Exhibit 10.48
 

FINAL EXECUTION COPY

ASSET CONTRIBUTION AND EXCHANGE AGREEMENT

dated as of October 3, 2006

by and among

NOVAMED ACQUISITION COMPANY, INC.,

SURGERY CENTER OF CLEVELAND, L.L.C.

AND

ITS MEMBERS

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ASSET CONTRIBUTION AND EXCHANGE AGREEMENT
 
THIS ASSET CONTRIBUTION AND EXCHANGE AGREEMENT (this “Agreement”) is dated as of
12:01 a.m. on October 3, 2006 (the “Closing Date”), by and among NovaMed
Acquisition Company, Inc., a Delaware corporation (“NovaMed”), Surgery Center of
Cleveland, L.L.C. a Tennessee limited liability company (“Seller”), Cataract and
Laser Center Partners, L.L.C., a Delaware limited liability company d/b/a
Ambulatory Surgical Centers of America, a member of Seller (“ASCOA”), each of
the other members of Seller listed on Exhibit 1 (the “Physician Members,”
together with ASCOA, the “Members”), and the Member’s Committee as the
representative of the Members (the “Members’ Representative”). Each of the
parties hereto shall sometimes be individually referred to herein as a “Party”
and collectively as the “Parties.” Certain capitalized terms have the meanings
provided in Section 13.1.
 
RECITALS

A.    Seller is engaged in the business of owning and operating a licensed
ambulatory surgery center located at 137 25th Street NE, Cleveland, Tennessee
37311 (the “Business”).
 
B.    Pursuant to the terms hereof, immediately prior to the Closing (as defined
herein), Seller will transfer substantially all of its assets (other than the
Excluded Assets), and certain liabilities described herein, to a newly formed
Delaware limited liability company, NovaMed Surgery Center of Cleveland, LLC
(the “New LLC”) in exchange for one hundred percent (100%) of the membership
interests in the New LLC (“New LLC Interests”).
 
C.    As a condition precedent to Closing, Seller and NovaMed must satisfy
certain conditions as described in this Agreement.
 
D.    Contemporaneous with the consummation of the transactions contemplated
herein, Seller desires to transfer and sell to NovaMed, and NovaMed desires to
acquire from Seller, sixty-five percent (65%) of the total New LLC Interests in
exchange for the Purchase Price (as defined herein), all on the terms and
conditions hereinafter set forth.
 
NOW, THEREFORE, in consideration of the mutual covenants of the parties as
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto hereby agree as
follows:
 
ARTICLE I.
CONTRIBUTION OF ASSETS TO NEW LLC AND OTHER PRE-CLOSING COVENANTS
 
1.1.    Formation of the New LLC. Prior to the Closing, the New LLC shall be
formed pursuant to the Certificate of Formation in the form attached hereto as
Exhibit 1.1-1.
 
1.2.    Transfer of Assets to New LLC. Immediately prior to the Closing, and as
a condition precedent to the transactions contemplated herein, Seller will
transfer (the “New LLC Asset Transfer”) substantially all of its assets, free
and clear of all Liens, in exchange for one hundred percent (100%) of the New
LLC Interests, which assets (the “Assets”), include, without limitation, the
following (except to the extent that any of Seller’s assets or properties are
designated as Excluded Assets in Section 1.3 below):
 

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(a)    all inventory and supplies with respect to the Business (collectively,
the “Inventory”);
 
(b)    all of the tangible and intangible personal property with respect to the
Business, including, without limitation, machinery, equipment, fixtures, phone
numbers, computer hardware and software that are listed on Schedule 1.2(b)
(collectively, the “Personal Property”);
 
(c)    all prepaid expenses relating to the Business set forth on Schedule
1.2(c);
 
(d)    all contract rights with respect to the contracts, agreements,
commitments or relationships (oral or written) listed on Schedule 1.2(d),
purchase orders, licenses and leases pertaining to the Business, including all
leasehold improvements, rights under any restrictive covenants accruing to the
benefit of the Business and any provider agreements relating to the operation of
the Business (collectively, the “Assumed Contracts”);
 
(e)    all names and tradenames of Seller and the Business, including, without
limitation, “The Surgery Center of Cleveland” and all derivations thereof;
 
(f)    all records, files and papers primarily pertaining to the Business,
including general business records, accounting records and Medical Records;
 
(g)    all Permits, licenses and certificates of need relating to the operation
of the Business, to the extent transferable or assignable;
 
(h)    all causes of action, claims, warranties, guarantees, refunds, rights of
recovery and set-off of every kind and character, relating primarily to the
Assets or the Business;
 
(i)    all casualty insurance and warranty proceeds of Seller received after the
Closing Date with respect to damage to, nonconformance of, or loss to, the
Assets;
 
(j)    to the extent permitted by law, all accounts receivable or other rights
to receive payment owing to Seller (the “Accounts Receivable”);
 
(k)    all of the goodwill of and associated with the Business;
 
(l)    the real property, personal property, inventory, supplies, equipment and
contracts owned by any Member or any Affiliate of Seller or any Member primarily
used in, or necessary for, the continued conduct of the Business and set forth
on Schedule 1.2(l) (collectively, the “Member Assets”), and
 
(m)    all fee simple interests in the real property located at 137 25th Street
NE, Cleveland, Tennessee 37311 (the “25th Street Real Property”).
 
1.3.    Excluded Assets. Notwithstanding anything to the contrary contained
herein, the Assets do not include the following (collectively, the “Excluded
Assets”):
 
(a)    Seller’s and Members’ rights under this Agreement, including the
consideration paid, directly or indirectly, to Seller and Members pursuant to
this Agreement and the Transaction Documents;
 
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(b)    the tax records relating to the Business;
 
(c)    the Employee Benefit Plans relating to the employees of the Business and
any and all rights therein or in the assets thereof;
 
(d)    all Material Contracts other than the Assumed Contracts;
 
(e)    all cash-on-hand and cash equivalents as of the Closing Date; and
 
(f)    all personal effects of Seller, any Member or their respective Affiliates
that are located at the location of the Business other than the Member Assets as
specified on Schedule 1.3(f).
 
1.4.    Excluded Liabilities. Notwithstanding anything to the contrary contained
in this Agreement (except for the sentence immediately following) or in any
Transaction Document, the New LLC will not assume, agree to pay, perform and
discharge or in any way be responsible for any debts, liabilities or obligations
of the Business, Seller, any Member or any of their respective Affiliates of any
kind or nature whatsoever, arising out of, relating to, resulting from, or
caused by any transaction, status, event, condition, occurrence or situation
relating to, arising out of or in connection with the Business, the Assets,
Seller or any Member existing, arising or occurring on or prior to the Closing
Date, including, without limitation, any liabilities or obligations relating to
or arising from the Excluded Assets (the “Excluded Liabilities”).
Notwithstanding the foregoing, Seller will contribute into New LLC, and New LLC
will assume and thereafter pay and fully satisfy when due, all liabilities and
obligations: (a) which arose prior to the New LLC Asset Transfer and represent
normal and current trade payables incurred by Seller in connection with the
operation of the Business in the ordinary course of business, consistent with
past custom and practice (to the extent not delinquent), including without
limitation those set forth on Schedule 1.4(a) (which Schedule will be updated by
Seller as of the Closing Date) (“Accounts Payable”); (b) the other accrued
liabilities of Seller which have been incurred in the ordinary course of
business, consistent with past custom and practice, and which are specifically
set forth on Schedule 1.4(b) (which Schedule will be updated by Seller as of the
Closing Date) (“Accrued Liabilities”); and (c) arising after the New LLC Asset
Transfer under any Assumed Contract (except for any liability or obligation
arising from any breach or failure to perform under any of the foregoing prior
to the Closing Date) (all such liabilities and obligations to be so contributed
into, and assumed by, the New LLC being collectively referred to herein as the
“New LLC Assumed Liabilities”).
 
1.5.    Satisfaction of Liabilities. Excluding the New LLC Assumed Liabilities,
Seller agrees to satisfy all liabilities of Seller relating to the Business
prior to the New LLC Asset Transfer, or as and when they become due and payable,
which liabilities include, without limitation:
 
(a)    all payroll expense and other compensation due and owing Seller’s
employees for the period preceding the Closing Date (excluding any paid time off
or other employee-related accruals to the extent they are included in Accrued
Liabilities); and
 
(b)    all Taxes, including payroll taxes, sales taxes and income taxes accrued
up to the New LLC Asset Transfer (but excluding any such Taxes to the extent
they are included in Accrued Liabilities).
 
1.6.    Prorations. NovaMed and Seller shall prorate, as of the Closing Date,
all personal property lease payments, real estate and personal property Taxes,
utilities, charges, assessments and other similar charges normally prorated upon
the sale of assets of a going concern. The proration shall be set forth on
Schedule 1.6 attached hereto.
 
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ARTICLE II.
SALE OF NEW LLC INTERESTS BY SELLER TO NOVAMED
 
2.1.    Sale of Transferred LLC Interests. In reliance upon the representations
and warranties of NovaMed contained herein, and on the terms and conditions
hereinafter set forth, Seller hereby agrees to sell, assign, transfer, convey
and deliver to NovaMed at the Closing, free and clear of all Liens, all of
Seller’s right, title and interest in and to sixty-five percent (65%) of the
issued and outstanding New LLC Interests (the “Transferred LLC Interests”). In
reliance upon the representations and warranties of Seller and Members contained
herein, and on the terms and conditions hereinafter set forth, NovaMed hereby
agrees to purchase the Transferred LLC Interests from Seller for the Purchase
Price set forth in Article III hereof.
 
2.2.    Ownership of New LLC following Transactions. As a result of the sales
described in this Article II: (a) NovaMed shall own sixty-five percent (65%)
percent of the New LLC Interests in the New LLC, and (b) the Members shall
collectively and individually own thirty-five percent (35%) the New LLC
Interests in the New LLC.
 
ARTICLE III.
CONSIDERATION AND MANNER OF PAYMENT
 
3.1.    Purchase Price. The aggregate purchase price for the Transferred LLC
Interests shall be Nine Million Eight Hundred Fifty Thousand and No/100 Dollars
($9,850,000) (the “Purchase Price”), which the parties agree is the fair market
value of the Transferred LLC Interests.
 
3.2.    Payment of Purchase Price. At the Closing, NovaMed will pay to Seller,
by wire transfer of immediately available funds to Seller’s designated bank
account, an amount equal to the Purchase Price, according to the wire transfer
instructions attached as Exhibit 3.2.
 
3.3.    Purchase Price Adjustment. Medicare placed a brief hold on payments for
all claims for the last nine days of the Federal fiscal year, September 22, 2006
through September 30, 2006. To address this delay with respect to any potential
impact on the Accounts Receivable balance as of the Closing Date, the parties
hereto have agreed to increase the Purchase Price by $12,866.01, which amount
shall be payable at Closing in accordance with Section 3.2 hereof.
 
ARTICLE IV.
SELLER’S AND MEMBERS’ REPRESENTATIONS AND WARRANTIES
 
Each of Seller and Members hereby represents and warrants, jointly and
severally, to NovaMed as of the Closing Date, as follows:
 
4.1.    Seller’s Organization, Good Standing and Authority. Seller is a limited
liability company duly organized, validly existing and in good standing under
Tennessee law. Each of Seller and Members has full capacity, power, right and
authority to enter into and perform their respective obligations under this
Agreement and each of the Transaction Documents to which each of them is a
party. This Agreement and each of the Transaction Documents to which each is a
party have been duly executed and delivered by each of Seller and Members, and
constitute the valid and binding obligations of Seller and Members, enforceable
against them in accordance with their respective terms, except as the same may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally and the
availability of equitable remedies.
 
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4.2.    Assets.
 
(a)    Seller has full power and authority to carry on the Business as it is
currently being conducted and to own and hold under lease the properties and
assets it now owns or holds under lease. Upon consummation of the transactions
contemplated by this Agreement, Seller will have conveyed, and the New LLC will
be vested with, good and marketable title to the Assets, free and clear of all
Liens.
 
(b)    The Assets constitute all tangible or intangible property, rights and
assets necessary for the conduct by Seller of the Business as conducted during
the twelve months preceding the Closing Date and, to the knowledge of Seller,
there is no need to acquire or replace any material assets. Seller has good and
marketable title to the Assets, in each case free and clear of any and all
Liens. All of the Assets that are personal property are in operable condition
and repair and none of such property requires any repair or replacement except
for maintenance in the ordinary course of business. Except as set forth on
Schedule 4.2, none of the Assets are held under any lease, security agreement,
conditional sales contract or other title retention or security agreement or are
located other than at the Facility.
 
4.3.    Approvals. Except as set forth on Schedule 4.3, no consent, approval,
order or authorization of, or registration, declaration, notice or filing with,
any national, state, provincial, local, governmental, judicial, public,
quasi-public or administrative authority or agency (collectively, “Governmental
Authority”) or other Person is required to be made or obtained by Seller or any
Member in connection with the authorization, execution, delivery and performance
of this Agreement or any other Transaction Document, or the consummation of the
transactions contemplated hereby and thereby.
 
4.4.    New LLC Interests. Immediately prior to the Closing Date, Seller will be
the only record and beneficial holder of the New LLC Interests. Seller has good
and marketable title to the New LLC Interests free and clear of all Liens, and
has full right, power and authority to transfer the Transferred LLC Interests to
NovaMed as provided herein, without obtaining the consent of any third party
(other than the Manager of the New LLC (the “Manager”) as set forth in the terms
and conditions of the Operating Agreement of the New LLC). Upon consummation of
the transactions contemplated herein, Seller shall have transferred good and
marketable title to the Transferred LLC Interests free and clear of all Liens.  
 
4.5.    Financial Statements. Seller has previously delivered to NovaMed
unaudited financial statements of Seller, to the extent available for the years
ending December 31, 2004 and December 31, 2005, consisting of a balance sheet,
statement of operations and members’ equity and statement of cash flows, and an
interim profit and loss statement for the seven-month period ending on July 31,
2006 (“Financial Statements”). Except as set forth on Schedule 4.5, each of the
Financial Statements (a) has been prepared in accordance with the accrual basis
method of accounting consistent with past practice; (b) is true, complete and
correct in all material respects as of the respective dates and for the
respective periods above stated; (c) fairly presents in all material respects
the financial position of Seller at such dates and the results of its operations
for the periods ended on such dates; and (d) is in all material respects
consistent with Seller’s books and records.
 
4.6.    Absence of Undisclosed Liabilities. Neither Seller nor any Member, with
respect to the Business, has any material debts, liabilities or obligations of
any nature (whether accrued, absolute, contingent, direct, indirect, perfected,
inchoate, unliquidated or otherwise and whether due or to become due) arising
out of transactions entered into at or prior to the Closing, or any transaction,
series of transactions, action or inaction at or prior to the Closing, or any
state of facts or condition existing at or prior to the Closing (regardless of
when such liability or obligation is asserted), including but not limited to
guarantees, liabilities or obligations on account of Taxes or governmental
charges or penalties, interest or fines thereon or in respect thereof, except
(a) to the extent specifically reflected and accrued for or reserved against in
the Financial Statements, (b) for liabilities specifically set forth on Schedule
4.6, (c) Taxes or governmental charges that are not yet due and payable, or (d)
to the extent specifically disclosed in any other representation and warranty in
this Agreement.
 
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4.7.    Inventory. All of the Inventory is usable in the ordinary course of
business, is fully paid for and not subject to consignment or conditional sales
arrangements and no material portion of the Inventory is obsolete or damaged.
 
4.8.    Taxes. Seller has filed all Tax Returns on a timely basis that it is
required to have filed in connection with the operation of the Business, and
such returns are true, complete and correct. Seller has paid all Taxes, interest
and penalties, if any, reflected on such Tax Returns or otherwise due and
payable by them. Any deficiencies proposed as a result of any governmental
audits of such Tax Returns have been paid or settled, and there are no present
disputes as to Taxes payable by Seller in connection with the operation of the
Business. With respect to all amounts of Taxes imposed on Seller for which
Seller is or could be liable, whether to taxing authorities or to other Persons,
with respect to all taxable periods or portions of periods ending on or before
the Closing Date, all applicable Tax laws and agreements have been fully
complied with, and all such amounts required to be paid by Seller to taxing
authorities or others on or before the Closing Date have been paid, or have been
fully accrued for or fully reserved against on the Financial Statements. No
issues have been raised and are currently pending by any taxing authority in
connection with any of the Tax Returns. No waivers of statutes of limitations
with respect to the Tax Returns have been given by or requested from Seller or
any Member. There are no Liens for Taxes (other than current taxes not yet due
and payable) upon any asset of Seller. Seller is not a party to any
Tax-indemnity, Tax-sharing, Tax allocation or other similar agreements or
arrangements.
 
4.9.    Material Contracts. Schedule 4.9 is a correct and complete list of every
material written contract, agreement, relationship or commitment, every material
oral contract, commitment, agreement or relationship, to which Seller is a party
or by which Seller is bound and, to the extent directly related to the operation
of the Business, to which any Member is a party or by which any Member is bound
(the “Material Contracts”), correct and complete copies of which previously have
been furnished to NovaMed. Except as set forth on Schedule 4.9, neither Seller
nor any Member party to such a Material Contract is in default, and no event has
occurred which with the giving of notice or the passage of time or both would
constitute a default by such party, under any Material Contract, and, to the
knowledge of Seller or any Member, no event has occurred which with the giving
of notice or the passage of time or both would constitute such a default by any
party to any such Material Contract.
 
4.10.    Real Property. Seller owns a fee simple interest in the 25th Street
Real Property. At Closing, Seller will convey by Limited Warranty Deed, fee
simple absolute title, to the 25th Street Real Property to the New LLC. The 25th
Street Real Property constitutes all real properties used or occupied by Seller
in connection with the Business or reflected on the Financial Statements. Upon
conveyance of the 25th Street Real Property by Limited Warranty Deed to the New
LLC, the New LLC will have a fee simple absolute ownership interest in the 25th
Street Real Property, which interest will be free and clear of all Liens, except
for Liens created by the New LLC. With respect to the 25th Street Real Property:
(a) Seller has all easements and rights necessary to conduct the Business; (b)
no portion thereof is subject to any pending or, to the knowledge of Seller or
any Member, threatened condemnation proceeding or proceeding by any public
authority; (c) the buildings, plants and structures, including
heating, ventilation and air conditioning systems, roof, foundation and floors,
are in good operating condition and repair, subject only to ordinary wear and
tear, and are not in violation of any zoning or other Rules; (d) there are no
leases, subleases, licenses, concessions or other agreements, written or oral,
granting to any party or parties the right of use or occupancy of any portion of
the 25th Street Real Property; (e) the 25th Street Real Property is supplied
with utilities and other services necessary for the operation of such
facilities; (f) the 25th Street Real Property is not located within a wetland or
an area of flood hazard for which flood insurance is required to be obtained;
and (g) there are no public improvements which may result in special assessments
against or otherwise affect the 25th Street Real Property.
 
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4.11.    Litigation. Except as set forth on Schedule 4.11, there are no claims,
counterclaims, actions, suits, orders, proceedings (arbitration, mediation or
otherwise), investigations or judgments pending or, to the knowledge of Seller
or any Member, threatened against or involving Seller, the Business or, with
respect to the Business, any Member, or relating to the transactions
contemplated hereby, at law or in equity, in any court or agency, or before or
by any Governmental Authority, nor, to the knowledge of Seller or any Member,
are there any facts, conditions or incidents that could be reasonably expected
to result in any such actions, suits, proceedings (arbitration, mediation or
otherwise) or investigations. Except as set forth on Schedule 4.11, neither
Seller nor any Member, as it relates to the operation of the Business, is
subject to any judgment, order or decree of any court or Governmental Authority.
None of the matters set forth on Schedule 4.11 could reasonably be expected to
result in any Material Adverse Effect on Seller, the Assets, the Business or the
New LLC.
 
4.12.    Compliance with Applicable Laws; Permits.
 
(a)    Each of Seller and Members, in their conduct of the Business through the
Closing Date, have complied, in all material respects, with applicable federal,
state and local laws and the rules and regulations of all Governmental
Authorities having authority over them, including, without limitation, agencies
concerned with occupational safety, environmental protection, employment
practices, Fraud and Abuse Laws and Medicare and Medicaid requirements
applicable to the Members’ and Seller's billing procedures (except denials of
claims in the ordinary course of business). Neither Seller nor any Member has
received any written notice of Seller’s violation of any such rules or
regulations, whether corrected or not, within the last five (5) years. Seller is
eligible to receive payment under Titles XVIII and XIX of the Social Security
Act. Seller has timely and accurately filed all requisite reports, returns,
data, and other information required by all Governmental Authorities which
control, directly or indirectly, any of Seller’s activities to be filed with any
commissions, boards, bureaus, and agencies and has paid all sums heretofore due
with respect to such reports and returns. No such report or return has been
inaccurate, incomplete or misleading in any material respect. Seller has timely
and accurately filed all requisite reimbursable claims and other reports
required to be filed or otherwise filed in connection with all state and federal
Medicare and Medicaid programs in which Seller participates that are due on or
before the Closing Date or which relate to services provided on or before the
Closing Date, and Seller has not billed for any services that were not provided
at the Facility. There are no claims scheduled, pending or, to Seller’s
knowledge, threatened before any authority, including without limitation any
intermediary, carrier, or other state or federal agency with respect to any
Medicare and Medicaid claim filed by Seller on or before the Closing Date, or
program compliance matters. Except for routinely scheduled Medicare and Medicaid
program participation and certification surveys pursuant to Seller’s Medicare
and Medicaid contracts and filings, no valid program integrity review related to
Seller has been conducted by any authority in connection with the Medicare or
Medicaid programs and no such review is scheduled, pending, or to Seller’s
knowledge, threatened against or affecting Seller, the Business, the Facility,
or the consummation of the transactions contemplated hereby.
 
(b)    Seller holds all the permits, licenses, certificates of need and other
approvals of Governmental Authorities necessary or material for the current
conduct, ownership, use, occupancy and operation of the Business and the 25th
Street Real Property, including, without limitation, those identified on
Schedule 4.12(b) (“Permits”). Seller is in compliance in all material respects
with such Permits, all of which are in full force and effect, and Seller has not
received any written notices to the contrary. All of the Permits are in good
standing, and to Seller’s knowledge, no suspension, cancellation or adverse
action is threatened against the Permits, and there is no reasonable basis for
believing that any Permits will not be renewed upon expiration.
 
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(c)    Seller and Members are not in violation of any applicable fraud and abuse
laws including, without limitation, 18 U.S.C. §201 (bribery of public
officials); 18 U.S.C. §286 (conspiracy to defraud government with respect to
claims); 18 U.S.C. §287 (false, fictitious or fraudulent claims); 18 U.S.C. §371
(conspiracy to commit offense or to defraud the government); 18 U.S.C. §666
(theft or bribery concerning programs receiving federal funds); 42 U.S.C.
§1320a-7a (civil monetary penalties); 42 U.S.C. §1320a-7b (criminal penalties);
and 42 U.S.C. §1395nn (prohibited referrals), each as they may be amended or
renumbered from time to time.
 
4.13.    Transaction Not a Breach. Except as set forth in Schedule 4.13, the
execution, delivery and performance by Seller and any Member of this Agreement
and the Transaction Documents will not:
 
(a)    Result in a breach of any of the terms or conditions of, or constitute a
default under, or in any manner release any party thereto from any obligation
under any mortgage, note, bond, indenture, contract, agreement, license or other
instrument or obligation of any kind or nature by which Seller or the Business
may be bound or affected;
 
(b)    Violate or conflict with any order, writ or injunction of any court,
administrative agency or Governmental Authority to which Seller or any Member is
subject;
 
(c)    Constitute an event which would permit any party to terminate any
agreement or accelerate the maturity of any indebtedness or other obligation;
 
(d)    Violate any provision of the organizational documents of Seller;
 
(e)    Result in the creation or imposition of any Lien upon any property of
Seller; or
 
(f)    Require any authorization, consent, approval, exemption or other action
by or notice to any court, Governmental Authority or any other Person.
 
4.14.    Conduct of Business. Since the Review Date, Seller has conducted the
Business in the ordinary course of business, consistent with past custom and
practice, and has incurred no material liabilities other than in the ordinary
course of business, consistent with past custom and practice, and there has been
no Material Adverse Effect on the assets, financial condition, operating
results, employee or patient relations or business activities of Seller or the
Business. Without limiting the foregoing, since the Review Date, Seller has not,
except in the ordinary course of business, consistent with past custom and
practice, or as otherwise set forth on Schedule 4.14:
 
(a)    Incurred any obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, whether individually or in the
aggregate, that has had or could be reasonably expected to result in a Material
Adverse Effect;
 
(b)    Pledged or subjected any of its assets to any Lien;
 
(c)    Voluntarily or involuntarily sold, transferred, abandoned, surrendered,
leased or otherwise disposed of any of its assets having an aggregate value in
excess of $10,000;
 
(d)    Canceled or compromised any material debt or claim, or waived or released
any right of substantial value;
 
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(e)    Received any written notice of termination of any contract, lease or
other agreement, or suffered any damage, destruction or loss that, individually
or in the aggregate, has had or could be reasonably expected to result in a
Material Adverse Effect;
 
(f)    Instituted, settled or agreed to settle any litigation, action,
proceeding or arbitration;
 
(g)    Made any purchase commitment other than in the ordinary course of
business, consistent with past custom and practice, exceeding $10,000 per
commitment or $25,000 in the aggregate;
 
(h)    Modified the timing, course of conduct or other cash management
activities with respect to the collection of accounts receivable of the
Business;
 
(i)    Failed to pay any accounts or notes payable or any other obligations
consistent with past practices, except for bona fide disputes arising in the
ordinary course of business;
 
(j)    Entered into any material transaction, contract or commitment other than
in the ordinary course of business, consistent with past custom and practice,
other than the transactions contemplated by the Transaction Documents;
 
(k)    Suffered any event or events, whether individually or in the aggregate,
that has had or could be reasonably expected to result in a Material Adverse
Effect; or
 
(l)    Issued any equity interests or entered into any agreement or
understanding to do so.
 
4.15.    Health, Safety and Environment. Seller has never generated,
transported, treated, stored, disposed of or otherwise handled any Hazardous
Materials at any site, location or facility in connection with its business or
any of its assets in violation of any applicable Environmental and Safety
Requirements (as hereinafter defined), nor does the 25th Street Real Property
contain (including containment by means of any underground storage tank) any
Hazardous Materials. Seller: (i) is in material compliance with all applicable
federal, state and local laws, rules, regulations, ordinances and requirements
relating to public health and safety, worker health and safety and pollution and
protection of the environment, all as amended or hereafter amended
(“Environmental and Safety Requirements”), and (ii) possesses all required
permits, licenses, certifications and approvals and has filed all notices or
applications required thereby or pertaining thereto. Seller has never been
subject to, or received any written notice of, any private, administrative or
judicial inquiry, investigation, order or action, or any written notice of any
intended or threatened private, administrative, or judicial inquiry,
investigation, order or action relating to the presence or alleged presence of
Hazardous Materials in, under or upon any property leased or owned by Seller,
nor has Seller any knowledge of any such inquiry, investigation, order, action
or notice. There are no pending, or to the knowledge of Seller or any Member,
threatened, investigations, actions, orders or proceedings (or written notices
of potential investigations, actions, orders or proceedings) from any
Governmental Authority or any other entity regarding any matter relating to
Environmental and Safety Requirements.
 
4.16.    Employees. Schedule 4.16 is a true, complete and correct list setting
forth the names and current compensation rate and compensation of all
individuals employed by Seller. There has been no material increase, other than
in the ordinary course of business, consistent with past custom and practice, in
the compensation or rate of compensation payable to any employees of Seller
since the Review Date, nor since that date has there been any promise to any
employee listed on Schedule 4.16, orally or in writing, of any bonus or increase
in compensation, except for increases in the ordinary course of business
consistent with Seller’s past compensation practices and listed on
Schedule 4.16, and obligations incurred under existing bonus, insurance, pension
or other Employee Benefit Plans described on Schedule 4.19 or Schedule 4.20.
Except as set forth on Schedule 4.16, there has been no promise to any employee
listed on Schedule 4.16, orally or in writing, of any guaranty of employment
following the Closing Date.
 
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4.17.    Insurance. Schedule 4.17 sets forth a list of all policies of insurance
currently in effect with respect to which Seller is a party or otherwise the
beneficiary of coverage, specifying the insurer and coverage limits. All such
insurance is in full force and effect and all premiums due on such policies have
been paid. Such insureds have complied in all material respects with the
provisions of all such policies. Seller has previously delivered to NovaMed
complete and correct copies of all such policies, together with all riders and
amendments thereto in the possession of Seller. Except as set forth on Schedule
4.17, there are no claims or asserted claims reported to insurers under such
policies, including all medical malpractice claims and similar types of claims,
actions or proceedings asserted against any of Seller and the Members at any
time within the past five (5) years.
 
4.18.    Affiliate Transactions. Excluding ordinary course distributions to its
equity holders, there are no transactions involving the transfer of any cash,
property or rights to or from Seller from, to or for the benefit of any
Affiliate or former Affiliate of Seller (“Affiliate Transactions”) during the
period commencing January 1, 2005 and continuing through the date hereof or any
existing commitments of Seller to engage in the future in any Affiliate
Transactions.
 
4.19.    Employee Benefit Plans. Except as set forth in Schedule 4.19, neither
Seller nor any Plan Affiliate has maintained, sponsored, adopted, made
contributions to or obligated itself to make contributions to or to pay any
benefits or grant rights under or with respect to any “Employee Pension Benefit
Plan” (as defined in Section 3(2) of ERISA), “Employee Welfare Benefit Plan” (as
defined in Section 3(1) of ERISA), “multi-employer plan” (as defined in Section
3(37) of ERISA), any collective bargaining agreement, plan of deferred
compensation, medical plan, life insurance plan, long-term disability plan,
dental plan or other plan providing for the welfare of any of Seller’s employees
or former employees or beneficiaries thereof, personnel policy (including but
not limited to vacation time, holiday pay, bonus programs, moving expense
reimbursement programs and sick leave), material fringe benefit, excess
benefit plan, bonus or incentive plan (including but not limited to stock
options, restricted stock, stock bonus and deferred bonus plans), severance
agreement, salary reduction agreement, top hat plan or deferred compensation
plan, change-of-control agreement, employment agreement, consulting agreement or
any other benefit, program, policy, arrangement, agreement or contract
(collectively, “Employee Benefit Plans”), whether or not written or terminated,
which reasonably could give rise to or result in Seller or such Plan Affiliate
having any debt, liability, claim or obligation of any kind or nature, whether
accrued, absolute, contingent, direct, indirect, known or unknown, perfected or
inchoate or otherwise and whether or not due or to become due. Correct and
complete copies of all Employee Benefit Plans previously have been furnished to
NovaMed. The Employee Benefit Plans are in compliance in all material respects
with governing documents and agreements and with applicable laws. Seller
represents that it has complied, in all material respects, with the applicable
requirements of COBRA through the Closing Date.
 
4.20.    Personnel Agreements, Plans and Arrangements. Except as listed in
Schedule 4.20, neither Seller nor any Member is a party to or obligated in
connection with the Business with respect to any outstanding contracts with
current or former employees, agents, consultants, or advisers. 
 
4.21.    Certain Payments. None of Seller, the Members, any director, officer,
agent, or employee of Seller or any other Person associated with or acting for
or on behalf of Seller has, directly or indirectly, made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to any
Person, private or public, regardless of form, whether in money, property, or
services (i) for securing patients or referrals, (ii) for patients or referrals
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of Seller, or (iv) in violation of any law.
 
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4.22.    Workers Compensation. Schedule 4.22 sets forth all expenses,
obligations, duties and liabilities relating to any pending, threatened or
ongoing claims by employees and former employees (including dependents and
spouses) of Seller (or its predecessors), and the extent of any specific accrual
on or reserve therefor set forth on the Financial Statements, for costs,
expenses and other liabilities under any workers compensation laws, regulations,
requirements or programs. Except as set forth on Schedule 4.22, to Seller’s
knowledge, no claim, injury, fact, event or condition exists which would give
rise to a material claim by any employees or former employees (including
dependents and spouses) of Seller under any workers compensation laws,
regulations, requirements or programs. Since the Review Date, there has been no
material change, other than in the ordinary course of business, in the
information disclosed in Schedule 4.22.
 
4.23.    Accounts Receivable/Accounts Payable.
 
(a)    Accounts Receivable. Except as set forth on Schedule 4.23(a), the
Accounts Receivable are valid, binding and legally enforceable obligations and
are owned by Seller free and clear of all Liens, and, except for contractual
allowances and adjustments, reserves for bad debts and other adjustments that
are consistent with those adjustments made in preparing the Financial
Statements, will not be subject to any offset, counterclaim or other adverse
claim or defense, and may be transferred to the New LLC to the extent permitted
by law. The Accounts Receivable arose in the ordinary and usual course of the
business, and the Accounts Receivable are set forth on the books and records of
Seller. Schedule 4.23(a) contains a complete and accurate list of all Accounts
Receivable as of the date stated thereon. Seller does not know of any reason why
the Accounts Receivable would not be collectible according to approximately the
same ratios as accounts receivable have been historically collectible.
 
(b)    Accounts Payable and Accrued Liabilities. Schedule 1.4(a) and Schedule
1.4(b) sets forth a complete and correct list of the Accounts Payable and
Accrued Liabilities. Each of the Accounts Payable and Accrued Liabilities are
valid and have been incurred in connection with the operation of the Business in
the ordinary course of business, consistent with Seller’s past custom and
practice.
 
4.24.    Brokers. All negotiations relating to this Agreement and the
Transaction Documents, and the transactions contemplated hereby and thereby,
have been carried on without the intervention of any Person acting on behalf of
any of Seller or any Member in such a manner as to give rise to any valid claim
for any broker’s or finder’s fee or similar compensation against NovaMed.
 
4.25.  HIPAA. Seller and Members represent and warrant that (a) all of the
Purchased Assets being sold and/or provided by Seller to NovaMed under this
Agreement, including without limitation, any computer hardware and/or software,
are in compliance with the Health Insurance Portability and Accountability Act
of 1996 (Public Law 104-91, 42 U.S.C. 1301 et. seq.) and regulations promulgated
thereunder (collectively, “HIPAA”), and applicable state laws having similar
subject matter to HIPAA (“State HIPAA”), and (b) Seller conducted its business
and activities, including, without limitation, its billing and collection
activities, its medical records management activities, and its general practice
management activities, in a manner that complied with HIPAA and State HIPAA.
 
4.26.  Rates and Reimbursement Policies. Seller does not have any rate appeal
currently pending before any Governmental Authority or any administrator of any
third-party payor program.
 
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4.27.  Physicians. None of the physicians who utilize the Center other than
Dr. Kyle (collectively, the “Physicians”) have threatened to discontinue or to
terminate his or her relationship with the Seller and the provision of services
at the Facility. To the knowledge of Seller or any Member, none of the
Physicians have expressed plans to retire from the practice of medicine in the
next five (5) years nor to be involved in the development or operations of
another ambulatory surgery center. During the three (3) years preceding the
Closing Date, each of the Physicians:
 
(a)    Has been duly licensed and registered, and is in good standing by his or
her state to engage in the practice of medicine, and said license and
registration have not been suspended, revoked or restricted in any manner; and
 
(b)    Has had valid professional liability insurance in place in the amounts
set forth on Schedule 4.27(b) and has not indicated any intent to terminate or
reduce his or her professional liability coverage.
 
4.28.    Certain Representations With Respect to the Facility.
 
(a)    The Facility is qualified for participation in the Medicare program.
Complete and accurate copies of the Facility’s existing letter of acceptance as
a Medicare provider has been furnished to NovaMed. Seller is presently in
compliance with all of the Medicare conditions of Participation and all
applicable terms and conditions required for the Facility to remain a qualified
Medicare provider.
 
(b)    The Facility is qualified for participation in the Medicaid program.
Complete and accurate copies of Seller’s existing Medicaid contracts have been
furnished to NovaMed. Seller is presently in compliance with all of the terms,
conditions and provisions of such contracts.
 
4.29.    No Designated Health Services. Seller does not provide any services
that constitute “designated health services” within the meaning of 42 U.S.C. d
1395nn.
 
4.30.    No Misrepresentation. None of the representations and warranties of
Seller and Members set forth in this Agreement, in any of the certificates,
schedules, lists, documents, exhibits, or other instruments delivered, or to be
delivered, to NovaMed as contemplated by any provision hereof (including the
Transaction Documents), contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements contained herein or
therein not misleading. To the knowledge of Seller or any Member, there are no
material facts which have not been disclosed to NovaMed which have a Material
Adverse Effect, or could reasonably be anticipated to have a Material Adverse
Effect, on the Business or Seller’s or Member’s ability to consummate the
transactions contemplated hereby.
 
ARTICLE V.
NOVAMED’S REPRESENTATIONS AND WARRANTIES
 
NovaMed hereby represents and warrants to Seller and the Members as of the
Closing Date as follows:
 
5.1.    Organization. NovaMed is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
 
5.2.    Authorization. NovaMed has full power, right and authority to enter into
and perform its obligations under this Agreement and each of the Transaction
Documents to which it is a party. The execution, delivery and performance by
NovaMed of this Agreement and each of the Transaction Documents to which it is a
party have been duly and properly authorized by all requisite corporate action
in accordance with applicable law and with NovaMed’s Certificate of
Incorporation. This Agreement and each of the Transaction Documents to which
NovaMed is a party have been duly executed and delivered by NovaMed and are the
valid and binding obligation of NovaMed and are enforceable against NovaMed in
accordance with their respective terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the rights of creditors generally and the availability of
equitable remedies.
 
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5.3.    Transaction Not a Breach. The execution, delivery and performance of
this Agreement and the Transaction Documents by NovaMed will not violate and
conflict with, or result in the breach of any of the terms, conditions, or
provisions of NovaMed’s Certificate of Incorporation or of any contract,
agreement, mortgage, or other instrument or obligation of any nature to which
NovaMed is a party or by which NovaMed is bound. 
 
5.4.    Acquisition of Transferred LLC Interests. NovaMed is acquiring the
Transferred LLC Interests for its own account and not with a view to the
distribution or resale thereof. NovaMed has no intention of selling the
Transferred LLC Interests in a public distribution in violation of federal
securities laws or any applicable state securities laws. 
 
5.5.    Broker. All negotiations relating to this Agreement and the Transaction
Documents, and the transactions contemplated hereby and thereby, have been
carried on without the intervention of any Person acting on behalf of NovaMed in
such a manner as to give rise to any valid claim for any broker’s or finder’s
fee or similar compensation against Seller.
 
5.6.    Approvals. Except as set forth on Schedule 5.6, no consent, approval,
order or authorization of, or registration, declaration notice or filing with,
any Governmental Authority or other Person is required to be made or obtained by
NovaMed in connection with the authorization, execution, delivery and
performance of this Agreement or any other Transaction Document, or the
consummation of the transactions contemplated hereby and thereby.
 
5.7.    No Misrepresentation. None of the representations and warranties of
NovaMed set forth in this Agreement or in any of the certificates, schedules,
lists, documents, exhibits, or other instruments delivered, or to be delivered,
to Seller as contemplated by any provision hereof (including the Transaction
Documents), contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained herein or therein not
misleading. 
 
ARTICLE VI.
ADDITIONAL AGREEMENTS
 
6.1.    Release of Liens and Lien Searches. Seller shall procure all applicable
releases of liens with respect to those Liens set forth on Schedule 4.2, prior
to or contemporaneously with the New LLC Asset Transfer or the Closing. Seller
shall provide NovaMed with all information and other assistance required for the
parties to file all applicable UCC termination statements (in form and manner
required by NovaMed or its lenders). Following the filing of all such UCC
termination statements, there shall be no remaining financing statements,
judgments, taxes or other Liens outstanding against Seller or any of its assets
as of the Closing Date.
 
6.2.    Employees; Labor Relations.
 
(a)    Continuing Employees. New LLC shall offer to employ the employees of
Seller listed on Schedule 6.2(a) (the “Continuing Employees”) as of the Closing
Date, on the terms and conditions established by New LLC in its sole discretion.
Such offer of employment by New LLC shall not be deemed to create a continuing
right to employment for any Continuing Employees. Seller shall be solely
responsible for all liabilities relating, directly or indirectly, to any of
Seller’s employees who do not accept New LLC’s offer of employment. Seller shall
be solely responsible for any employment-related claims filed by any employees
of Seller which relate to facts and circumstances existing on and prior to the
Closing Date, or arise from or relate to completion of the transactions
contemplated by this Agreement or the Transaction Documents, regardless of when
filed.
 
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(b)    COBRA Notice. Seller agrees that it shall be responsible for all
liabilities arising under COBRA with respect to any event occurring prior to and
on the Closing Date.
 
(c)    Noncompetition Agreements. Seller hereby waives any noncompetition
provision that may apply to the Continuing Employees with respect to New LLC’s
hiring of the Continuing Employees.
 
(d)    Employee Benefit Plans. Seller acknowledges that it will be solely
responsible for administering and/or terminating its Employee Benefit Plans
following the Closing.
 
6.3.    Post-Closing Remittances; New LLC’s Appointment as Attorney-In-Fact. If,
after the Closing Date, Seller shall receive any remittance from any account
debtors with respect to the Accounts Receivable, Seller shall endorse such
remittance to the order of the New LLC and forward it to the New LLC promptly
following receipt thereof. Seller hereby irrevocably constitutes and appoints
New LLC and any officer or agent of New LLC as Seller’s true and lawful
attorney-in-fact, with full power and authority, in the place and stead of
Seller for the limited purposes of receiving, collecting, indorsing, negotiating
and cashing any and all cash, checks, drafts, payments, accounts receivable and
other instruments (collectively the “Items”) which are payable to Seller and
which represent Items related to the Business or which represent payment on
Accounts Receivable related to the Business, and which in accordance with the
terms of this Agreement, have been sold, conveyed, assigned or transferred to
New LLC or are otherwise for the account of New LLC hereby. Seller further
agrees to execute all documents and take such other action as New LLC may
reasonably request to confirm the power granted to New LLC by this Section 6.3.
Notwithstanding the foregoing, in no event shall New LLC receive, collect,
indorse, negotiate or cash such Items pursuant to the above authority if to do
so would be to violate the laws, regulations or other written guidance of any
state or federal health program. In such event, New LLC and Seller agree to take
such actions as necessary to convey such payments to New LLC consistent with
applicable laws and regulations.
 
6.4.    Further Assurances. The parties hereto shall execute such further
documents, and perform such further acts, as may be reasonably necessary to
transfer and convey the Assets to the New LLC, and the Transferred LLC Interests
to NovaMed, all on the terms contained herein, and to otherwise comply with the
terms of this Agreement and consummate the transactions contemplated herein.
 
6.5.    Professional Liability Tail Coverage. To the extent Seller’s
professional liability insurance policy for the Facility is on a claims-made
basis (rather than an occurrence basis), Seller shall obtain an extended
reporting (“tail”) professional liability insurance policy covering acts and
omissions occurring at the Facility prior to the Closing Date, in an amount
equal to the professional liability insurance carried immediately prior to the
Closing Date, or such other amount, and for such period of time, as determined
by mutual agreement of NovaMed and Seller. Upon NovaMed’s request, Seller shall
provide New LLC with proof of such tail professional liability coverage. The
cost and expense of such tail coverage shall be borne solely by Seller.
 
6.6.    Credentialing. As of the Closing Date, the Members and other physicians
credentialed by the Facility immediately prior to the Closing Date shall receive
provisional privileges to perform surgical procedures at the Facility that will
be operated by the New LLC from and after the Closing Date. As a condition to
receiving these provisional privileges, each of the Members hereby agree, and
shall cause all of such other credentialed physicians to agree, that following
the Closing Date he or she will comply with all of the New LLC’s credentialing
requests (including, without limitation, providing New LLC with any reasonably
requested information and completing any applicable credentialing forms) so that
the New LLC may complete its credentialing review process for each physician by
the expiration date of the provisional privileges.
 
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6.7.    Asset Transfers. To the extent of any Member Assets, the Seller will
cause the party owning the applicable Member Assets to contribute such Member
Assets to Seller for contribution to the New LLC, free and clear of all Liens,
prior to the Closing Date.
 
6.8.    Real Estate Matters.
 
(a)    On behalf of New LLC, NovaMed shall obtain a commitment (“Commitment”)
issued by a title insurance company (the “Title Company”) for the issuance of
ALTA Owner’s Policy of Title Insurance (Form 1970) for the 25th Street Real
Property (a “Title Policy”), in an amount of the approximate fair market value
of the 25th Street Real Property. The Commitment shall show fee simple title to
the parcel vested in the Seller, subject only to current real estate taxes not
yet due or payable as of the Closing Date and the Permitted Exceptions. The
Title Policy to be issued by the Title Company shall have all standard and
general exceptions deleted to the fullest extent permitted by applicable law and
regulations, including but not limited to the standard survey exception and any
exception relating to rights of parties in possession, and shall at NovaMed’s
option, contain such endorsements as may be reasonably requested by NovaMed. At
Closing, Seller and the Members, as applicable, shall deliver or cause to be
delivered such affidavits or other instruments as the Title Company may
reasonably require to delete the standard and general exceptions and to provide
the endorsements required hereunder. Notwithstanding anything to the contrary
contained in this Agreement, the premium for the Title Policy at the Closing,
including the premium for deletion of the standard survey exception, and for any
other endorsements reasonably requested by NovaMed herein shall be paid by
Seller. Seller shall pay or otherwise be responsible for any costs, expenses,
deposits or security required to insure over an Unpermitted Encumbrance (as
defined herein) or Survey Defect (as defined herein).
 
(b)    On behalf of New LLC, NovaMed shall obtain an as-built survey for the
25th Street Real Property (“Survey”) prepared by a registered land surveyor or
engineer, licensed in the state of Tennessee, dated on or after the date of this
Agreement, certified to New LLC, the Title Company, and such other entities as
NovaMed may designate in writing, and in accordance with the Minimum Standard
Detail Requirements for ALTA/ACSM Land Title Surveys, jointly established and
adopted by ALTA, ACSM and NSPS in 1999, and including all Table A items, and
pursuant to the Accuracy Standards (as adopted by ALTA, NSPS and ACSM and in
effect on the date of certification) such that the survey measurements are made
in accordance with the Minimum Angle, Distance and Closure Requirements for
Survey Measurements Which Control Land Boundaries for ALTA/ACSM Land Title
Surveys, sufficient to cause the Title Company to delete the standard printed
survey exception to the extent permitted. Seller shall pay the entire cost of
obtaining the Survey.
 
(c)    If (i) the Commitment discloses a title exception other than a Permitted
Encumbrance (an “Unpermitted Encumbrance”) or (ii) the Survey discloses any
encroachment, overlap, boundary dispute, gap or any other matter which renders
title to the 25th Street Real Property uninsurable or reflects that any utility
service to the improvements or access thereto does not lie wholly within the
25th Street Real Property, or within an unencumbered easement for the benefit of
the 25th Street Real Property, or reflects any other matter adversely affecting
the present use or value of the 25th Street Real Property (any of the foregoing,
a “Survey Defect”), then NovaMed shall give written notice to the Seller
specifying NovaMed's objections (the "Title Objections") to one or more of the
Unpermitted Encumbrances or Survey Defects, together with a copy of the
Commitment and Survey, within ten (10) business days after NovaMed’s receipt of
the Commitment (including legible copies of all exceptions listed on Schedules B
and C of the Commitment) and Survey. Seller and the Members, at their sole cost
and expense and using commercially reasonable efforts, shall either (x) cause
all Unpermitted Encumbrances to be removed from the Commitment and/or all Survey
Defects to be eliminated from the Survey prior to the Closing, or (y) if Seller
and the Members reasonably determine that they are unable to cure any
Unpermitted Encumbrance or Survey Defect (1) due to impracticality, or (2)
because it is not commercially reasonable to do so, Seller and the Members shall
promptly notify NovaMed in writing which Title Objections they cannot or will
not satisfy, in which event NovaMed shall have the option of (A) waiving the
unsatisfied Title Objections, in which event the unsatisfied Title Objections
will become Permitted Exceptions, or (B) terminating this Agreement as provided
in Article X.
 
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(d)    As of the Closing Date Seller shall have delivered to NovaMed the
following materials that are in the Seller’s and/or Members possession: (i)
complete and legible copies of all Material Contracts relating to or affecting
the 25th Street Real Property as set forth on Schedule 4.9 and (ii) complete
copies of all existing title insurance policies, title reports or commitments,
surveys, appraisals, mechanical and structural reports, engineering plans,
architectural drawings, and soil studies and similar reports, if any, with
respect to the 25th Street Real Property. Seller shall reimburse NovaMed for the
cost of its environmental report conducted by a consultant retained by NovaMed.
Seller shall also be responsible for all transfer taxes associated with the
transfer of the 25th Street Real Property to New LLC.
 
ARTICLE VII.
CLOSING
 
7.1.    Time and Place. The closing of the transactions that are the subject of
this Agreement shall be consummated at a closing (the “Closing”) simultaneous
with the execution and delivery of this Agreement and the other Transaction
Documents by the applicable parties, which execution and delivery shall be via
facsimile effective as of the Closing Date, with original documents to be
exchanged by nationally recognized overnight courier for delivery on the next
business day after the Closing Date.
 
7.2.    Conditions Precedent. As a condition precedent to the consummation of
the transactions contemplated herein: (a) Seller shall have consummated the New
LLC Asset Transfer in accordance with the terms and conditions of Article I
hereof; and (b) the New LLC shall have received all necessary state licensure
and Medicare approvals to commence the New LLC’s ownership and operation of the
Business or, if such approvals are pending as of the Closing Date, the New LLC
shall have received certificates or other assurance from the applicable
Governmental Authorities satisfactory to NovaMed that such approvals shall be
given upon receipt of evidence of the Closing of the Transaction (with the
understanding that upon commencement of operations, there may be billing delays
associated with procuring third party payor provider numbers).
 
7.3.    Deliveries of Seller and Members. At the Closing, Seller and Members
will execute and deliver or cause to be executed and delivered to NovaMed: 
 
(a)    a Contribution Agreement to evidence the New LLC Asset Transfer and to
effectively vest the New LLC with full, complete and marketable right, title and
interest in and to the Assets, in substantially the form attached hereto as
Exhibit 7.3(a) (the “Contribution Agreement”);
 
(b)    the Limited Liability Company Agreement of the New LLC, in the form
attached hereto as Exhibit 7.3(b) (the “Operating Agreement”);
 
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(c)    a certificate of the Secretary of Seller as to (i) copies of resolutions
of its Manager(s) and Members authorizing the execution, delivery and
performance of this Agreement and the Transaction Documents; (ii) a Certificate
of Good Standing issued by the Secretary of State of Tennessee; (iii) its
Operating Agreement; (iv) incumbency and specimen signatures with respect to its
officers executing this Agreement and any Transaction Documents; and (v) its
Articles of Organization certified by the Secretary of State of Tennessee.
 
(d)    any required third party consents, filings, and certificates from Seller
or any third party (including, any Governmental Authority) relating to the
transfer of the Assets, including without limitation, all consents from the
State of Tennessee regarding the transfer of all Permits and licenses relating
to the ownership and operation of the Facility, and copies of all written
consents obtained in connection with the transfer of the Material Contracts;
 
(e)    clearance certificates or similar documents required by any state taxing
authority in order to relieve NovaMed of any obligation to withhold any portion
of the Purchase Price;
 
(f)    the Assignment of LLC Interests, substantially in the form attached as
Exhibit 7.3(f) (the “Assignment of LLC Interests”), duly executed by Seller;
 
(g)    a Limited Warranty Deed, in a form provided by NovaMed and reasonably
satisfactory to the Seller and the Members, conveying the 25th Street Real
Property to the New LLC, subject only to general real estates taxes not yet due
or payable and those title exceptions agreed to by NovaMed in writing
(collectively, the "Permitted Exceptions")
 
(h)    the Title Policy (or a mark-up of the commitment reflecting the Title
Policy to be issued pursuant to the Commitment) as provided in Section 6.7;
 
(i)    all applicable documentation releasing Liens covering, concerning or
relating to the Assets, in form and substance reasonably acceptable to NovaMed;
 
(j)    Redemption Agreement pursuant to which Seller redeems Physician Members’
ownership interests in Seller in exchange for Seller’s membership interests in
the New LLC, effective immediately following the Closing Date; and
 
(k)    such other documents and instruments as NovaMed or its counsel reasonably
shall deem necessary to consummate the transactions contemplated hereby.
 
All documents delivered to NovaMed shall be in form and substance reasonably
satisfactory to counsel for NovaMed.
 
7.4.    Deliveries of NovaMed. At the Closing, NovaMed will deliver or will
cause the New LLC to deliver to Seller simultaneously with the delivery of the
items referred to in Section 7.3 above:
 
(a)    the payment of the Purchase Price;
 
(b)    the Operating Agreement;
 
(c)    certificate of the Secretary of NovaMed as to (i) copies of resolutions
of its board of directors authorizing the execution, delivery and performance of
this Agreement and the Transaction Documents; and (ii) incumbency and specimen
signatures with respect to its officers executing this Agreement and any
Transaction Documents; 
 
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(d)    a duly executed Management Agreement (the “Management Agreement”) between
NovaMed Management Services, LLC and the New LLC, substantially in the form of
attached Exhibit 7.4(d);
 
(e)    the Assignment of LLC Interests, duly executed by NovaMed; and
 
(f)    such other documents and instruments as Seller or its counsel reasonably
shall deem necessary to consummate the transactions contemplated hereby.
 
All documents delivered to Seller shall be in form and substance reasonably
satisfactory to the counsel for Seller.
 
7.5.    Change of Ownership Process. To the extent from and after the Closing
there are any actions necessary to confirm or effect all reasonably necessary
licensure and regulatory approvals required in connection with New LLC’s
ownership and operation of the Business (the receipt of which is a condition
precedent to the Closing), Seller, Members and their respective agents and
representatives agree to cooperate with NovaMed and New LLC in connection these
filings and applications, and will use commercially reasonable efforts to
respond in a timely manner to any information or signature requests reasonably
required in connection with these applications and notices.
 
ARTICLE VIII.
INTENTIONALLY OMITTED
 
ARTICLE IX.
INTENTIONALLY OMITTED
 
ARTICLE X.
INTENTIONALLY OMITTED
 
ARTICLE XI.
COVENANT NOT TO COMPETE
 
11.1.    Acknowledgment. Each of Seller and Members acknowledges and agrees that
in order to assure that the Business will retain its value as a “going concern,”
it is necessary that Seller and Members undertake not to utilize their present
special knowledge of the Business to compete with NovaMed and the Business
during the Restricted Period after the acquisition of Transferred LLC Interests;
provided that NovaMed acknowledges that the Physician Members (excluding Dr.
Kyle) will continue to have an interest in the Business through their ownership
of a minority interest in the New LLC. Each of Seller and Members further
acknowledges that (a) NovaMed has been and/or will be engaged in the Business;
(b) each of Seller and Members possesses extensive knowledge and a unique
understanding of the Business, as well as (subsequent to the transactions
contemplated by this Agreement) the proprietary and confidential information
concerning the Business; (c) the agreements and covenants contained in this
Section 11.1 are essential to protect NovaMed and the value of the Business and
are a condition precedent to NovaMed’s willingness to pay for the Transferred
LLC Interests; (d) NovaMed would be irreparably damaged if Seller and/or any
Member were to violate the terms and conditions of this Article XI; and (e) the
geographic, temporal and business scope of the restrictive covenants in this
Article XI are reasonable. 
 
11.2.    Non-Compete. Each of Seller and Members hereby agrees that for the
five-year period beginning on the Closing Date (the “Restricted Period”;
provided, that in the event that any such party is determined to have violated
the covenants set forth in this Article XI, the Restricted Period shall be
extended day for day for the time period that such party is in violation of any
such covenant), he, she or it shall not, directly or indirectly, act as a
director, officer, member or partner of, or own any equity or other financial
interest in, any Person that owns and/or operates an ambulatory surgery center,
licensed surgical facility or any other outpatient surgical facility that is
located within a thirty (30) mile radius of the current location of the
Business. Notwithstanding the foregoing, and without limiting the terms of the
Operating Agreement, Seller and/or any Member may (a) be a director on the Board
of Trustees of a hospital, (b) serve on the medical staff of any hospital, (c)
own an interest in the New LLC in accordance with the terms of the Operating
Agreement; and (d) practice medicine in his or her own office or the office of
the professional entity in which he or she is an employee or owner. In addition,
notwithstanding the restrictions set forth in this Section 11.2, the Members
listed on Schedule 11.2 may continue to own their equity interests in the
facilities set forth across from their names on Schedule 11.2, provided at no
time during the Restricted Period shall any such Member other than ASCOA
increase his ownership interests in such listed facilities (except in the event
such increase in ownership interest is the result of no action or further
investment by such Member (e.g. another investor is redeemed by the entity));
ASCOA shall be free to increase its ownership interests in such listed facility.
 
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11.3.    Property of the Business. All memoranda, notes, lists, records and
other documentation or papers (and all copies thereof), including such items
stored in computer memories, or microfiche or by any other means, which will
become the New LLC’s property (after the consummation of transactions
contemplated by this Agreement), are and shall be the New LLC’s property and
shall be delivered to the New LLC promptly on the request of NovaMed.
 
11.4.    Blue-Pencil. If any court of competent jurisdiction shall at any time
deem the term of this Agreement or any particular restrictive covenant contained
in this Article XI too lengthy or the territory too extensive, the other
provisions of this Article XI shall nevertheless stand, the Restricted Period
herein shall be deemed to be the longest period permissible by law under the
circumstances and the territory described in Section 11.2 shall be deemed to
comprise the largest territory permissible by law under the circumstances. The
court in each case shall reduce the Restricted Period and/or territory described
in Section 11.2 to permissible duration or size.
 
11.5.    Remedies.
 
(a)    Each of Seller and Members acknowledges and agrees that the covenants set
forth in this Article XI are reasonable and necessary for the protection of
NovaMed and the New LLC’s business interests, that irreparable injury will
result if Seller or any Member breaches any of the terms of said restrictive
covenants, and that in the event of actual or threatened breach of any such
restrictive covenants, NovaMed will have no adequate remedy at law. Each of
Seller and Members accordingly agrees that in the event of any actual or
threatened breach by any of them of any of the covenants set forth in this
Article XI, NovaMed 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 NovaMed 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. The parties also agree
that the existence of any claim or cause of action by Seller or any Member
against NovaMed or any Affiliate, whether predicated upon this Agreement or
otherwise, shall not constitute a defense to the enforcement of the restrictive
covenants set forth herein, but shall be litigated separately.
 
(b)    To the extent Seller or a particular Member breaches a covenant set forth
in this Article XI, then such breach shall only create liability for such
breaching Party and shall not create liability or responsibility for any other
non-breaching Party.
 
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11.6    Assignment. Seller and Members agree that the rights granted in this
Article XI to NovaMed may be assigned by NovaMed at its sole and absolute
discretion in connection with any transaction involving a sale of assets by
NovaMed (or any other transaction substantially similar in effect). All of the
provisions of this Article XI shall inure to any successors of NovaMed, all of
which are specifically third party beneficiaries of this Article XI with full
rights hereunder. In addition, the parties hereto agree that an assignee of the
rights hereunder is an intended, direct third party beneficiary of Article XI
and may enforce such rights in its own name in addition to or in lieu of
NovaMed.
 
11.7    Patient Freedom. The parties hereto agree that the benefits afforded
either party hereunder are not payment for, and are not in any way contingent
upon the referral, admission or any other arrangement for, the provision of any
item or service offered by any party hereto. Nothing in this Agreement shall be
construed to limit the freedom of any patient of Seller or any Member to choose
the facility or physician from whom any patient shall receive health care
services or limit or interfere with Seller or any Member’s ability to exercise
professional judgment in treating patients or their ability to provide medical
services to patients.
 
ARTICLE XII.
POST-CLOSING COVENANTS
 
12.1.    Indemnification by Seller and Members. From and after the Closing, each
Member (on a Pro Rata Basis (as defined in Section 13.1)) agrees to severally
(but not jointly as more specifically described in Section 12.6 below) indemnify
NovaMed and its respective Affiliates (including, without limitation, the New
LLC) and each of their respective officers, directors, managers, employees,
agents and fiduciaries (each, a “NovaMed Indemnified Party”), from and against,
and to pay to a NovaMed Indemnified Party or reimburse a NovaMed Indemnified
Party for any and all liabilities (whether contingent, fixed or unfixed,
liquidated or unliquidated, or otherwise), obligations, deficiencies, demands,
claims, suits, actions, or causes of action, assessments, losses, costs,
expenses, interest, fines, penalties, damages or costs or expenses of any and
all investigations, proceedings, judgments, environmental analyses,
remediations, settlements and compromises (including reasonable fees and
expenses of attorneys, accountants and other experts) but excluding
Consequential Damages (as defined in Section 13.1) (individually and
collectively, the “Losses”) actually sustained or incurred by any NovaMed
Indemnified Party relating to, resulting from, arising out of or otherwise by
virtue of any of the following:
 
(a)    any misrepresentation or breach of a representation or warranty contained
in this Agreement by Seller or any Member, or non-compliance with or breach by
Seller or any Member of any of the covenants or agreements contained in this
Agreement to be performed by Seller or Members;
 
(b)    the operation of the Business, including the use of the Assets and the
Excluded Assets, on or prior to the Closing Date, provided, however, that to the
extent that any matter related to the operation of the Business, including the
use of the Assets, on prior to the Closing Date, is addressed in the
representations and warranties contained in Article IV and is covered by Section
12.1(a) hereof, such matters shall be excluded from this Section 12.1(b) (other
than with respect to Third Party Claims);
 
(c)    any Tax liability of Seller or any Member whatsoever, including without
limitation any Tax liability with respect to or arising from the transactions
contemplated hereby or the structuring of the transactions contemplated hereby
or any Tax liability under the Tennessee bulk sales laws;
 
(d)    any violations of or obligations under Environmental and Safety
Requirements relating to acts, omissions, circumstances or conditions to the
extent existing or arising on or prior to the Closing Date, whether or not such
acts, omissions, circumstances or conditions constituted a violation of
Environmental and Safety Requirements as then in effect;
 
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(e)    to the extent not covered by insurance, any liabilities relating to or
arising from the provision of (or failure to provide) professional medical
services, including any liabilities relating to the failure, prior to the
Closing Date, to adhere to or comply with any Medicare and Medicaid requirements
or Fraud and Abuse Laws;
 
(f)    any action, demand, proceeding, investigation or claim (whenever made) by
any third party (including Governmental Authorities) against or affecting
NovaMed or its Affiliates which, if successful, would give rise to or evidence
the existence of or relate to a misrepresentation or breach of any of the
representations or warranties contained this Agreement or the non-compliance
with or breach of any of the covenants contained in this Agreement by Seller or
any Member;
 
(g)    the Excluded Assets or Excluded Liabilities; or
 
(h)    any claim for payment of fees and/or expenses as a broker or finder in
connection with the origin, negotiation, execution or consummation of this
Agreement based upon any alleged agreement between the claimant and Seller or
any Member.
 
12.2.    Indemnification by NovaMed. From and after the Closing, NovaMed agrees
to indemnify, Seller, Members and their respective Affiliates, and their
respective officers, directors, managers, members, shareholders, employees,
trustees, agents, representatives, heirs and executors other than the New LLC
(each, a “Seller Indemnified Party”) from and against, and to pay to a Seller
Indemnified Party or reimburse a Seller Indemnified Party for any and all Losses
actually sustained or incurred by any Seller Indemnified Party relating to,
resulting from, arising out of or otherwise by virtue of any of the following:
 
(a)    any misrepresentation or breach of a representation or warranty contained
in this Agreement by NovaMed, or non-compliance with or breach by NovaMed of any
of the covenants or agreements contained in this Agreement to be performed by
NovaMed;
 
(b)    any action, demand, proceeding, investigation or claim (whenever made) by
any third party (including Governmental Authorities) against or affecting
Seller, Members or their respective Affiliates which, if successful, would give
rise to or evidence the existence of or relate to a misrepresentation or breach
of any of the representations or warranties contained in this Agreement or the
non-compliance with or breach of any of the covenants contained in this
Agreement by NovaMed; or
 
(c)    any claim for payment of fees and/or expenses as a broker or finder in
connection with the origin, negotiation, execution or consummation of this
Agreement based upon any alleged agreement between the claimant and NovaMed.
 
12.3.    Indemnification Procedure.
 
(a)    Third Party Claims. In the event that subsequent to the Closing any
Person entitled to indemnification under this Agreement (an “Indemnified Party”)
asserts a claim for indemnification or receives notice of the assertion of any
claim or of the commencement of any action or proceeding by any entity that is
not a party to this Agreement or an Affiliate of a party to this Agreement
(including, but not limited to any domestic or foreign court or Governmental
Authority, federal, state or local) (a “Third Party Claim”) against such
Indemnified Party, against which a party to this Agreement is required to
provide indemnification under this Agreement (an “Indemnifying Party”), the
Indemnified Party shall give written notice together with a statement of any
available information regarding such claim to the Indemnifying Party within 60
days after learning of such claim (or within such shorter time as may be
necessary to give the Indemnifying Party a reasonable opportunity to respond to
such claim). The Indemnifying Party shall have the right, upon written notice to
the Indemnified Party (the “Defense Notice”) within 30 days after receipt from
the Indemnified Party of notice of such claim, which notice by the Indemnifying
Party shall specify the counsel it will appoint to defend such claim (“Defense
Counsel”), to conduct at its expense the defense against such claim in its own
name, or if necessary in the name of the Indemnified Party; provided, however,
that the Indemnified Party shall have the right to approve the Defense Counsel,
which approval shall not be unreasonably withheld, and in the event the
Indemnifying Party and the Indemnified Party cannot agree upon such counsel
within 10 days after the Defense Notice is provided, then the Indemnifying Party
shall propose an alternate Defense Counsel, which shall be subject again to the
Indemnified Party’s approval. If the parties still fail to agree on Defense
Counsel, then, at such time, they shall mutually agree in good faith on a
procedure to determine the Defense Counsel. The delivery of a Defense Notice
shall not constitute an admission with respect to the claim for indemnification.
 
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(i)    In the event that the Indemnifying Party shall fail to give the Defense
Notice, it shall be deemed to have elected not to conduct the defense of the
subject claim, and in such event the Indemnified Party shall have the right to
conduct such defense in good faith and to compromise and settle the claim
without the consent of the Indemnifying Party and the Indemnifying Party will be
liable for all costs, expenses, settlement amounts or other Losses paid or
incurred in connection therewith.
 
(ii)    In the event that the Indemnifying Party does deliver a Defense Notice
and thereby elects to conduct the defense of the subject claim, the Indemnified
Party will cooperate with and make available to the Indemnifying Party such
assistance and materials as it may reasonably request, all at the expense of the
Indemnifying Party, and the Indemnified Party shall have the right at its
expense to participate in the defense assisted by counsel of its own choosing,
provided that the Indemnified Party shall have the right to compromise and
settle the claim only with the prior written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld or delayed.
 
(iii)    Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party Claim
or cease to defend against such claim, if pursuant to or as a result of such
settlement or cessation, (i) injunctive or other equitable relief would be
imposed against the Indemnified Party, or (ii) such settlement or cessation
would lead to liability or create any financial or other obligation on the part
of the Indemnified Party for which the Indemnified Party is not entitled to
indemnification hereunder.
 
(iv)    The Indemnifying Party shall not be entitled to control, and the
Indemnified Party shall be entitled to have sole control over, the defense or
settlement of any claim to the extent that claim seeks an order, injunction or
other equitable relief against the Indemnified Party which, if successful, could
materially interfere with the business, operations, assets or condition
(financial or otherwise) of the Indemnified Party (and the cost of such defense
shall constitute an amount for which the Indemnified Party is entitled to
indemnification hereunder).
 
(v)    If a firm decision is made to settle a Third Party Claim, which offer the
Indemnifying Party is permitted to settle under this Section 12.3(a), and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party will give written notice to the Indemnified Party to that effect. If the
Indemnified Party fails to consent to such firm offer within 15 calendar days
after its receipt of such notice, the Indemnified Party may continue to contest
or defend such Third Party Claim and, in such event, the maximum liability of
the Indemnifying Party as to such Third Party Claim will not exceed the amount
of such settlement offer, plus costs and expenses paid or incurred by the
Indemnified Party through the end of such 15-day period.
 
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(vi)    Any judgment entered or settlement agreed upon in the manner provided
herein shall be binding upon the Indemnifying Party, and shall conclusively be
deemed to be an obligation with respect to which the Indemnified Party is
entitled to prompt indemnification hereunder.
 
(b)    Claims Not Third Party Claims. With respect to a claim for
indemnification under this Article XII that is not a Third Party Claim:
 
(i)    An Indemnification Notice shall, to the extent known and reasonably
practicable, specify in reasonable detail the Losses included in the amount so
stated, the date such item was paid or properly accrued, the basis for any
anticipated liability and the specific representation, warranty or covenant to
which each such item is related and the computation of the amount to which such
Indemnified Party claims to be entitled hereunder (an “Indemnification Notice”)
and be delivered to the Indemnifying Party.
 
(ii)    In the event that the Indemnifying Party shall in good faith object to
the indemnification of an Indemnified Party in respect of any claim or claims
specified in any Indemnification Notice, the Indemnifying Party shall, within 30
days after delivery to the Indemnifying Party of such Indemnification Notice,
deliver to the Indemnified Party written notice to such effect and the
Indemnifying Party and the Indemnified Party shall, within the 30 day period
beginning on the date of delivery to the Indemnified Party of such objection,
attempt in good faith to agree upon the rights of the respective parties with
respect to each of such claims to which the Indemnifying Party shall have so
objected. If the Indemnifying Party, within 30 days after delivery of such
Indemnification Notice, has not delivered written notice to the Indemnified
Party announcing its objections to the claims asserted therein by the
Indemnified Party, then such claims and the Indemnified Party's liability
therefor shall be deemed accepted by the Indemnifying Party. If the Indemnified
Party and the Indemnifying Party shall succeed in reaching agreement on their
respective rights with respect to any of such claims, the Indemnified Party and
the Indemnifying Party shall promptly prepare and sign a memorandum setting
forth such agreement. If any such dispute has not been so resolved by
negotiation under this Section 12.3(b)(ii) within such 30 day time period, then
the Indemnified Party and the Indemnifying Party shall seek to resolve such
dispute in accordance with Section 13.12 hereof.
 
(iii)    Claims for Losses (A) specified in any Indemnification Notice to which
an Indemnifying Party shall not object in writing within 30 days of delivery of
such Indemnification Notice, (B) which are agreed to in a memorandum of
agreement of the nature described in Section 12.3(b)(ii), (C) the validity and
amount of which shall have been established by the dispute resolution process
set forth in Section 13.12 hereof or which have been settled with the consent of
the Indemnifying Party, are hereinafter referred to, collectively, as "Resolved
Claims". Within ten days of the determination of the amount of any Resolved
Claims, the Indemnifying Party shall pay to the Indemnified Party an amount
equal to the Resolved Claim by wire transfer in immediately available funds to
the account designated by the Indemnified Party in a notice to the Indemnifying
Party not less than two business days prior to such payment.
 
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12.4.    Failure to Give Timely Notice. A failure by an Indemnified Party to
give timely, complete or accurate notice as provided in Section 12.3 will not
affect the rights or obligations of any party hereunder except and only to the
extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise directly and materially damaged as a result
of such failure to give timely notice.
 
12.5.    Survival. Notwithstanding anything contained to the contrary in this
Agreement, all representations and warranties of the parties hereto contained in
or arising out of the Transaction Documents, or in any schedule or certificate
given in connection herewith and therewith, shall survive the Closing and shall
continue in effect until the 18-month anniversary of the Closing Date; provided,
however, that the representations and warranties set forth in Sections 4.2(a),
4.4, 4.6, 4.8, 4.12(b), 4.15 and 4.19 shall survive until (i) with respect to
Sections 4.6 and 4.12(b), the five-year anniversary of the Closing Date and (ii)
with respect to each of the other foregoing Sections, the expiration of the
statutes of limitation applicable to the specific representation or warranty
with respect to which a claim is made. Unless a specified period is set forth in
this Agreement (in which event such specified period will control), all
covenants and indemnities contained in this Agreement will survive the Closing
and remain in effect indefinitely.
 
12.6.    Limitation on Indemnification.
 
(a)    The aggregate amount of the Losses required to be paid by Seller and
Members pursuant to Section 12.1 hereof shall not exceed the amount of the
Purchase Price; provided, however, that no Member shall be liable, in the
aggregate, for such Losses pursuant to Section 12.1 that are in excess of such
Member’s Pro Rata Basis of the Purchase Price.
 
(b)    The NovaMed Indemnified Parties shall be entitled to indemnification
under Section 12.1(a) and Section 12.1(f) only if the aggregate amount of all
Losses thereunder (on a cumulative basis) exceeds $150,000 (the “Basket
Amount”), in which case the Seller and Members shall be obligated to indemnify
the NovaMed Indemnified Parties only for the excess of the aggregate amount of
all such Losses over the Basket Amount.
 
(c)    Seller Indemnified Parties shall be entitled to indemnification under
Section 12.2(a) and Section 12.2(b) only if the aggregate amount of all Losses
thereunder (on a cumulative basis) exceeds the Basket Amount, in which case
Buyer shall be obligated to indemnify the Seller Indemnified Parties only for
the excess of the aggregate amount of all such Losses over the Basket Amount.
 
(d)    The rights set forth in this Article XII shall be each party’s sole and
exclusive remedy for any claim or dispute relating to any breach of a
representation, warranty or covenant by the other parties under this Agreement;
provided, however, that the limitations set forth in this Section 12.6 shall not
apply, and the aggrieved party shall have all remedies available at law and in
equity, in the case of (i) fraud or intentional misrepresentation by a party
hereto or (ii) any claim or dispute arising under or relating to Article XI
hereof.
 
(e)    Notwithstanding anything to the contrary herein, nothing in this Section
12.6 shall be deemed to limit or impair NovaMed’s rights under Article XI
hereof. In addition, for purposes of this Section 12.6, in no event shall Losses
be construed to include any remedies paid to NovaMed under Article XI.
 
12.7.    Right of Offset. If any of Seller and Members is the Indemnifying Party
and fail to make any payment as contemplated by this Article XII, or shall fail
to make any payment when due under the terms of any of the Transaction
Documents, then NovaMed may elect to offset such amount against any amount due
and owing by the New LLC to Seller or such Member pursuant to the terms of the
Operating Agreement (including, without limitation, any distributions payable to
Seller or such Member).
 
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ARTICLE XIII.
MISCELLANEOUS
 
13.1.    Definitions.  For purposes of this Agreement, the following terms have
the meaning set forth below:
 
“Affiliate” means an affiliate as defined in Rule 405 under the Securities Act
of 1933, as amended, and includes any past and present Affiliate of a Person;
provided that with respect to determining any Affiliate of NovaMed, such
Affiliates shall include, without limitation, NovaMed, Inc. and any of its
subsidiaries.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Consequential Damages” shall mean consequential, special, exemplary or punitive
damages, except to the extent that such damages relate to a Third Party Claim in
which case they shall not be deemed “Consequential Damages” and shall be
included in “Losses” for purposes of Article XII hereof.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
“Facility” means the Medicare-certified, state-licensed ambulatory surgery
center located at 137 25th Street NE, Cleveland, Tennessee 37311.
 
“Fraud and Abuse Laws” means all fraud and abuse laws promulgated under Section
1128(b) of the Social Security Act, 42 U.S.C. Section 1320a-7(b) and Section
1877 of the Social Security Act, 42 U.S.C. Section 1877, and all rules and
regulations promulgated thereunder; any other federal, state or local law
relating to the referral of patients to medical facilities owned by providers of
medical services; and all federal statutes (whether set forth in Title XVIII of
the Social Security Act or elsewhere) affecting the health insurance program for
the aged and disabled established by Title XVIII of the Social Security Act and
any statues succeeding thereto, together with all rules and regulations
promulgated thereunder.
 
“Hazardous Materials” means (a) hazardous materials, hazardous substances,
extremely hazardous substances or hazardous wastes, as those terms are defined
by the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. §9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
§6901 et seq., and any other Environmental and Safety Requirements; (b)
petroleum, including crude oil or any fraction thereof which is liquid at
standard conditions of temperature and pressure (60 degrees Fahrenheit and 14.7
pounds per square inch absolute); (c) any radioactive material, including any
source, special nuclear, or by-product material as defined in 42 U.S.C. §2011 et
seq.; (d) asbestos in any form or condition; and (e) any other material,
substance or waste to which liability or standards of conduct may be imposed
under any Environmental and Safety Requirements.
 
“Knowledge” or “knowledge” or “aware” and all permutations thereof shall mean
the knowledge of any of Luke Lambert, an officer of ASCOA, Connie Jones,
Seller’s administrator, and the members of the Members’ Committee, which any
such member shall be deemed to have “Knowledge” of a particular fact or other
matter if: (i) such individual is actually aware of such fact or matter; or (ii)
a prudent individual could be expected to discover or otherwise become aware of
such fact or other matter in the course of conducting a reasonably comprehensive
investigation concerning the existence of such fact or other matter. A person
(other than an individual) will be deemed to have “Knowledge” of a particular
fact or other matter if any individual who is serving, or who has at any time
served, as a director, or officer of such Person (or in any similar capacity)
has, or at any time had, Knowledge of such fact or other matters.
 
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“Liens” means any claims, liens, charges, restrictions, options, preemptive
rights, mortgages, hypothecations, assessments, pledges, encumbrances or
security interests of any kind or nature whatsoever provided, however, that
Liens shall neither mean nor include Permitted Liens.
 
“Material Adverse Effect” means, with respect to any Person, a material adverse
effect on the business, financial condition or results of operations of such
Person or any of its subsidiaries, taken as a whole.
 
“Medical Records” shall mean all medical records of patients treated at the
Facility, including, without limitation, any and all medical charts, files,
notes, transcripts, x-ray files, lab reports, other diagnostic information or
materials, insurance information, billing and payment statements or records of
any kind, explanations of benefits, and other information of or relating to any
patient treated at the Facility, of any kind and in any form whatsoever;
provided that Medical Records shall be limited to the records of the Facility
and will not include records of the provider of professional medical services.
 
“Members’ Committee” means a committee made up of Dr. Eddie N. Duncan, Dr. Nancy
M. Blank and Dr. Jack P. Byrd and each of their successors.
 
“Permitted Liens” means Liens for current Taxes not yet due and payable.
 
“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, undertaking, unincorporated association, corporation, entity,
organization or Governmental Authority.
 
“Pro Rata Basis” shall mean each Member’s percentage interest in Seller as set
forth on Exhibit 2.
 
“Review Date” means December 31, 2005.
 
“Tax” means any federal, state, local or foreign income, gross receipts,
franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer,
registration, value added, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, environmental, customs, duties, real
property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing; the foregoing shall include any
transferee or secondary liability for a Tax and any liability assumed by
agreement or arising as a result of being (or ceasing to be) a member of any
Affiliated Group, as defined in Section 1504 of the Code (or being included, or
required to be included, in any Tax Return relating thereto).
 
“Tax Returns” means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
Schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of any Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
 
“Transaction Documents” means this Agreement and all agreements and instruments
contemplated by and being delivered pursuant to or in connection with this
Agreement.
 
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13.2.    Notices, Consents, etc. Any notices, consents or other communication
required to be sent or given hereunder by any of the parties shall in every case
be in writing and shall be deemed properly served if (a) delivered personally,
(b) sent by registered or certified mail, in all such cases with first class
postage prepaid, return receipt requested, (c) delivered by a nationally
recognized overnight courier service, or (d) sent by facsimile transmission to
the parties at the addresses as set forth below or at such other addresses as
may be furnished in writing.
 
(i)    If to Seller and Members:

Members’ Committee
c/o NovaMed Surgery Center of Cleveland, LLC
137 25th Street NE
Cleveland, Tennessee 37311
Attention:  Dr. Eddie N. Duncan
Fax: 423-479-3060

with a copy to:

Miller & Martin PLLC
1000 Volunteer Building
832 Georgia Avenue
Chattanooga, Tennessee 37402
Attention: E. Mattias Jannerbo, Esq.
Fax: 423-785-8480

(ii)    If to ASCOA:
 
Cataract and Laser Center Partners
d/b/a Ambulatory Surgical Centers of America
124 Washington Street, Suite 4
Norwell, Massachusetts 02061
Attention: Luke Lambert
Fax: 509-272-5200

with a copy to:

McGuire Woods LLP
77 West Wacker Drive, Suite 4100
Chicago, Illinois 60601
Attention: Scott Becker
Fax: 212-920-6135
 
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(ii)    If to NovaMed:

NovaMed Acquisition Company, Inc.
980 North Michigan Avenue
Suite 1620
Chicago, Illinois 60611
Attention: Thomas S. Hall
John W. Lawrence, Jr.
Fax: (312) 664-4250

Date of service of such notice shall be (A) the date such notice is personally
delivered, (B) three days after the date of mailing if sent by certified or
registered mail, (C) one day after date of delivery to the overnight courier if
sent by overnight courier or (D) the next succeeding business day after
transmission by facsimile.
 
13.3.    Certain Taxes. Seller and Members will (on a several Pro Rata Basis)
pay all transfer taxes and other taxes and charges, if any (except for any sales
taxes and income tax of NovaMed and its Affiliates), which may become payable in
connection with the transactions contemplated by this Agreement.
 
13.4.    Remedies Not Exclusive. No remedy conferred by any of the specific
provisions of this Agreement or the Transaction Documents is intended to be
exclusive of any other remedy. Each such remedy shall be cumulative, and in
addition to every other such remedy or any other remedy existing at law or in
equity.
 
13.5.    Severability and Reformation. The unenforceability or invalidity of any
provision of this Agreement shall not affect the enforceability or validity of
any other provision. If any of the transactions contemplated herein or
provisions hereof violates any applicable law, then the parties hereto agree to
negotiate in good faith such changes to the structure and terms of the
transactions provided for in this Agreement or the Transaction Documents as may
be necessary to make these transactions, as restructured, lawful under
applicable laws and regulations, without materially disadvantaging either party.
The parties to this Agreement shall execute and deliver all documents or
instruments necessary to effect or evidence the provisions of this Section 13.5.
 
13.6.    Amendment and Waiver. This Agreement may be amended, or any provision
of this Agreement may be waived, provided that any such amendment or waiver will
be binding on a party hereto only if such amendment or waiver is set forth in a
writing executed by such party. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any other breach.
 
13.7.    Counterparts. This Agreement may be executed simultaneously via
facsimile or otherwise in two or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to the other.
 
13.8.    Expenses. Except as otherwise specifically provided herein, each of the
parties shall pay all costs and expenses incurred or to be incurred by it, him
or her, as the case may be, in negotiating and preparing this Agreement and in
closing and carrying out the transactions contemplated by this Agreement.
 
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13.9.    Construction. 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 Delaware, without giving effect to provisions thereof regarding
conflict of laws.
 
13.10.    Headings. The subject headings of Articles and Sections of this
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
 
13.11.    Assignment. This Agreement may not be assigned by Seller or any Member
without the prior written consent of NovaMed. Subject to Section 11.6 hereof,
NovaMed may assign this Agreement without the prior written consent of Seller or
any Member.
 
13.12.    Mediation and Arbitration. Except as expressly set forth herein, the
parties hereto agree that any and all controversies, disputes or claims arising
out of or in connection with this Agreement shall be solely and exclusively
resolved in accordance with this Section 13.12 and not in any court of law or
equity. The parties hereto shall first try in good faith to settle the dispute
by mediation under the Commercial Mediation Rules of the American Arbitration
Association (“AAA”) (such mediation session to be held in Atlanta, Georgia, and
to commence within thirty (30) days after the appointment of the mediator by the
AAA). If the controversy, claim or dispute cannot be settled by mediation, then
by arbitration administered by the AAA under its Commercial Arbitration Rules
(such arbitration to be held in Atlanta, Georgia before a single arbitrator
mutually agreed upon by Seller and NovaMed and to commence within thirty (30)
days after the appointment of the arbitrator by the AAA), and judgment on the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Notwithstanding the foregoing, nothing herein shall limit NovaMed’s
rights to seek and obtain injunctive relief, specific performance or other
equitable relief in any proceeding commenced in a federal or state court which
may be brought to enforce any provision in Article XI hereof.
 
13.13.    Entire Agreement. This Agreement, the Preamble and all the Schedules
attached to this Agreement (all of which shall be deemed incorporated in the
Agreement and made a part hereof) set forth the entire understanding of the
parties with respect to the subject matter hereof, and shall not be modified or
affected by any offer, proposal, statement or representation, oral or written,
made by or for any party in connection with the negotiation of the terms hereof,
and may be modified only by instruments signed by all of the parties hereto.
 
13.14.    Third Parties. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any Person, other than the parties
to this Agreement and their respective permitted successors and assigns, any
rights or remedies under or by reason of this Agreement.
 
13.15.    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.
 
13.16.    Public Announcement. Seller and Members acknowledge that NovaMed
intends to publicly announce the transactions contemplated herein, whether
through a press release, a filing with the Securities and Exchange Commission,
or some other form or medium selected by NovaMed.
 
13.17.    Members’ Representative.
 
(a)    Each of the Members hereby constitutes and appoints the Members’
Committee as the Members’ Representative and as agent and attorney-in-fact for
and on behalf of each Member, with full powers of substitution (and, if
substituted, the Members’ Representative will notify NovaMed in writing a
reasonable period of time in advance of such substitution), to give and receive
notices and communications, to agree to, negotiate, enter into settlements and
compromises of, and demand dispute resolution and comply with orders of
arbitrators, courts, tribunals or other Governmental Authority and awards of
arbitrator, courts, tribunals or other Governmental Authority with respect to
any claims or other matters that may arise under this Agreement or the
Transaction Documents, and to take all actions and execute all such documents
necessary or appropriate in the good faith discretion of the Members’
Representative for the accomplishment of the transactions contemplated by this
Agreement and the Transaction Documents, including, without limitation, the
power:
 
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(i)    to receive and hold the proceeds payable pursuant to this Agreement and
to distribute the same to the Members;
 
(ii)    to execute and deliver the Transaction Documents, a closing statement
and all other agreements, documents and other papers which the Members’
Representative deems necessary or appropriate in connection with this Agreement
and the Transaction Documents, or any of the transactions contemplated hereby or
thereby;
 
(iii)    to terminate, amend, waive or interpret any provision of this Agreement
or the Transaction Documents.
 
(iv)    to act for each Member with regard to the indemnification matters
referred to in this Agreement, including, without limitation, the power to
compromise or settle any claim on behalf of such Member; and
 
(v)    to do or refrain from doing any further act or deed on behalf of each
Member which the Members’ Representative deems necessary or appropriate in its
sole discretion relating to the subject matter of this Agreement as fully and
completely as such Member could if personally present.
 
(b)    No bond shall be required of the Members’ Representative, and the
Members’ Representative shall receive no compensation for its services.
 
(c)    Each Member hereby appoints the Members’ Representative such Member’s
agent for service of process for all purposes under this Agreement and the
Transaction Documents, and agrees that service of any process, summons, notice
or document pursuant to the Agreement to the Members’ Representative at its
address shall be effective service of process of any action, suit or proceeding
brought against such Member.
 
(d)    NovaMed may, for all purposes of this Agreement, assume and treat every
notice, payment or any other action directed to the Members’ Representative as
if such notice, payment or other action had been directed to each Member.
 
(e)    Neither the Members’ Representative nor any of its agents or employees
shall be liable to any Member of any error of judgment, or any action taken,
suffered or omitted to be taken, under this Agreement except in the case of its
gross negligence, willful misconduct or fraud. The Members’ Representative may
consult with legal counsel, independent public accountants or other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accounts or experts. NovaMed shall be entitled to reply on all statements,
representations, agreements and decisions of the Members’ Representative.
 
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(f)    By executing and delivering this Agreement, each Member hereby agrees to
indemnify and hold the Members’ Representative harmless from any and all
liability, loss, cost, damage or expense (including attorneys’ fees) reasonably
incurred or suffered as a result of the performance of its duties under this
Agreement, except such that arises from the gross negligence or willful
misconduct or fraud of the Members’ Representative.
 
(g)    A decision, act, consent or instruction of the Members’ Representative
shall constitute a decision of all Members and shall be final, binding and
conclusive upon each Members. NovaMed may rely upon any such decision, act,
consent or instruction of the Members’ Representative as being the decision,
act, consent or instruction of the Members. NovaMed is hereby relieved from any
liability to any Person for any acts done by it in accordance with such
decision, acts, consents or instruction of the Members’ Representative. The
Members hereby releases and discharges NovaMed from and against any liability
arising out of or in connection with the Members’ Representative actions or
inactions on behalf of the Members.
 
(h)    Notwithstanding the foregoing or anything else in this Agreement, the
Members’ Representative shall have no authority to defend a breach or alleged
breach by Member of Article XI of this Agreement, as to which such Member shall
have the sole authority to defend.
 
13.18.    Members’ Committee. Any action or inaction by the Members’ Committee
shall require the approval of a majority of the three members of the Members’
Committee. Any member of the Members’ Committee who resigns or is otherwise
unable to serve on the Members Committee shall be replaced by an individual
elected by a majority of the Members.
 
* * *

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
 
SELLER:
 
SURGERY CENTER OF CLEVELAND, L.L.C.
 
By:/s/ Eddie N. Duncan
Its: President
NOVAMED:
 
NOVAMED ACQUISITION COMPANY, INC.
 
By:  /s/ Thomas S. Hall
Thomas S. Hall, President

 
 
MEMBERS:
 
CATARACT AND LASER CENTER PARTNERS, L.L.C.,
d/b/a Ambulatory Surgical Centers of America
 
By:/s/ Luke M. Lambert
Its: CEO
 
 
 
/s/ Robert Beasley
Robert Beasley, M.D.
 
/s/ Nancy M. Blank
Nancy M. Blank, M.D.
 
/s/ Jack P. Byrd
Jack P. Byrd, M.D.
 
/s/ Marc Clark
Marc Clark, M.D.
 
/s/ Eddie N. Duncan
Eddie N. Duncan, M.D.
 
/s/ Bruce W. Faerber
Bruce W. Faerber, M.D.
 
/s/ Dennis C. Ford
Dennis Clifford Ford, M.D.
 
/s/ Daniel V. Johnson
Daniel V. Johnson, M.D.
 
/s/ C. A. Kyle
C. A. Kyle, M.D.
 
/s/ Kenneth H. McCarley
Kenneth H. McCarley, M.D.
 
/s/ Thomas W. McGuire
Thomas W. McGuire, M.D.
 
/s/ Michael T. Rumble
Michael T. Rumble, M.D.
 
/s/ Larry Shuster
Larry Shuster, M.D.
 
/s/ James P. Stone
James Patterson Stone, M.D.
 
/s/ Timothy A. Viser
Timothy A. Viser, M.D.

 

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MEMBERS’ COMMITTEE:
 
/s/ Eddie N. Duncan
Eddie N. Duncan, M.D.
 
 
/s/ Nancy M. Blank
Nancy M. Blank, M.D.
 
/s/ Jack P. Byrd
Jack P. Byrd, M.D.
 

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EXHIBITS*
 

Exhibit 1  — Members Exhibit 2  — Pro Rata Basis Exhibit 1.1-1  — Certificate of
Formation Exhibit 3.2  — Wire Transfer Instructions Exhibit 7.3(a)  —
Contribution Agreement Exhibit 7.3(b)  — Operating Agreement Exhibit 7.3(f)  —
Assignment of LLC Interests Exhibit 7.4(d)  — Management Agreement

   
SCHEDULES*
 

Schedule 1.2(b) — Personal Property Schedule 1.2(c) — Prepaid Business Expenses
Schedule 1.2(d) — Assumed Contracts Schedule 1.2(e) — Member Assets Schedule
1.3(f) — Excluded Assets/Personal Effects Schedule 1.4(a) — Accounts Payable
Schedule 1.4(b) — Accrued Liabilities Schedule 1.6 — Prorations Schedule 4.1 —
Notifications and Approvals Schedule 4.2 — Liens and Encumbered Assets Schedule
4.3 — Seller Approvals Schedule 4.5 — Financial Statements Schedule 4.6 —
Liabilities Schedule 4.9 — Material Contracts Schedule 4.11 — Litigation
Schedule 4.12(b) — Licenses and Permits Schedule 4.13 — No Breaches Schedule
4.14 — Conduct of Business Schedule 4.16 — Salaries Schedule 4.17 — Insurance
Schedule 4.19 — Employee Benefit Plans Schedule 4.20 — Personnel Agreements
Schedule 4.22 — Workers Compensation Schedule 4.23(a) — Accounts Receivable
Schedule 5.6 — NovaMed Approvals Schedule 6.2(a) — Continuing Employees Schedule
11.2 — Ownership in other Entities

   
* NovaMed, Inc. agrees to furnish supplementally a copy of any omitted schedule
or exhibit to the Securities and Exchange Commission upon request.
 

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EXHIBIT 1

 
Physician Members

Robert Beasley, M.D.
Nancy M. Blank, M.D.
Jack P. Byrd, M.D.
Marc Clark, M.D.
Eddie N. Duncan, M.D.
Bruce W. Faerber, M.D.
Dennis Clifford Ford, M.D.
Daniel V. Johnson, M.D.
C. A. Kyle, M.D.
Kenneth H. McCarley, M.D.
Thomas W. McGuire, M.D.
Michael T. Rumble, M.D.
Larry Shuster, M.D.
James Patterson Stone, M.D.
Timothy A. Viser, M.D.
 

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