLY TO ANY INVENTIONS OR WORK PRODUCT DEVELOPED OR
VESTED BY EMPLOYEE PRIOR TO THE EFFECTIVE DATE.

     

    (c)           EMPLOYEE
ACKNOWLEDGES THAT HE HAS READ THIS SECTION 4.6 AND FULLY
UNDERSTANDS THE LIMITATIONS WHICH IT IMPOSES UPON HIM AND HAS RECEIVED A
DUPLICATE COPY OF THIS AGREEMENT FOR HIS RECORDS.

     

    4.7.         Blue-Pencil.  If
any court of competent jurisdiction shall at any time deem the term of this
Agreement or any particular Restrictive Covenant (as defined) too lengthy or the
Territory too extensive, the other provisions of this Article IV shall nevertheless
stand, the Restrictive Period herein shall be deemed to be the longest period
permissible by law under the circumstances and the Territory herein shall be
deemed to comprise the largest territory permissible by law under the
circumstances.  The court in each case shall reduce the time period
and/or Territory to permissible duration or size.

     

    4.8.         Remedies.  Employee
acknowledges and agrees that the covenants set forth in this Article IV (collectively, the
“Restrictive Covenants”)
are reasonable and necessary for the protection of the Company’s business
interests, that irreparable injury will result to the Company if Employee
breaches any of the terms of said Restrictive Covenants, and that in the event
of Employee’s actual or threatened breach of any such Restrictive Covenants, the
Company will have no adequate remedy at law.  Employee accordingly
agrees that in the event of any actual or threatened breach by him of any of the
Restrictive Covenants, the Company shall be entitled to immediate temporary
injunctive and other equitable relief, without bond and without the necessity of
showing actual monetary damages, subject to hearing as soon thereafter as
possible.  Nothing contained herein shall be construed as prohibiting
the Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of any damages which it is able to
prove.

     

    4.9.         Covenant Not to
Disparage.  During the Restrictive Period and thereafter,
Employee shall not disparage, denigrate or derogate in any way, directly or
indirectly, any of the Company, its agents, officers, directors, employees,
parent, subsidiaries, affiliates, affiliated practices, affiliated doctors,
representatives, attorneys, executors, administrators, successors and assigns
(collectively, the “Protected
Parties”), nor shall Employee disparage, denigrate or derogate in any
way, directly or indirectly, his experience with any Protected Party, or any
actions or decisions made by any Protected Party.


    
      
         


      

      
        14

        
          

        

      

      
         


      

    


    ARTICLE
V

    Miscellaneous

     

    5.1.         Notices.  Any
notice provided for in this Agreement must be in writing and must be either (i)
personally delivered, (ii) mailed by registered or certified first class mail,
prepaid with return receipt requested or (iii) sent by a recognized overnight
courier service, to the recipient at the address below indicated:

    


    
      	 
      	
              To
      the Company:

            
	 
      	 
      	 
      
	 
      	 
      	
              NovaMed
      Management Services, LLC

            
	 
      	 
      	
              980
      N. Michigan Avenue

            
	 
      	 
      	
              Suite
      1620

            
	 
      	 
      	
              Chicago,
      IL 60611

            
	 
      	 
      	
              Attention:

            	
              Thomas
      S. Hall

            
	 
      	 
      	 
      	
              John
      W. Lawrence, Jr.

            
	 
      	 
      	 
      
	 
      	
              with
      a copy to:

            
	 
      	 
      	 
      
	 
      	 
      	
              DLA
      Piper LLP (US)

            
	 
      	 
      	
              203
      North LaSalle Street, Suite 1900

            
	 
      	 
      	
              Chicago,
      Illinois  60601-1293

            
	 
      	 
      	
              Attention:  Steven
      V. Napolitano, Esq.

            
	 
      	 
      	 
      
	 
      	
              To
      Employee:  at his home address then on file with the
      Company.

            


    

    


    or such
other address or to the attention of such other person as the recipient party
shall have specified by prior written notice to the sending
party.  Any notice under this Agreement will be deemed to have been
given (a) on the date such notice is personally delivered, (b) three (3) days
after the date of mailing if sent by certified or registered mail, or (c) one
(1) day after the date such notice is delivered to the overnight courier service
if sent by overnight courier.

    


    5.2.           Severability.  Whenever
possible, each provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other jurisdiction,
but this Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been contained
herein.

     

    5.3.           Entire
Agreement.  This Agreement, those documents expressly referred
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and, as of the Effective Date,
shall supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.


    
      
         


      

      
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    5.4.           Counterparts.  This
Agreement may be executed on separate counterparts, each of which is deemed to
be an original and all of which taken together constitute one and the same
agreement.

     

    5.5.           Successors and
Assigns.  This Agreement is intended to bind and inure to the
benefit of and be enforceable by Employee and the Company and their respective
successors and permitted assigns.  Employee may not assign any of his
rights or obligations hereunder without the written consent of the
Company.

     

    5.6.           No Strict
Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
hereto.

     

    5.7.           Amendments and
Waivers.  Any provision of this Agreement may be amended or
waived only with the prior written consent of the Company and
Employee.

     

    5.8.           Governing
Law.  This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the laws
of the State of Illinois, without giving effect to provisions thereof regarding
conflict of laws.

     

    5.9.           Income Tax
Treatment.  Employee and the Company acknowledge that it is the
intention of the Company to deduct all amounts paid under this Agreement as
ordinary and necessary business expenses for income tax
purposes.  Employee agrees and represents that he will treat all such
amounts as ordinary income for income tax purposes, and should he report such
amounts as other than ordinary income for income tax purposes, he will indemnify
and hold the Company harmless from and against any and all taxes, penalties,
interest, costs and expenses, including reasonable attorneys’ and accounting
fees and costs, which are incurred by Company directly or indirectly as a result
thereof.

     

    5.10.         CONSENT TO
JURISDICTION.  THE COMPANY AND EMPLOYEE HEREBY CONSENT TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK,
STATE OF ILLINOIS AND IRREVOCABLY AGREE THAT SUBJECT TO THE COMPANY’S ELECTION,
ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE
LITIGATED IN SUCH COURTS.  EMPLOYEE ACCEPTS FOR HIMSELF AND IN
CONNECTION WITH HIS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT.


    
      
         


      

      
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    5.11.         WAIVER OF JURY
TRIAL.  THE PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF
THIS TRANSACTION AND THE RELATIONSHIP THAT IS BEING ESTABLISHED.  THE
PARTIES HERETO ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH
MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE OTHER PARTY.  THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, DISCRIMINATION CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS.  THE PARTIES HERETO ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED
ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO
RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.  THE COMPANY AND
EMPLOYEE FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH
THEIR RESPECTIVE LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES
THEIR RESPECTIVE JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED
HEREBY.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.


     

    [Signature
Page to Follow]


    
      
         


      

      
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    IN WITNESS WHEREOF, the
parties have executed this Agreement on the day and year first above
written.

    


    THIS
AGREEMENT CONTAINS AUTOMATIC RENEWAL PROVISIONS.

    


    
      
        
          
            	 
      	
                    COMPANY:

                  
	 
      	 
      
	 
      	
                    NovaMed Management Services, LLC, a Delaware

                    limited liability company

                  
	 
      	 
      
	 
      	
                    By:

                  	
                    /s/ Thomas S. Hall

                  	 
      
	 
      	
                    Thomas S. Hall, President and Chief

                  
	 
      	
                    Executive Officer

                  
	 
      	 
      
	 
      	
                    EMPLOYEE:

                  
	 
      	 
      
	 
      	
                    /s/ Graham Cherrington

                  	 
      
	 
      	
                    Graham Cherrington

                  


          

        

      

    

    
      	 
      


    

     

    
      
         


      

      
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