EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of April 1,
1996 by and between THE TRYLON CORPORATION, a Delaware corporation (the
"Company"), and XXXXXXX X. XXXXX, M.D. (the "Employee") with reference to the
following facts:
A. The Company desires to encourage the continuity of its management and
secure for its benefit the skills of individuals who provide unique value to its
operations;
B. The Company recognizes that Employee possesses certain skills and
expertise which give him peculiar value to the Company, the loss of which cannot
be reasonably or adequately replaced;
C. The Company desires to retain these skills for the benefit of the
Company and to provide Employee with compensation commensurate with such skills;
and
D. Employee and the Company desire to enter into an employment agreement
on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
BASIC EMPLOYMENT
1.1 Employment. The Company agrees to employ Employee, and Employee
hereby agrees to be employed by the Company, to perform the duties described
below for the compensation and duration specified in this Agreement, as it may
be amended from time to time, subject to and upon all the terms and conditions
set forth herein. Employee shall only be required to perform his duties in Los
Angeles County, California, provided, however that the foregoing shall not apply
as to reasonable business travel commensurate with Employee's position and the
Company's operational requirements.
1.2 Term. The term of this Agreement ("Term") shall commence as of April
1, 1996 (the "Effective Date"), and continue in full force and effect after the
Effective Date for a period of three years. At or prior to the time when the
remaining term of this Agreement is one year, the Company shall inform Employee
either that (a) it will renew this Agreement or offer to Employee a new
agreement and provide Employee with an execution copy of such agreement, or (b)
it will not renew this Agreement upon expiration. Each twelve (12) month period
during the Term shall be referred to herein as a "Contract Year." Upon the
Effective Date, all previously existing employment agreements or arrangements
between Employee and the Company (other than this Agreement and any agreements
pursuant to the Company's 1994 Long-Term Incentive Plan) shall terminate
automatically and be of no further force or effect.
1.3 Duties. During the Term, Employee shall hold the office of Chief
Medical Officer and Executive Vice President and shall serve as a director on
the Company's Board of Directors. Employee hereby agrees to use his best efforts
and to devote such professional time, energy and ability as he deems necessary
in order to assure the proper and efficient performance of his work for the
Company, it being expressly understood that Employee shall not be devoting all
of his time to the management of the Company and that Employee shall be
rendering services of a business, professional or commercial nature to other
persons or firms indicated on the attached Schedule 1. At present, Employee is
actively involved with the entities indicated on the attached Schedule 1
(whether as an employee, shareholder, partner, officer, director or otherwise).
1.4 Compensation. The Company hereby agrees to pay Employee an initial
salary (the "Initial Salary") at the annual rate set forth in Exhibit "A",
attached hereto and incorporated herein by this reference. The Initial Salary
and the Initial Salary as adjusted pursuant to this Section 1.4 (collectively,
the "Base Salary"), shall be payable in arrears in equal payments at such
frequency as is the custom and practice of the Company and on at least a monthly
basis. Each Contract Year, Employee's performance shall be reviewed by the
Board or a committee or other designee of the Board. Employee's Base Salary
shall be subject to an upward adjustment as determined by the Board or a
committee or designee of the Board, based on the results of such performance
review. Employee's Base Salary will be increased by not less than the greater
of (i) the amount determined by the Board of Directors, committee or designee of
the Board, or (ii) the change in the Consumer Price Index (1982-84=100) for
Urban Wage Earners and Clerical Workers - Los Angeles, Anaheim, Riverside for
such Contract Year. Employee's Base Salary in any Contract Year shall never be
less than the Initial Salary as set forth in Exhibit "A."
1.5 Bonus Compensation. In addition to Base Salary, during each year of
this Agreement Employee shall be eligible for a bonus in the form of cash
("Bonus Compensation") to be based upon Employee's performance. The Bonus
Compensation shall consist of two parts: the "Personal Management Goals" and the
"Enterprise Goals." The Personal Management Goals shall be determined annually
during the term of this Agreement (and not later than the end of the first month
of each Contract Year) mutually by the Board of Directors (or, if in existence,
the Compensation Committee of the Board of Directors) and Employee. The
Personal Management Goals, which shall be based on fulfillment of Employee's job
description and objectives and scaled by allocation of specified percentages of
the maximum annual bonus amount to completion of specified tasks or projects,
shall be suggested by Employee each year for review by the Board of Directors or
Compensation Committee. Upon agreement, they shall be attached to Exhibit "A"
hereto and shall become a part of this Agreement. The Personal Management Goals
and the related bonus eligibility for the first Contract Year (which shall not
be decreased but may be increased for future Contract Years) are set forth in
Exhibit "A" attached hereto and incorporated herein. The Enterprise Goals, as
set forth in Exhibit "A" hereto, are intended to reward Employee for assisting
the Company in attaining the specified enterprise goals, which bonus payment to
Employee shall be made at the time the relevant enterprise goal is achieved.
1.6 Change of Control. If Employee's employment with the Company is
terminated either by the Company without cause or by the Employee for cause
within three (3) months prior to or twelve (12) months after a Change of
Control, as defined below, the Company shall pay Employee in satisfaction of
this Agreement the greater of:
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(i) a lump sum cash payment equal to his Base Salary, Bonus Compensation and the
cash value of any and all benefits including, but not limited to, health, life,
disability and other insurance benefits (collectively "Benefits") which Employee
would have earned had he remained employed with the Company for the eighteen
(18) months following his termination within the time frame described above in
this Section 1.6, or (ii) a lump sum cash payment equal to the amount of his
Base Salary, Bonus Compensation and the cash value of any and all Benefits which
Employee would have earned had he remained employed with the Company for the
remainder of the Term. If the foregoing is characterized under Section 280G of
the Internal Revenue Code (the "Code") as "excess parachute payment" (as defined
therein), the maximum amount payable to Employee shall be limited to 2.99 times
the base amount (as defined therein) (e.g. such amount which is the highest
allowable payment without invoking the excise tax imposed by Section 280G of the
Code). The term "Change of Control" shall be defined as the (i) sale or transfer
of more than fifty percent (50%) of the common stock of the Company in one or a
series of transactions to a single buyer or group of persons acting in concert
(but shall not include any sale or transfer to the extent that such is made to a
shareholder or shareholders of the Company who owned shares of the Company's
common stock as of the date of this Agreement), or (ii) sale of all or
substantially all of the assets of the Company. Notwithstanding the foregoing,
the term "Change of Control" shall not include any initial or secondary public
offering of the common stock of the Company or any transaction with a subsidiary
or affiliate of the Company. Upon payment to Employee of the lump sum payment
hereunder, this Agreement shall terminate (except as to such provisions hereof
which expressly survive termination) and Employee shall have no further
obligations or liabilities of any kind to the Company.
1.7 Working Conditions/ Benefits
1.7.1 Location of Employment. In connection with his employment by
the Company, Employee shall at all times be entitled to maintain his existing
office at the Company's principal executive offices in Los Angeles County,
California. The Company shall not, without the written consent of Employee,
transfer Employee to a location more than forty (40) miles from the Company's
current location. The Company shall promptly pay (or reimburse Employee for)
all reasonable moving expenses incurred by Employee as a result of a change of
his principal residence in connection with any such relocation to which Employee
has consented, and will indemnify Employee against, and reimburse Employee for,
any loss incurred as a result of the sale of his principal residence (which loss
shall be computed for the purpose hereof as the difference between the actual
sales price of such residence and the higher of (a) Employee's aggregate
investment in such residence or (b) the fair market value of such residence as
determined by a real estate appraiser designated by Employee and reasonably
satisfactory to the Company) in connection with any such change in residence.
1.7.2 Vacation and Illness. Employee shall be entitled to no less
than twenty-five (25) business days of paid vacation per Contract Year. Any
unused vacation days shall accrue from year to year. Employee shall receive a
cash payment equal to the value of any accrued vacation days, computed based
upon Employee's current Base Salary and an eight (8) hour working day, in the
event (i) Employee provides the Company with written notice of his election to
receive such sums and not to use such vacation days, which election may be made
at any time, and from time to time, during the Term, or (ii) this Agreement is
terminated for any reason. Employee shall further be entitled to leaves of
absence and sick leave with pay in accordance with the Company's policies and
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procedures established from time to time, or, if there is no policy or procedure
in place at any applicable time, then on the same basis as other senior
management of the Company.
1.7.3 Insurance Benefits. Employee shall be eligible to participate
in and, if eligible, to receive employee group medical, dental, life insurance
and such other benefits made available by the Company in accordance with the
Company's policies and procedures established from time to time, or, if there is
no policy or procedure in place at any applicable time, then on the same basis
as other senior management of the Company. In addition, Employee shall arrange
for, and the Company shall fund, a life insurance policy, in form reasonably
satisfactory to Employee, for the benefit of Employee or his designated
beneficiaries in the amount and on the terms set forth in Exhibit "B" attached
hereto and incorporated herein. The beneficiary of such policy shall be
determined by the Employee. The Company shall provide Employee with secondary
dental insurance and excess co-payment/deductible medical insurance in form and
amount as set forth on Exhibit "B" attached hereto and incorporated herein. The
Company shall also provide Employee with disability insurance, in form
reasonably satisfactory to Employee, with a benefit in the amount set forth on
Exhibit "B" attached hereto and incorporated herein. Company also shall
purchase and fund for the benefit of Employee an annuity in an amount and with a
payment schedule as set forth on Exhibit "B" attached hereto and incorporated
herein.
1.7.4 Stock Options and Awards. Should senior management of the
Company receive grants of Company stock options or awards during the Term,
Employee shall participate at such time in all such grants or awards and shall
receive grants or awards (subject to compliance with applicable laws) which have
the same terms as generally afforded to senior management and which equals at
least the average amount received by such senior management at such time.
Notwithstanding the foregoing, stock grants made in consideration of entering
into an employment agreement or relationship with the Company or stock option
grants that are not included within a stock option plan or program approved by
the shareholders of the Company shall not be included in any calculation of the
foregoing.
1.7.5 Expenses. Employee shall be entitled to reimbursement for all
approved reasonable travel and other business expenses incurred by Employee in
connection with his services to the Company pursuant to the terms of this
Agreement. The Company shall also pay to Employee a monthly automobile
allowance in the amount set forth on Exhibit "B" attached hereto and
incorporated herein. All business expenses for which Employee seeks
reimbursement from the Company shall be adequately documented by Employee in
accordance with the Company's procedures covering expense reimbursement and in
compliance with the regulations of the Internal Revenue Service.
1.7.6 Facilities. Company shall provide Employee with a private
office, computer, secretarial support, telephone, facsimile, reprographic and
other support services and facilities commensurate with Employee's position and
applicable industry standards.
ARTICLE II
PROPRIETARY INFORMATION
2.1 Non-Disclosure. Employee acknowledges that, during the course and
scope of his employment with the Company, Employee may gain knowledge of, have
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access to or have otherwise disclosed to him confidential information and
materials which are of value to the Company. Employee recognizes and
acknowledges that any and all confidential information and materials are made
available to him only for the limited purpose of the performance of his duties
as an employee. Employee agrees that, during and after the Term, Employee will
regard and preserve such information and materials as strictly confidential,
and, without the express prior written consent of the Company, will not directly
or indirectly disclose to any third person or use for the benefit of anyone
other than the Company, any and all confidential information obtained or
originated by the Employee by reason of his employment.
2.2 Confidential Information. For purposes of this Agreement,
confidential information and materials shall include, but shall not be limited
to, information, in all forms and in whatever media embodied, relating to the
business of the Company, contract terms, contracting policies, sales data,
sales programs, budgets, business plans, financial information, financial data,
personnel or payroll information, internal business procedures, processes,
techniques, methods, ideas, discoveries, developments, computer programs, access
codes, information flow systems and design, information processing technologies
and protocols, records, product designs, product planning, research and
development data and programs, trade secrets, customer lists and related
customer information, all of which is deemed confidential and/or proprietary,
which Employee has encountered, become aware of, or originated in the course of
or arising out of his employment with the Company ("Confidential Information").
Confidential Information shall not include (i) information independently
developed by Employee without the use of Confidential Information, and (ii)
information which is or becomes publicly known through no breach of the terms of
this Article.
2.3. Books and Records. All business records of the Company and any and
all additional correspondence, notes, files, records (including computer
hardware, software, discs and printouts), books or papers relating in any manner
whatsoever to the Company, or relating to or arising out of Confidential
Information whether prepared by Employee or otherwise, in whatever media
embodied ("Confidential Books and Records") shall be the exclusive property of
the Company. Employee shall not make or retain any copies of such Confidential
Books and Records without the approval of the Company. All such Confidential
Books and Records, including any photographic or electronic copy or original of
such records, shall be immediately returned to the Company by Employee upon
termination of his employment or upon the request of the Company.
2.4. Inventions. All inventions, discoveries and improvements relating in
any way to the business of the Company (including but not limited to research
and development, products, protocols, methods, computer programs or procedures)
which are conceived, suggested or devised by Employee solely or jointly with
others during the period of Employee's employment with the Company, shall be
disclosed to the Company and all such inventions, discoveries and improvements
shall become and remain the sole property of the Company. Employee agrees to
cooperate with the Company in the execution of appropriate instruments assigning
and evidencing such ownership rights.
2.5. Remedies. Employee acknowledges and agrees that the disclosure of
Confidential Information and the breach of the provisions of this Article may
give rise to irreparable injury to the Company which cannot be adequately
compensated with monetary damages, and Employee further agrees that the Company
may seek and obtain injunctive relief against the breach or threatened breach of
any of the provisions of this Article and/or
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specific enforcement of such provisions in addition to any other legal or
equitable remedies which may be available.
ARTICLE III
TERMINATION
3.1 Termination by Company for Cause. The Company shall not terminate
Employee's employment hereunder other than for "Cause" (as defined herein). The
Company shall have the right to terminate Employee's employment at any time for
Cause by giving Employee written notice of the effective date of termination.
For purposes of this Section, "Cause" shall be defined as:
(i) dishonesty, fraud, misappropriation, embezzlement or other act
of material misconduct against the Company;
(ii) substantial, continuing and willful failure to render services
in accordance with the terms of this Agreement, provided that a reasonable
demand for performance of services had been delivered to Employee by the Board
at least thirty (30) days prior to termination identifying the manner in which
the Board believes that Employee has failed to perform (as determined by the
Board) and Employee has failed to reasonably remedy such failure to perform
within such thirty (30) day period;
(iii) willful and knowing violation of any laws, rules or regulations
of any governmental or regulatory body material to the business of the Company;
or
(iv) conviction of or a plea of nolo contendere to a felony or a
charge or indictment of a felony, the defense of which renders Employee
substantially unable to perform his services hereunder.
If the Company terminates Employee's employment for any of the reasons set forth
in this Section 3.1, the Company shall have no further obligation hereunder from
and after the effective date of such termination and shall have all other rights
and remedies available under this Agreement, at law or in equity.
3.2 Termination on Account of Death or Permanent Disability. To
compensate in the case of Employee's death or Permanent Disability, the Board of
Directors shall provide Employee or his Designated Beneficiary with (i) a lump
sum payment equal to one (1) time Employee's current Base Salary or (ii) during
the Term and before such death or Permanent Disability, Company provides
Employee with insurance coverage as to death and Permanent Disability that
equals or exceeds one (1) year of Employee's current Base Salary and adjusts
annually for any increase in such Base Salary. For purposes of this Agreement,
the term "Permanent Disability" shall mean Employee's inability to perform his
duties under this Agreement for ninety (90) consecutive days or one hundred and
eighty (180) days during any twelve (12)
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month period. If the Board of Directors chooses to provide insurance coverage,
Employee, his spouse and his children shall also be entitled to continue to be
covered, if eligible, by all medical, health, accident and other insurance at
the same coverage level maintained for Employee's benefit immediately prior to
the date of Employee's termination (subject to continuing payment of any
premiums, deductibles and copayments by the person who was the responsible party
at the time of death or Permanent Disability) for a period of eighteen (18)
months from the date of Employee's death or Permanent Disability. In the event
Employee's surviving children are ineligible under the terms of such insurance
to continue to be so covered, the Company shall provide substantially equivalent
coverage through other sources or will provide Employee's surviving children
with the lump sum payment equal to the agreed upon present value of the
continuation of such health insurance coverage under this Section 3.2. In the
event of Permanent Disability, Employee shall continue to receive credit for
years of service under all retirement plans of the Company where permitted by
law.
3.3 Voluntary Termination by Employee Without Cause. Employee may
terminate this Agreement at any time without cause upon sixty (60) days' advance
written notice to the Company; provided, that in the event that Employee's
employment with the Company is voluntarily terminated by Employee without cause:
(i) Employee shall continue to be bound by any provisions of this Agreement that
expressly survive termination of this Agreement, and (ii) the Company shall,
within thirty (30) days of the effective date of such termination, pay Employee
in cash and in one lump sum an amount equal to one half (.5) times his current
Base Salary. Should such termination occur later than the first Contract Year,
such amount paid Employee shall be equal to eighteen months of his current Base
Salary multiplied by the percentage of the Term completed at the time of such
termination.
3.4 Termination by Employee for Cause. Employee may terminate this
Agreement due to any uncured material breach by the Company of any provision of
this Agreement or for "Good Reason" upon written notice to the Company; provided
that a reasonable demand for performance had been delivered to the Company by
the Employee at least thirty (30) days prior to termination identifying the
manner in which the Employee believes that the Company has failed to perform and
the Company has failed to remedy such failure to perform within such thirty (30)
day period (or, in the case of breaches which are capable of cure but not
reasonably within such thirty (30) day period, if Company has not commenced
efforts to cure within such thirty (30) day period and has not thereafter
continued diligently in good faith its efforts to cure until such cure has been
effected). "Good Reason" shall mean (i) the failure by the Company to
continuously provide Employee with working conditions and supervisory authority
that are of the type and level as are applicable to Employee as of the Effective
Date, except in connection with the termination of his employment for
disability, retirement or Cause or by Employee other than for Good Reason, (ii)
a requirement that Employee travel on the Company's business to an extent
materially greater than Employee's normal business travel obligations; or (iii)
any material breach by the Company of any provision of this Agreement or any
other agreement with Employee.
3.5 Termination by the Company Without Cause. At any time beginning
eighteen (18) months after the Effective Date, the Company may terminate this
Agreement without cause upon sixty (60) days' advance written notice to
Employee; provided, that in the event that Employee's employment with the
Company is terminated by the Company without cause: (i) the Company shall
continue to be bound by any provisions of this Agreement that expressly survive
termination of this Agreement, and (ii) the Company
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shall, as of the effective date of such termination, pay Employee in cash and in
one lump sum an amount equal to eighteen (18) months of Employee's current Base
Salary, Bonus Compensation and Benefits.
ARTICLE IV
INDEMNIFICATION
The Company shall indemnify Employee and hold him harmless from and against
any acts or decisions made by Employee in good faith and while exercising
reasonable judgment in performing services for the Company. The Company shall
also obtain and maintain coverage for Employee under any insurance policy now in
force or hereafter obtained during the Term covering other officers of the
company against lawsuits. To the extent permitted by applicable law, the
Company shall pay all expenses, including reasonable attorneys fees, actually
and necessarily incurred by the Employee in connection with the defense of such
act, suit or proceeding, including the cost of court settlements, provided that
the Employee has not acted with gross negligence or in bad faith.
ARTICLE V
MISCELLANEOUS
5.1 Notices. Whenever notice is to be served hereunder, service
shall be made personally, by facsimile transmission, by overnight courier or by
registered or certified mail, return receipt requested. All postage and other
delivery charges shall be prepaid by the party sending the notice. Notice shall
be effective only upon receipt by the party being served, except notice shall be
deemed received 72 hours after posting by the United States Post Office, by
method described above. Confirmation of receipt of any facsimile sent must be
received in order to presume that the transmission was received. All notices
shall be sent to the addresses described below unless changed by written notice
pursuant to the terms of this Section:
To the Company:
THE TRYLON CORPORATION
000 Xxxx 000xx Xxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000-0000
Attention:
Fax: 000-000-0000
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To Employee:
Xxxxxxx X. Xxxxx, M.D.
Westchester Medical Plaza
0000 X. Xxxxxxxxx Xxxxxxxxx, Xxxxx 0000
Fax: 000-000-0000
5.2 Assignability. The Company may assign its interest in this
Agreement to any subsidiary or affiliate of the Company or in connection with a
merger or sale of all or substantially all of the assets of the Company and the
provisions of this Agreement shall inure to the benefit of the successors and
assigns of the Company. Employee may not assign or transfer this Agreement, it
being deemed personal to Employee only; provided, however, upon Employee's
death, Employee's heirs, executors and/or administrators may seek collection of
any sums that may have been due Employee as of Employee's death. Subject to the
above, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, legal representatives, successors
and assigns.
5.3 Severability. If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall to any extent be found
to be invalid, void, or unenforceable, the remaining provisions of this
Agreement and any application thereof shall, nevertheless, continue in full
force and effect without being impaired or invalidated in any way.
5.4 Waiver. No waiver of any term, provision or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be or be construed as a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
5.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original instrument and all of
which together shall constitute the same instrument.
5.6 Entire Agreement. This Agreement, together with the Exhibits and
Schedules hereto and any extensions or renewals hereof, constitutes the parties'
entire Agreement with respect to the subject matter hereof and supersedes all
prior statements or agreements, both written and oral. This Agreement may be
amended only by a writing signed by the parties.
5.7 Governing Law. The validity, interpretation and construction of
this Agreement, and all other matters related to the Agreement, shall be
interpreted and governed by the laws of the State of California.
5.8 Headings. The headings herein used are for convenience purposes
only and shall not be used to construe the meaning of this Agreement in any
respect.
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5.9 Deductions. The Company shall deduct from any payment to
Employee hereunder such social security insurance, federal, state and other
taxes, state disability insurance and other withholdings as may be required by
law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
as of the date first above written, by their duly authorized representatives.
COMPANY THE TRYLON CORPORATION,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx
------------------------------
Title: President
---------------------------
EMPLOYEE /s/ Xxxxxxx X. Xxxxx, M.D.
---------------------------------
Xxxxxxx X. Xxxxx, M.D.
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EXHIBIT "A"
COMPENSATION
INITIAL SALARY
--------------
$180,000
MAXIMUM ANNUAL PERSONAL MANAGEMENT GOALS BONUS COMPENSATION
-----------------------------------------------------------
$45,000
ENTERPRISE GOALS
----------------
Milestone Bonus
--------- -----
Initial Public Offering or comparable $37,500
private placement or sale transaction
with a valuation for the Company of at
least $75 million (post-money)
The Company achieving $5 million annual $75,000
pre-tax earnings cumulatively during the
term of the Agreement, with earnings
calculated according to generally accepted
accounting principles (GAAP) and the Company's
historical accounting practices
The Company achieving an additional $5 million $112,500
annual pre-tax earnings cumulatively during
the term of the Agreement, with earnings
calculated according to generally accepted
accounting principles (GAAP) and the
Company's historical accounting practices
SCHEDULE 1
OUTSIDE ACTIVITIES AS OF EFFECTIVE DATE
1. Xxxxxxx X. Xxxxx, M.D., a sole proprietorship.
2. General partner of Medical Associates of Westchester.
3. President and sole shareholder of West Coast Cardiopulmonary, Inc.
