Exhibit
10.25


 


EMPLOYMENT AGREEMENT


 


THIS EMPLOYMENT AGREEMENT (the “Agreement”), dated the 15th day of December, 2008, amends and restates,
effective as of January 1, 2009, that certain employment agreement dated
as of March 19, 2007 (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; 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 a Senior Vice President of the Company on
the terms and conditions contained in the Prior Agreement.


 


C.            The
Company and the Employee desire to modify the Prior Agreement, by amending and
restating it in the form set forth herein, to conform it with the requirements
of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).


 


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 January 1, 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 


 


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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.


 


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 $228,000 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 


 


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the Company’s
other compensation policies; provided that any increase in the Base Salary
shall require approval of the Board or its Compensation Committee.


 


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 


 


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terminated
immediately by the Company as set forth herein for Cause or without Cause, or
by reason of Employee’s Permanent Disability.


 


“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 ten (10) 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, the
Severance Period shall increase based on additional years of service by
Employee as follows:  Beginning March 19,
2009 and each anniversary thereafter for so long as Employee continues to be
employed by the Company, the Severance Period shall be increased by one (1) month
every March 19th (e.g. on
March 19, 2009, the Severance Period shall be increased to eleven (11)
months; and on March 19, 2010, the Severance Period shall be increased to
twelve (12) months), provided that in no event shall the Severance Period payable
under this Section 3.3(b) be
greater than twelve (12) 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 


 


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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.


 


(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 twenty-five percent (125%) 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
fifteen (15) 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) thirty percent (30%) 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 twenty-five percent (125%); 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
seven and one-half (7-1/2) 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 


 


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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.


 


(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 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 


 


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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.


 


(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 


 


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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.


 


(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 


 


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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.


 


(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


 


10














 


payments of deferred compensation subject to Section 409A
of the Code, Employee’s “separation from service” as defined in Section 409A
of the Code.


 


(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.


 


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 


 


12

















 


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, 


 


13

















 


his executors, legal representatives and assignees
that he will assign, transfer and convey to the Company, its successors and
assigns the Inventions and Discoveries.


 


(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 


 


14

















 


derogate in any way, directly or indirectly, his
experience with any Protected Party, or any actions or decisions made by any
Protected Party.


 


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 


 


15

















 


understandings, agreements or representations by or
among the parties, written or oral, which may have related to the subject
matter hereof in any way.


 


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.


 


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 


 


16

















 


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]


 


17

















 


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

  
				



 


18