Pediatric Surgical Associates, P.C. - Page 5




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          1995, those individuals were:  Drs. Ellis, Mann, James P. Miller,           
          and Timothy L. Black (collectively, the shareholder surgeons).              
          On June 30, 1995, Dr. Ellis ceased to be a shareholder, and, from           
          July 1, 1995, to December 31, 1995, petitioner was owned equally            
          by the three remaining shareholder surgeons.                                
               Drs. Mann, Miller, and Black were employees of petitioner              
          for all of 1994 and 1995.  Dr. Ellis was an employee of                     
          petitioner for all of 1994 and until June 30, 1995.                         
          Shareholder Surgeon Employment Contracts                                    
               With respect to their relative periods of employment during            
          the audit years, the shareholder surgeons were all employed by              
          petitioner pursuant to agreements containing similar terms                  
          (sometimes, the shareholder employment agreements).  Among other            
          things, the shareholder employment agreements provide:  The                 
          relationship between petitioner and the shareholder surgeon                 
          “shall be that of an employer and an employee”.  The agreement is           
          to continue from year to year if such is mutually agreeable to              
          the shareholder surgeon and the board of directors of petitioner            
          (the board).  The shareholder surgeon “is employed to engage                
          exclusively, and actively in the practice of medicine on behalf             
          of the Association.”  The shareholder surgeon “shall devote full            
          time and attention to rendering professional services on behalf             
          of the Association and in furtherance of its best interests”.               
          The shareholder surgeon has, however, the option of working less            






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