Pediatric Surgical Associates, P.C. - Page 9




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          Dr. Vaughan.  No bonuses are payable.  Each is to engage in the             
          practice of medicine on behalf of, and exclusively for,                     
          petitioner, in furtherance of its best interests.  Petitioner is            
          to furnish each with an office, stenographic help, supplies,                
          equipment and other facilities and services adequate for the                
          performance of duty.  At the conclusion of the 2-year employment            
          period, each has the option to purchase shares in the corporation           
          at a price based on accounts receivables and the fair market                
          value of petitioner’s assets.                                               
               Each of the nonshareholder employment agreements has a                 
          noncompete clause:  With respect to Dr. Snyder, for an 8-year               
          period beginning on the effective date of his employment, if his            
          employment terminated for any reason other than death or                    
          disability, and if he continues either the practice of medicine,            
          or to have hospital privileges, in Tarrant County, Texas, he is             
          obligated to pay petitioner $6,000 a month until 96 months have             
          passed.  Dr. Vaughan is similarly restricted, except the term of            
          his restriction is 3 years, and the monthly penalty is $8,000.              
               For 1994, Dr. Snyder received a salary of $72,000, and, for            
          1995, Dr. Vaughan received a salary of $76,061.  Petitioner                 
          incurred expenses in connection with the employment of the                  
          nonshareholder surgeons during the audit year.                              
               The nonshareholder surgeons had no significant duties with             
          respect to the administration of petitioner.                                






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