**Exhibit 10.13**

 

*              Portionsof this exhibit have been omitted pursuant to a request for confidentialtreatment and have been filed separately with the Commission.

 

**MANAGEMENT RIGHTS PURCHASE AGREEMENT**

** **

THIS MANAGEMENT RIGHTSPURCHASE AGREEMENT (“Agreement”), dated as of July 27, 2005, is by andamong Parthenon Management Partners,LLC, a California limited liability company (the “Company”), Andrew A.Brooks, M.D. and Randhir S. Tuli, both residents of the State of California(each an “Owner” and, collectively, the “Owners”) (the Company and the Ownersbeing, collectively, the “Sellers”) and SymbionARC Management Services, Inc.,a Tennessee corporation (“Purchaser”). The Company, Owners and Purchaser are sometimes referred to hereinindividually as a “Party” and collectively as the “Parties.”  Symbion Ambulatory Resource Centres, Inc.,a Tennessee corporation (“SARC”), joins herein solely for the purposes ofmanifesting its agreement with Article VIII hereof.

 

**RECITALS:**

** **

WHEREAS, as of thedate hereof, the Owners collectively own 100% of the outstanding membershipinterests of the Company; and

 

WHEREAS, the Ownersare the holders of outstanding membership interests comprised of membershipunits of ownership (collectively, the “Ownership Interests”) in Specialty SurgicalCenters, LLC, a California limited liability company (the “Beverly Hills LLC”),Specialty Surgical Center of Encino, LLC, a California limited liabilitycompany (the “Encino LLC”), Specialty Surgical Center of Irvine, LLC, aCalifornia limited liability company (the “Irvine LLC”), Specialty SurgicalCenter of Arcadia, LLC, a California limited liability company (the “ArcadiaLLC”) and Specialty Surgical Center of Thousand Oaks, LLC, a California limitedliability company (the “Thousand Oaks LLC”) (each an “LLC” and collectively,the “LLCs”); and

 

WHEREAS, the Beverly Hills LLC leases space for, owns the assets of,and operates an outpatient surgery center located at 9575 Brighton Way, Suite 100,Beverly Hills, CA 90210 (the “Brighton Center”) and owns a 99% general partnerinterest in Specialty Surgical Center of Beverly Hills, L.P., a Californialimited partnership (the “Wilshire Partnership”), which leases space for, ownsthe assets of, and operates an outpatient surgery center located at 8670 WilshireBoulevard, Suite300, Beverly Hills, CA 90211 (the “Wilshire Center”);

 

WHEREAS, the Encino LLC owns a 99% general partner interest inSpecialty Surgical Center of Encino, L.P., a California limited partnership(the “Encino Partnership”), which leases space for, owns the assets of, andoperates an outpatient surgery center located at 16501 Ventura Boulevard, Suite 103,Encino, CA  91436 (the “Encino Center”);

 

WHEREAS, the Irvine LLC owns a 99% general partner interest inSpecialty Surgical Center of Irvine, L.P., a California limited partnership(the “Irvine Partnership”), which leases space for, owns the assets of, andoperates an outpatient surgery center located at 15825 Laguna Canyon Road, Suite 200,Irvine, CA 92618 (the “Irvine Center”);

 

WHEREAS, the Arcadia LLC owns a 99% general partner interest inSpecialty Surgical Center of Arcadia, L.P., a California limited partnership(the “Arcadia Partnership”), which leases space for, owns the assets of, andoperates an outpatient surgery center located at 51 North Fifth Avenue, Suite 101,Arcadia, CA 91006 (the “Arcadia Center”);

 

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WHEREAS, the Thousand Oaks LLC intends to lease space for, own theassets of, and operate an outpatient surgery center located at 696 HampshireRoad, Thousand Oaks, CA 91361 (the “Thousand Oaks Center”);

 

WHEREAS, the Brighton Center, the Wilshire Center, the Encino Center,the Irvine Center, the Arcadia Center and the Thousand Oaks Center are referredto individually as a “Center” and, collectively, the “Centers”; and

 

WHEREAS, the BeverlyHills LLC and the Encino LLC are referred to individually as an “ExistingCenter LLC” and, together, as the “Existing Center LLCs”; and

 

WHEREAS, the IrvineLLC, the Arcadia LLC and the Thousand Oaks LLC are referred to individually asa “Developing Center LLC” and, collectively, as the “Developing Center LLCs”;

 

WHEREAS, in the case of each LLC that is a member of a Partnership, thePartnership of which the LLC is a Member is referred to hereinafter as that LLC’s“Applicable Partnership”;

 

WHEREAS, Affiliates of Purchaser have enteredinto a Purchase Agreement, of even date herewith (the “Membership InterestPurchase Agreement”), pursuant to which such Affiliates of Purchaser willacquire units of membership interest in each LLC (the “Ownership Interests”)from the members of each such LLC (including the Owners) and will acquire theright and option to acquire additional Ownership Interests from such members ofeach such LLC (including the Owners), all as further described in theMembership Interest Purchase Agreements; and

 

WHEREAS, in addition to the Ownership Interests,the Owners and the Company collectively own rights in and to those certaineconomic interests that entitle such Persons to receive consideration for andobligate such Persons to perform certain management responsibilities for eachCenter (collectively, the “Management Rights”) under Sections 5.6(a) and5.6(b) of the Operating Agreement of the Beverly Hills LLC, Sections 5.6(a) and6.4(b) of the Operating Agreement of the Encino LLC, Sections 5.7(a) and6.2(f) of each the Operating Agreement of the Irvine LLC, the OperatingAgreement of the Arcadia LLC and the Operating Agreement of the Thousand OaksLLC;

 

WHEREAS, as acondition to the closing of the transactions contemplated by the MembershipInterest Purchase Agreement, each LLC is required to terminate the ManagementRights and in lieu thereof execute and deliver to one or more Affiliates ofPurchaser identified on Schedule 1 hereto a Management Agreementsubstantially in the form of Exhibit 1.2 hereto (each a “ManagementAgreement”), pursuant to which such Affiliate(s) of Purchaser shall becomeentitled to receive considerationfor and obligate such Affiliate(s) ofPurchaser to perform certainmanagement responsibilities for and on behalf of each Center from and after the date of the Closing(as defined in the Membership Interest Purchase Agreement); and

 

WHEREAS, in order toconvey and assign the Management Rights so as to permit the Existing CenterLLCs and Developing Center LLCs to cancel them and execute and deliver theManagement Agreements, the Sellers desire to sell to Purchaser, and Purchaserdesires to purchase from the Sellers, the Management Rights on the terms andconditions of this Agreement; and

 

NOW, THEREFORE, inconsideration of the foregoing and of the promises and mutual covenantscontained herein, the Parties hereby agree as follows:

 

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** **

**I.  PURCHASE AND SALE OF MANAGEMENT RIGHTS**

** **

1.1.                              Purchase and Sale of ManagementRights.  Subject to theterms and conditions hereof, in reliance upon the representations andwarranties of the other Parties set forth herein, and in exchange for thepayment of the Purchase Price hereunder and the other covenants and obligationsset forth herein, at the Closing (as hereinafter defined), Purchaser agrees topurchase from the Sellers, and the Sellers agree to sell, assign, transfer anddeliver to Purchaser, the Management Rights. The Management Rights being transferred hereunder do not include, andthe Sellers shall retain, the right to any compensation earned, or rights toreimbursement of expenses thereunder with respect to all periods prior to theClosing.

 

1.2.                              Consideration.

 

(a)                                  Subject to the termsand conditions hereof, in reliance upon the representations and warranties ofthe Sellers set forth herein, and as consideration for the assignment of theManagement Rights and the other covenants and obligations set forth herein,Purchaser agrees to tender to the Sellers as the purchase price hereunder (I) FIVE MILLION EIGHTHUNDRED SIXTEEN THOUSAND DOLLARS ($5,816,000) (the “Initial Purchase Price”),and (II) the Deferred Payment (if any) with respect to each Center.  The Initial Purchase Price (less the (i) aggregateamount of “Individual Escrow Amounts” set forth on Exhibit A to the MIPAwith respect to each Seller’s sale of the Management Rights and (ii) AHEscrow Amount defined below) shall be payable to the Sellers at theClosing.  The Deferred Payment withrespect to any Center shall be paid to the Sellers at the end of the PaymentPeriod (as defined in Consulting Agreement) for that Center.  All payments due hereunder shall be made inimmediately available funds by electronic wire transfer to an accountdesignated by the Sellers. No party will take any steps intended to delaycollection of Fees.

 

(b)                                 From the InitialPurchase Price, an amount equal to THREE HUNDRED THIRTY THREE THOUSAND THREEHUNDRED THIRTY THREE AND NO/100 DOLLARS ($333,333.00) (the “AH Escrow Amount”)shall be withheld from delivery to the Sellers and, instead, be delivered tothe Escrow Agent in cash at Closing, by wire transfer of immediately availablefunds, pursuant to the Escrow Agreement substantially in the form of Exhibit 1.2(b) (the“Escrow Agreement”) attached to this Agreement and incorporated into thisAgreement by reference. The Parties acknowledge and agree that the AH EscrowAmount represents that portion of the Initial Purchase Price that isconsideration for the Management Rights of Sellers with respect to the ThousandOaks Center.  If there shall have been aSuccessful Syndication of the Thousand Oaks LLC on or before December 31,2005, then within ten (10) days after the Successful Syndication, thePurchaser shall instruct the Escrow Agent to distribute the AH Escrow Amount tothe Sellers.  If there shall not havebeen a Successful Syndication of the Thousand Oaks LLC on or before December 31,2005, then all of the AH Escrow Amount shall be returned to the Purchaser, andPurchaser shall have no obligation hereunder to acquire Management Rights withrespect to the Thousand Oaks LLC and the Initial Purchase Price under Section 1.2(a) shallbe deemed to have automatically been reduced by the amount of the AH EscrowAmount.  As used herein, “SuccessfulSyndication” means the closing of the sale of not less than sixty percent (60%)of the membership interests in the Thousand Oaks LLC to not fewer than fifteen(15) suitable purchasers (for this purpose, individual physician members of a “PhysicianEntity” (as defined in the Operating Agreement of the Thousand Oaks LLC) whoare anticipated to use the Thousand Oaks Center as an extension of theirpractices will each be counted as an individual purchaser), all of whom must beacceptable to the Purchaser in such Purchaser’s reasonable discretion.

 

(b)                                 Not later than thedate described in Section 1.2(a), Purchaser shall calculate in good faiththe amount of the Deferred Payment then due and deliver to the Sellers astatement (the

 

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“Statement”) setting forthsuch calculation in reasonable detail together with a check for the amountshown as due thereunder.  The Sellersshall be entitled to audit the books and records of the Manager and itsaffiliates upon which any Statement is based. The Sellers shall pay all costs and expenses of the audit unless suchexamination shows an underpayment of at least ten percent (10%) or more of thetotal amount payable during the period covered by the audit, in which case thecosts of the audit shall be paid by the Purchaser.  Any underpayment will bear interest at primeplus 2%, and the amount of such underpayment shall be paid by Purchaser withintwo (2) business days of its calculation.

 

(c)                                  As used herein,

 

(i)                                     “Deferred Payment”means (i) three and one-half (3.5) times the TTM Fees (defined below) withrespect to an Existing Center LLC, or (ii) two and seventy twoone-hundredths (2.72) times the TTM Fees with respect to a Developing CenterLLC, such calculations being based for purposes hereof on the product of, inthe case of Existing Center LLCs, seven (7.0), and in the case of DevelopingCenter LLCs, six and eight-tenths (6.8), in all cases multiplied by thepercentage of Fees required by the Consulting Agreement to be paid to Sellersas a “Consulting and Oversight Fee” (defined that term is defined in Section 2.1of the Consulting Agreement); provided, however, in the eventthat a Repurchase Notice shall have been delivered in accordance with Section 1.4(f) ofthe Membership Interest Purchase Agreement and the election provided in Section 1.4(g)(2) ofthe Membership Interest Purchase Agreement shall have been made, then theDeferred Payment with respect to such Developing Center LLC shall instead equalthe Management Agreement Termination Fee (as defined in such Section 1.4(f))and provided further, however, that the Deferred Payment for any Centershall be zero in the event the Payment Period ends as a result of (i) atermination of the related Management Agreement in accordance with Section 1.4(g) ofthe Membership Interest Purchase Agreement or (ii) Manager (or itsaffiliates) ceasing to be the manager of that Center following the naturalexpiration of the term of the relevant Management Agreement.

 

(ii)                                  “Fees” means, withrespect to a Center, all fees payable to Manager and its Affiliates, withoutany deductions whatsoever, under a Management Agreement (but not the amount ofany expense reimbursements made under the Management Agreements).  No amendment or termination of any ManagementAgreement will affect the calculation of the Fees, which will continue to becalculated based on the terms of the Management Agreement in force on the datehereof unless otherwise consented in writing by the Sellers.

 

(iii)                               “TTM Fees” means, withrespect to a Center, the Fees actually received by Purchaser and its Affiliatesunder and pursuant to a Management Agreement for the twelve calendar monthsending with the month prior to the date on which the applicable payment is due(such date being the “Payment Term Ending Date”).

 

1.3.                              Assignment.  The sale, assignment, transfer and deliveryof the Management Rights shall be made by each Seller’s execution and deliveryat the Closing of an Assignment substantially in the form attached as Exhibit 1.3hereto (the “Assignment”) and the delivery by each LLC (or its ApplicablePartnership) of the executed Management Agreement. From and after the closingof the transactions contemplated by the Membership Interest Purchase Agreement,the Management Rights shall be cancelled and, thereafter, the ManagementAgreements shall supersede and replace the Management Rights.

 

1.4.                              No Assumption ofLiabilities.  Purchaser shallnot assume, at the Closing or otherwise, any liability of any Seller, and eachSeller covenants and agrees to satisfy, when due, all of its liabilities,indebtedness and obligations.  Purchasershall not be responsible, from and after the Closing or otherwise, for 

 

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any other of the Sellers’ leases,contracts, liabilities, indebtedness or any other obligations incurred by aSeller, fixed or contingent, disclosed or undisclosed.

 

1.5.                              Closing.  The sale and purchase of the ManagementRights and other activities provided for herein (the “Closing”) shall takeplace at Waller Lansden Dortch and Davis, PLLC, 511 Union Street, Suite 2700,Nashville, Tennessee 37219, or at such other place as the Parties may agreeupon, on the first business day following the satisfaction (or waiver) of allof the conditions to closing set forth in Articles VI and VII hereof (such datebeing the “Closing Date”), and the Closing shall be deemed effective at 12:01 a.m.on the Closing Date.

 

1.6.                              Interpretation.  In this Agreement, unless the contextotherwise requires:

 

(a)                                  references to this Agreement arereferences to this Agreement and to the Schedules and Exhibits attached hereto;

 

(b)                                 references to Articles and Sections arereferences to articles and sections of this Agreement;

 

(c)                                  references to any Party to this Agreementshall include references to its respective successors and permitted assigns;

 

(d)                                 references to a judgment shall includereferences to any order, writ, injunction, decree, determination or award ofany court or tribunal;

 

(e)                                  references to a person shall includereferences to any individual, company, body corporate, association, limitedliability company, firm, joint venture, trust or governmental entity or agency;

 

(f)                                    the terms “hereof,” “herein,” “hereby”and derivative or similar words will refer to this entire Agreement;

 

(g)                                 references to any document (includingthis Agreement) are references to that document as amended, consolidated,supplemented, novated or replaced by the Parties from time to time;

 

(h)                                 the word “including” shall mean includingwithout limitation;

 

(i)                                     each representation, warranty andcovenant contained herein shall have independent significance and, if any partyhereto has breached any representation, warranty or covenant contained hereinin any respect, the fact that there exists another representation, warranty orcovenant relating to the same subject matter (regardless of the relative levelsof specificity) which such party has not breached shall not detract from ormitigate the fact that the party is in breach of the first representation,warranty or covenant, provided that indemnification for any such breach shallbe only in accordance with and subject to the limitations of Article VIIIhereof; and

 

(j)                                     in respect of a party, the term “Affiliate”shall mean any entity controlling, controlled by or under common control withsuch party.

 

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** **

**II. REPRESENTATIONS AND WARRANTIES OF SELLERS**

** **

Except as set forth ina Schedule called for hereunder (each of which shall refer to a specificsection to which such Schedule shall apply), the Owners and the Company herebyjointly and severally represent and warrant to Purchaser as follows:

 

2.1.                              Authorization andBinding Effect of Owners.  The Company andeach Owner has all necessary authority and power to execute and deliver thisAgreement and consummate the transactions contemplated hereby and has taken allaction required to be taken to authorize the execution, delivery andperformance of this Agreement.  ThisAgreement constitutes a valid and binding agreement or commitment against theCompany and the Owners in accordance with its terms.  The execution of this Agreement by theCompany and the Owners, the performance by the Company and the Owners of theirobligations hereunder and the consummation of the transactions contemplatedhereby by the Company and the Owners will not require any consent, approval ornotice under, or violate, breach, be in conflict with or constitute a default(or an event that, with notice or lapse of time or both, would constitute adefault) under, or permit termination of, or result in the creation orimposition of any lien upon any properties, assets or business of the Companyor an Owner under any note, bond, indenture, mortgage, deed of trust, lease,franchise, permit, authorization, license, contract, instrument or otheragreement or commitment or any order, judgment or decree to which any of themis a party or by which any of them of their respective assets or properties isbound or encumbered, except as indicated on Schedule 2.1hereof.  No notice to, filing orregistration with or authorization, consent or approval of any public body orgovernmental or regulatory authority is necessary for the consummation by theCompany or the Owners of the transactions contemplated by this Agreement,except as indicated on Schedule 2.1 hereto.  Each Owner is a resident of the State ofCalifornia.

 

2.2.                              Organization of theCompany.  The Company is alimited liability company duly organized and validly existing in good standingunder the laws of the State of California, has full power and authority to ownand operate its property and to carry on its business as now being conducted,and is duly qualified to do business in each jurisdiction in which the natureof its property or business requires.

 

2.3.                              Capitalization.  The Owners own 100% of the issued andoutstanding equity securities of the Company.

 

2.4.                              Representations Regarding the Management Rights.

 

(a)                                  The Management Rightsare being transferred hereunder free and clear of any liens or claims, and uponamendment of the Operating Agreements, no person will have any further claimthereunder for periods following the Closing Date.  Attached hereto as Schedule 2.4(a) arestate and local UCC searches on the Sellers and, except as disclosed thereon,the Sellers have good title to the Management Rights, free and clear of allliens, claims or encumbrances.  Schedule2.4(a) reflects all security interests relating to the ManagementRights in every place where security interests created or perfected by filingare legally required to be filed and include copies of all such financingstatements.

 

(b)                                 Each Seller is in compliance with the terms andrequirements of the Management Rights; no event or circumstance exists that(with or without notice or lapse of time) contravenes, conflicts with, is in aviolation or breach of, or gives any party the right to declare a default onsuch Management Rights or exercise any remedy with respect thereto, or toaccelerate the maturity or performance of, or to cancel, terminate, or modify,any Management Right; no LLC or Applicable Partnership has given or receivedany written unresolved notice or other unresolved written communicationregarding any actual, alleged, possible, or potential violation or breach of,or default under, any Management Right; and there is no litigation,arbitration, governmental claim, investigation or proceeding, pending or, tothe knowledge of any Seller, threatened, against any Seller at law or inequity, before any court, arbitration tribunal or governmental 

 

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agency, relating to any of the Management Rights, and noSeller knows of any facts on which claims may legitimately or reasonably behereafter made against a Seller and relating to any of the Management Rights.

 

2.5.                              Calculation ofManagement Fees.  Each Seller acknowledges that the Initial Purchase Pricefor the Management Rights was determined by multiplying the revenues of theSellers derived from the Management Rights in the Existing Center LLCs for thetwelve month period ended December 31, 2004, times three and one-half(3.5), plus an additional one million dollars ($1,000,000) as consideration forthe Management Rights in the Developing Center LLCs.  The revenues of the Sellers derived from theManagement Rights during the twelve month periods ended December 31, 2003and 2004 were $1,424,180.68 and $1,392,087.78 respectively.

 

2.6.                              Court Orders, Decrees and Compliance with Laws.  There is notoutstanding or, to the Company’s or any Owners’ knowledge, threatened, anyorder, writ, injunction or decree or any court, governmental agency orarbitration tribunal against or affecting the Company, the ManagementRights.  The Company is in compliancewith all applicable federal, state and local laws, regulations andadministrative orders, except where noncompliance therewith would not have anadverse effect on the Company or the Management Rights, and has received nounresolved notices of alleged violations thereof.  There are no proceedings against the Companyand, to each Owners’ and the Company’s knowledge, no governmental authority iscurrently conducting an investigation and no such investigation or proceedingis being threatened.

 

2.7.                              No Finders or Brokers.  Neither the Company nor any Owner has engagedany finder or broker in connection with the transactions contemplatedhereunder.

 

2.8                                 Licenses.  Except as set forth on Schedule 2.8,no licenses, permits or approvals have been needed and/or have been required bylaw for Sellers to exercise the Management Rights or to discharge theobligations associated therewith.

 

2.9                                 No Untrue orInaccurate Representation or Warranty.  No representation or warranty by Owners orthe Company set forth in this Agreement contains or will contain any untruestatement of fact, or omits or will omit to state a fact necessary to make thestatements therein not misleading.

 

**III. REPRESENTATIONS AND WARRANTIES OF PURCHASER**

** **

Purchaser represents andwarrants to the Company and the Owners as follows:

 

3.1.                              Organizationand Standing.  Purchaseris a corporation duly organized, validly existing and in good standing underthe laws of the State of Tennessee and has full corporate power and authorityto conduct its business as now being conducted and is duly qualified to dobusiness in each jurisdiction in which the nature of its property or businessrequires.

 

3.2.                              Authorizationand Binding Effect.  Purchaserhas all necessary authority and corporate power to execute and deliver thisAgreement and consummate the transactions contemplated hereby and has taken allaction required to be taken by or on the part of Purchaser to authorize theexecution, delivery and performance of this Agreement.  This Agreement constitutes a valid andbinding agreement enforceable against Purchaser in accordance with itsterms.  The execution of this Agreementby Purchaser, the performance by Purchaser of its obligations hereunder and theconsummation of the transaction contemplated hereby by Purchaser will notrequire any consent, approval or notice under, or violate, breach, be inconflict with or constitute a default (or an event that, with notice or lapseof time or both, would constitute a default) under, or permit termination of,or result in the creation or imposition of any lien upon any properties, assetsor business of Purchaser under any note, bond, indenture, mortgage, deed oftrust, lease, franchise, permit, authorization, license, contract, instrumentor other agreement or 

 

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commitment or any order, judgment or decreeto which Purchaser is a party or by which Purchaser or any of its assets orproperties is bound or encumbered, except as indicated on Schedule 3.2hereof.  Assuming the accuracy of therepresentations in Section 2.2 hereof, no notice to, filing orregistration with or authorization, consent or approval of any public body orgovernmental or regulatory authority is necessary for the consummation byPurchaser of the transaction contemplated by this Agreement, except asindicated on Schedule 3.2 hereto.

 

3.3.                              Ownership.  Purchaser is a wholly-owned direct orindirect subsidiary of SARC, which is a wholly owned subsidiary of Symbion, Inc.,a Delaware corporation.

 

3.4.                              No Finders orBrokers.  Purchaser has not engaged anyfinder or broker in connection with the transactions contemplated hereunder.

 

3.5.                              No Untrue orInaccurate Representation or Warranty.  No representation or warranty by Purchaserset forth in this Agreement contains or will contain any untrue statement offact, or omits or will omit to state a fact necessary to make the statementstherein not misleading.

 

**IV.  COVENANTS OF PURCHASER**

 

4.1                                 Best Efforts.  Purchaser hereby covenants and agrees to takeall necessary corporate action and to use its reasonable best efforts to obtainall consents and approvals required to carry out the transactions contemplatedherein and to satisfy the conditions specified herein.Between the date hereof and the Closing Date, Purchaser will use reasonableefforts to keep the representations and warranties contained in Article IIIhereof true and correct at and as of the Closing Date (except for changescontemplated, permitted or required by this Agreement) and so that theconditions to be satisfied by Purchaser at the Closing shall have beensatisfied

 

4.2.                              Notification ofCertain Matters.  Untilthe Closing Date, Purchaser promptly advise the Sellers in writing of (i) anychange or event that would cause any condition to closing in Article VI orVII to be unable to be satisfied, (ii) any notice or other communicationfrom any Person alleging that the consent of such Person is or may be requiredin connection with the transactions contemplated by this Agreement and (iii) theexistence of any matter arising or discovered which would have been required tobe set forth or described in a disclosure schedule delivered pursuant to Article IIIof this Agreement.  Purchaser shallpromptly notify the Sellers of any action, suit or proceeding that shall beinstituted or threatened against Purchaser to restrain, prohibit or otherwisechallenge the legality of any transaction contemplated by this Agreement.

 

**V.  COVENANTS OF SELLERS**

 

5.1.                              Best Efforts.  Each Owner and the Company shall take allnecessary action and use reasonable best efforts to obtain all consents andapprovals required to carry out the transactions contemplated herein and tosatisfy the conditions specified herein.

 

5.2.                              Access andInformation.  Betweenthe date hereof and the Closing, the Sellers shall cooperate fully in theproviding Purchaser full access to all records of the Centers and any Seller,and Owners shall confer on a regular and frequent basis with one or morerepresentatives of Purchaser to report material operational matters of theCenters and to report the general status of ongoing operations of theCenters.  Owners shall notify Purchaserof any material adverse change in the financial position, earnings or businessof the Companyafter the date hereof and prior to theClosing and any unexpected emergency or other unanticipated change in thebusiness of the Company and of any governmental complaints, investigations orhearings or adjudicatory proceedings (or communications indicating that the

 

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samemay be contemplated) or of any other matter which may be material to theCompany and shall keep Purchaser reasonably informed of such events.

 

5.3.                              Conduct ofBusiness.  Betweenthe date hereof and the Closing Date, except as contemplated by thetransactions completed by the Membership Interest Purchase Agreement andhereunder, or otherwise approved by Purchaser in its sole discretion, theSellers shallconduct their business insofar as it isrelated to the Management Rights only in the ordinary course thereof consistentwith past practice and use reasonable efforts to keep the representations andwarranties contained in Article II hereof true and correct at and as ofthe Closing Date (except for changes contemplated, permitted or required bythis Agreement) and so that the conditions to be satisfied by the Sellers atthe Closing shall have been satisfied.

 

5.4.                              Notification ofCertain Matters.  Untilthe Closing Date, the Sellers shall promptly advise Purchaser in writing of (i) anychange or event that would cause any condition to closing in Article VI orVII to be unable to be satisfied, (ii) any notice or other communicationfrom any Person alleging that the consent of such Person is or may be requiredin connection with the transactions contemplated by this Agreement, and (iii) theexistence of any matter arising or discovered which would have been required tobe set forth or described in a disclosure schedule delivered pursuant to Article IIof this Agreement.  Each Seller shallpromptly notify Purchaser of any action, suit or proceeding that shall beinstituted or threatened against such Seller to restrain, prohibit or otherwisechallenge the legality of any transaction contemplated by this Agreement.

 

5.5.                              Exclusivity .  During the period from the date of thisAgreement until its termination in accordance with Article IX hereof, eachOwner and the Company shall not, and will cause each of its and theirrespective agents, employees, and affiliates to not, except as expresslycontemplated herein, directly or indirectly, initiate, encourage, conduct orhold discussions with any corporation, partnership, person or other entity(other than Purchaser and its Affiliates) (a “Third Party”) concerning:

 

(a)                                  a purchase,affiliation, joint venture or lease of all, or a material part of, theManagement Rights, the Company or any Center by a Third Party;

 

(b)                                 the management of anyCenter by a Third Party;

 

(c)                                  the transfer by anySeller of any of its ownership in the Company, the Management Rights or theCenters to a Third Party; or

 

(d)                                 the issuance by theCompany of any debt, equity or hybrid securities.

 

Ifan Owner or the Company shall receive any unsolicited offer or correspondencerelating to a transaction of the type described in this Section 5.5, suchOwner or the Company, as the case may be, shall promptly notify Purchaser ofany such transaction or negotiations and disclose the terms of any suchproposal.

 

5.6.                              Acknowledgementof Reliance and Inducement. The Sellers acknowledge and agree that their execution, delivery andperformance of the Consulting Agreement, and specifically the covenants andobligations set forth in Article IV thereof, were a material inducementfor the affiliates of Manager to enter into and to consummation thetransactions contemplated by this Agreement and the MIPA, and Purchaser wouldnot have entered into or consummated the transactions contemplated by thisAgreement and the MIPA unless the Sellers had agreed to the provisions of Article IVof the Consulting Agreement.  Thisacknowledgement is not intended to imply or support any increased damages(beyond those 

 

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specified herein and/or in the MIPA) forany breach of this Agreement, nor shall it be used for such purpose.

 

**VI.  CONDITIONS TO CLOSING BYPURCHASER**

** **

Except as may bewaived by Purchaser, the obligations of Purchaser to purchase the ManagementRights and to consummate the transactions contemplated hereby on the ClosingDate shall be subject to the satisfaction on or prior to the Closing Date ofthe following conditions:

 

6.1.                              Compliance.  All ofthe representations and warranties of the Company and Owners contained in Article IIof this Agreement shall be true as of the date of this Agreement and as of thetime of the Closing, except as would not individually or in the aggregate havea material adverse effect on the Company, the Business or the results ofoperations or financial condition of any Center and the Company and the Ownersshall have performed or complied with all covenants and conditions required bythis Agreement to be performed or complied with by it prior to or at theClosing, except for noncompliance which would not individually or in theaggregate have a material adverse effect on the Company, the Business or theresults of operations or financial condition of any Center.  Purchaser shall have been furnished acertificate dated the Closing Date and signed by an Owner or authorizedrepresentative of the Company to the foregoing effect.

 

6.2.                              Consents, Authorizations, Etc.  All necessary licenses, certifications,permits and approvals from federal, state and local governmental units for thetransactions contemplated hereby shall have been issued to the Company in formand substance reasonably satisfactory to Purchaser.

 

6.3.                              No Action or Proceeding. No action or proceeding shall have been brought or threatened before anycourt or administrative agency to prevent the consummation of, or to seekdamages in a material amount by reason of, the transactions contemplatedhereby, and no governmental authority shall have asserted that thesetransactions constitute a violation of law or give rise to liability on thepart of Purchaser or the Company.

 

6.4.                              Good Standing Certificate. Owners shall have delivered to Purchaser a good standing certificateissued with respect to the Company, issued by the Secretary of State of theState of California, dated as of a date that is not more than 15 days prior tothe Closing Date.

 

6.5.                              No Material Adverse Effect. The operations of the Company shall have been conducted in the ordinarycourse of business, consistent with past practice, and from December 31,2004 until the Closing, no event shall have occurred or have been threatened,which has or would have a material and adverse effect upon the operations ofthe Company, the Business or their respective prospects; and none of theCompany and the Assets shall have sustained any loss or damage, whether or notinsured, that affects materially and adversely the value of the ManagementRights.

 

6.6                                 Membership Interest Purchase AgreementClosing.  The “Closing” under the Membership InterestPurchase Agreement shall have occurred.

 

6.7                                 Consulting Agreement. The Purchaser shall have executed and delivered to the Company theConsulting Agreement, in the form attached hereto as Exhibit 6.7 (the “ConsultingAgreement”).

 

6.8                                 Assignment Agreement. Each Seller shall have delivered to the Purchaser a duly executedAssignment.

 

6.9                                 ClosingCertificate.  At the Closing, Purchaser shall have receivedcopies of the

 

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following, in eachcase certified as of the Closing Date by the managing members of the Company:

 

(a)                                  resolutions of the members of the Companyauthorizing the execution, delivery and performance of this Agreement and theother agreements that the Company is required to execute and deliver pursuantto the terms of this Agreement; and

 

(b)                                 the signature and incumbency of themanaging members of the Company authorized to execute and deliver thisAgreement and the other agreements and certificates that the Company isrequired to deliver on or before the Closing Date pursuant to this Agreement.

 

6.10.                        Opinion of Counsel.  Purchasershall have received from counsel to Sellers an opinion in form and substance asset forth in Exhibit 6.10 attached to this Agreement, addressed toPurchaser and dated as of the Closing Date.

 

6.11.                        Waiver of Conditions. Purchaser may waive any condition of this Article VI to the extentpermitted by applicable law.  Such waivershall not affect Purchaser’s remedies under this Agreement with respect to thewaived condition, or otherwise.

 

**VII.  CONDITIONS TO CLOSING BYTHE COMPANY**

** **

Except as may bewaived in writing by Owners and the Company, the obligations of the Company andthe Owners to consummate the transactions contemplated hereby on the ClosingDate shall be subject to the satisfaction on or prior to the Closing Date ofthe following conditions:

 

7.1.                              Compliance.  All ofthe representations and warranties made by Purchaser contained in Article IIIof this Agreement shall be true as of the date of this Agreement and as of thetime of Closing, except as would not individually or in the aggregate have amaterial adverse effect on Purchaser’s ability to consummate the transactionscontemplated by this Agreement, and Purchaser shall have performed and compliedwith all covenants and conditions required by this Agreement to be performed orcomplied with by it prior to or at the Closing, except for noncompliance whichwould not individually or in the aggregate have a material adverse effect onPurchaser’s ability to consummate the transactions contemplated by thisAgreement.  The Sellers shall have beenfurnished with a certificate, dated the Closing Date, of a duly authorizedofficer of Purchaser to the foregoing effect.

 

7.2.                              Secretary’s Certificate. At the Closing, the Sellers shall have received copies of the following,in each case certified as of the Closing Date by a Secretary or an AssistantSecretary of Purchaser:

 

(a)                                  resolutions of the board of directors ofPurchaser’s authorizing the execution, delivery and performance of thisAgreement and the other agreements that Purchaser is required to execute anddeliver pursuant to the terms of this Agreement; and

 

(b)                                 the signature and incumbency of theofficers of Purchaser authorized to execute and deliver this Agreement and theother agreements and certificates that Purchaser is required to deliver on orbefore the Closing Date pursuant to this Agreement.

 

7.3.                              Consent, Authorizations, Etc. All necessary consents, authorizations,licenses, certifications, permits and approvals from federal, state and localgovernmental units for the transactions contemplated hereby, and for continuedoperation of the Business as an ambulatory surgery center following theconsummation of the transactions contemplated hereby, shall have been issued tothe Company in form and substance reasonably satisfactory to Owners.

 

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7.4.                              No Action or Proceeding. No action or proceeding shall have beenbrought or threatened before any court or administrative agency to prevent theconsummation of, or to seek damages in a material amount by reason of, thetransactions contemplated hereby, and no governmental authority shall haveasserted that these transactions constitute a violation of law or give rise toliability on the part of Owners.

 

7.5.                              Good Standing Certificate. Purchaser shall have delivered toOwners a good standing certificate issued with respect to Purchaser by theSecretary of the State of Tennessee.  Suchgood standing certificate shall be dated as of a date that is not more than 15days prior to the Closing Date.

 

7.6.                              Membership Interest Purchase AgreementClosing.  The “Closing” under the Membership InterestPurchase Agreement shall have occurred.

 

7.7.                              Consulting Agreement. The Company shall have executed and delivered to Purchaser theConsulting Agreement.

 

7.8.                              Purchase Price. The Sellers shall have received the Initial Purchase Price (less the AHEscrow Amount) and the Escrow Agent shall have received the AH Escrow Amount.

 

7.9                                 Opinion of Counsel.  TheSellers shall have received from counsel to Purchaser an opinion in form andsubstance as set forth in Exhibit 7.9 attached to this Agreement,addressed to the Sellers and dated as of the Closing Date.

 

7.10.                        Waiver of Conditions. Owners and the Company may waive any conditions of this Article VIIto the extent permitted by applicable law. Such waiver shall not affect Owners’ or the Company’s remedies underthis Agreement with respect to the waived condition, or otherwise.

 

**VIII.  INDEMNIFICATION**

 

The Parties acknowledge and agree that the provisionsof Article VIII of the MIPA shall govern and control all indemnificationfor breaches of the reps, warranties, and covenants contained herein.  Except for remedies of injunctive andprovisional relief, if the Closing occurs, Article VIII of the MIPA shallbe the sole and exclusive remedy for breach of, or inaccuracy in, anyrepresentation, warranty, or covenant contained herein, or otherwise in respectof the transactions contemplated hereby.

 

**IX.  TERMINATION**

** **

9.1.                              TerminationEvents. ThisAgreement may be terminated and the transaction abandoned at any time prior tothe Closing Date as follows:

 

(a)                                  By the mutual written consent ofPurchasers and the Owners;

 

(b)                                 By the Owners (acting together) orPurchasers if the Closing has not occurred by August 31, 2005.

 

(c)                                  By Purchasers if there has been amaterial violation or breach of any of the Sellers’ covenants contained in thisAgreement which has not been waived by Purchasers in writing;

 

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(d)                                 By the Owners, if there has been amaterial violation or breach of any of the Purchaser’s covenants contained inthis Agreement which has not been waived by Owners in writing.

 

9.2.                              Notice ofTermination.  In theevent of such termination by either Purchaser or Owners pursuant to Section 9.1hereof, written notice shall forthwith be given to the other party or partieshereto.

 

9.3.                              Consequences ofTermination.  In the eventthis Agreement is terminated as provided in Section 9.1 above, (a) Purchasershall deliver to Owners all documents (and copies thereof in its possession)concerning the Company previously delivered by Owners or the Company toPurchaser; and (b) none of the parties hereto nor any of their respectiveshareholders, directors, officers, agents or consultants shall have anyliability to the other party for costs, expenses, loss of anticipated profits,consequential damages or otherwise, except for any intentional breach of any ofthe provisions of this Agreement.

 

**X. MISCELLANEOUS**

** **

10.1.                        Schedules and OtherInstruments.  EachSchedule and Exhibit to this Agreement shall be considered a part hereofas if set forth herein in full.

 

10.2.                        Additional Assurances.  The provisions of this Agreement shall beself-operative and shall not require further agreement by the Parties except asmay be herein specifically provided to the contrary; provided, however, at thereasonable request and expense of a Party, the other Party or Parties shallexecute such additional instruments and take such additional actions as therequesting Party may deem necessary to effectuate this Agreement.  In addition and from time to time after Closing,Owners and the Company shall execute and deliver such other instruments ofconveyance and transfer, and take such other actions as Purchaser reasonablymay request, to effectively convey and transfer full right, title and interestto, vest in, and place Purchaser in legal, equitable and actual possession ofthe Management Rights.  Owners and theCompany shall also furnish Purchaser with such information and documents inthat Party’s possession or under that Party’s control, or which Owners and theCompany can execute or cause to be executed, as will enable Purchaser toprosecute any and all petitions, applications, claims and demands relating toor constituting a part of the Management Rights. Additionally, each Partyhereto shall cooperate with one another and use their respective reasonable effortsto have their respective present directors, officers and employees cooperatewith one another on and after Closing in furnishing information, evidence,testimony and other assistance in connection with any action, proceeding,arrangement or dispute of any nature with respect to matters pertaining to allperiods prior to Closing in respect of the items subject to this Agreement,provided that any Party hereto will reimburse the other Parties hereto for allcosts and expenses incurred by the other Parties hereto in connectiontherewith.

 

10.3.                        Consented Assignment. Anything contained herein to the contrary notwithstanding, thisAgreement shall not constitute an agreement to assign any claim, right,contract, license, lease, commitment, sales order or purchase order if anattempted assignment thereof without the consent of the other Party theretowould constitute a breach thereof or in any material way affect the rights ofOwners and the Company, as appropriate, thereunder, unless such consent isobtained.  If such consent is notobtained, or if an attempted assignment would be ineffective or wouldmaterially affect the rights thereunder of Owners and the Company so thatPurchaser would not in fact receive all such rights, the Parties shallcooperate in any reasonable arrangement designed to provide for the Parties thebenefits under any such claim, right, contract, license, lease, commitment,sales order or purchase order, including, without limitation, enforcement ofany and all rights of Owners and the Company, against the other party orparties thereto arising out of the breach or cancellation by such other partyor otherwise.

 

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10.4.                        Legal Fees and Costs.  In the event a Party elects to incur legalexpenses to enforce or interpret any provision of this Agreement by judicialproceedings, the prevailing Party will be entitled to recover such legalexpenses, including, without limitation, reasonable attorney’s fees, costs andnecessary disbursements at all court levels, in addition to any other relief towhich such Party shall be entitled.

 

10.5.                        Choice of Law and Venue.  The Parties agree that this Agreement shallbe governed by and construed in accordance with the laws of the State ofCalifornia, without reference to its conflicts of law provisions. The Partieshereto hereby designate all courts of record sitting in Los Angeles County,California, both state and federal, as the exclusive forums where any action,suit or proceeding in respect of or arising out of this Agreement, or thetransactions contemplated by this Agreement shall be prosecuted as to allParties, their successors and assigns, and by the foregoing designations theParties hereto consent to the exclusive jurisdiction and venue of such courts.

 

10.6.                        Benefit/Assignment.  Subject to provisions herein to the contrary,this Agreement shall inure to the benefit of and be binding upon the Partieshereto and their respective legal representatives, successors and assigns; provided,however, that no Party may assign this Agreement without the priorwritten consent of the other Party, which consent shall not be unreasonablywithheld; provided, further, however, that any Party may,without the prior written consent of the other Party, assign its rights anddelegate its duties hereunder to one or more of its affiliates as long as suchassignment will not relieve the assigning Party of its obligations hereunder.This Agreement is intended solely for the benefit of the Parties hereto and isnot intended to, and shall not, create any enforceable third party beneficiaryrights.

 

10.7.                        Cost of Transaction.  Except as otherwise provided herein, whetheror not the transactions contemplated hereby shall be consummated, the Partiesagree as follows:  (i) Owners and theCompany will pay the fees, expenses, and disbursements of Owners and theCompany and their agents, representatives, accountants, and counsel incurred inconnection with the subject matter hereof and any amendments hereto; and (ii) Purchasershall pay the fees, expenses and disbursements of Purchaser and its agents,representatives, accountants and counsel incurred in connection with thesubject matter hereof and any amendments hereto.

 

10.8.                        Confidentiality.

 

(a)                                  The information, documentsand instruments delivered to Purchaser by Owners and the Company or theiragents and the information, documents and instruments delivered to Owners andthe Company by Purchaser or its respective agents are of a confidential andproprietary nature.  Each of the Parties heretoagrees that both prior and subsequent to the Closing it will maintain theconfidentiality of all such confidential information, documents or instrumentsdelivered to it by each of the other Parties hereto or their agents inconnection with the negotiation of this Agreement or in compliance with theterms, conditions and covenants hereof and will only disclose such information,documents and instruments to its duly authorized officers, directors,representatives and agents.  Each of theParties hereto further agrees that if the transactions contemplated hereby arenot consummated, it will return all such documents and instruments and allcopies thereof in its possession to the other Party to this Agreement.  Each of the Parties hereto recognizes that anybreach of this Section would result in irreparable harm to the otherParties to this Agreement and their affiliates and that therefore each of themshall be entitled to an injunction to prohibit any such breach or anticipatedbreach, without the necessity of posting a bond, cash or otherwise, in additionto all of their other legal and equitable remedies.  Nothing in this Section 10.8, however,shall prohibit the use of such confidential information, documents orinformation for such governmental filings as in the reasonable opinion ofOwners’ counsel or Purchaser’s counsel are required by law or governmentalregulations, provided that reasonable notice is provided to the other Parties.

 

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(b)                                 The Parties hereto agree that the termsand conditions of this Agreement, and all other agreements and instrumentsexecuted and delivered by the respective Parties in connection with thisAgreement (the “Transaction Documents”) shall remain confidential.  Neither Purchaser nor Owners and the Companynor their respective agents and representatives shall distribute theTransaction Documents or any drafts thereof, or any part thereof, to any thirdparty unless required by law to do so or in connection with the required approvalsby the LLCs.

 

10.9.                        Public Announcements.  The Sellers agree that they shall notrelease, publish or otherwise make available to the public in any mannerwhatsoever any information or announcement regarding the transactions hereincontemplated without the prior written consent of the other Party, except forinformation and filings reasonably necessary to be directed to governmentalagencies to fully and lawfully effect the transactions herein contemplated orrequired in connection with securities and other laws.

 

10.10.                  Waiver of Breach.  The waiver by any Party of a breach orviolation of any provision of this Agreement shall not operate as, or beconstrued to constitute, a waiver of any subsequent breach of the same or anyother provision hereof.

 

10.11.                  Notice.  Any notice, demand or communication required,permitted, or desired to be given hereunder shall be deemed effectively givenupon receipt or refusal to accept receipt when delivered personally, uponfacsimile (if the sending facsimile machine prints confirmation of receipt bythe receiving machine and notice is given by other means permitted by this Section withinone business day thereafter) or the next Business Day when sent by overnightcourier, with delivery prepaid thereon and overnight delivery specified, orfive days after being deposited in the United States mail, with postage prepaidthereon, or certified or registered mail, return receipt requested, addressedas follows:

 
| Sellers:            | To the addresses set forth on the signature page. |
|---------------------|---------------------------------------------------|
|                |                                              |
| With a simultaneous | Sheppard, Mullin, Richter & Hampton LLP  |
| copy to:            | 333 South Hope Street, 48th Floor                 |
|                | Los Angeles, California 90071                     |
|                | Attention: Lawrence M. Braun                      |
|                |                                              |
| and to              | Guth | Christopher LLP                            |
|                | 10866 Wilshire Blvd, Suite 1250              |
|                | Los Angeles, California 90024                     |
|                | Attention: Theodore E. Guth                       |
|                |                                              |
| Purchaser  or SARC: | c/o  Symbion, Inc.                           |
|                | 40  Burton Hills Boulevard, Suite 500        |
|                | Nashville,  Tennessee 37215                       |
|                | Attention:  President                             |
|                |                                              |
| With a simultaneous | Waller Lansden Dortch & Davis, PLLC      |
| copy to:            | 511 Union Street, Suite 2700                 |
|                | Nashville, Tennessee 37219-1760                   |
|                | Attention:  Joseph A. Sowell, III, Esq. |

 

orto such other address, and to the attention of such other person or officer asany Party may designate, with copies thereof to the respective counsel thereofas notified by such Party.

 

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10.12.                  Severability.  In the event any provision of this Agreementis held to be invalid, illegal or unenforceable for any reason and in anyrespect, such invalidity, illegality, or unenforceability shall in no eventaffect, prejudice or disturb the validity of the remainder of this Agreement,which shall be and remain in full force and effect, enforceable in accordancewith its terms.

 

10.13.                  Gender and Number.  Whenever the context of this Agreementrequires, the gender of all words herein shall include the masculine, feminineand neuter, and the number of all words herein shall include the singular andplural.

 

10.14.                  Divisions and Headings.  The divisions of this Agreement into sectionsand subsections and the use of captions and headings in connection therewithare solely for convenience and shall have no legal effect in construing theprovisions of this Agreement.

 

10.15.                  Survival.  All of the covenants and agreements made bythe Parties in this Agreement or pursuant hereto in any certificate, instrumentor document which are to be performed after closing shall survive theconsummation of the transactions described herein and shall not be deemedmerged into any instruments or agreements delivered at Closing or thereafter,and no other covenants and agreements shall survive the Closing but shall bedeemed merge into any instruments or agreements delivered at Closing.

 

10.16.                  Entire Agreement/Amendment.  This Agreement supersedes all previouscontracts, and constitutes the entire agreement of whatsoever kind or natureexisting between or among the Parties respecting the within subject matter andno Party shall be entitled to benefits other than those specified herein.  As between or among the Parties, no oralstatements or prior written material not specifically incorporated herein shallbe of any force and effect.  The Partiesspecifically acknowledge that in entering into and executing this Agreement,the Parties rely solely upon the representations and agreements contained inthis Agreement and no others.  All priorrepresentations or agreements, whether written or verbal, not expresslyincorporated herein are superseded and no changes in or additions to thisAgreement shall be recognized unless and until made in writing and signed byall Parties hereto.  This Agreement maybe executed in two or more counterparts, each and all of which shall be deemedan original and all of which together shall constitute but one and the sameinstrument.

 

10.17.                  Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVESANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING ORCOUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THERELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY.  THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TODEMAND A TRIAL BY JURY ARISING FROM ANY SOURCE INCLUDING, BUT NOT LIMITED TO,THE CONSTITUTION OF THE UNITED STATES OR ANY STATE THEREIN, COMMON LAW OR ANYAPPLICABLE STATUTE OR REGULATIONS.  EACHPARTY HERETO ACKNOWLEDGES THAT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHTSTO DEMAND TRIAL BY JURY.

 

10.18.                  Tax Advice and Reliance.  Except as expressly provided in thisAgreement, none of the Parties (nor any of the Parties’ respective counsel,accountants or other representatives) has made or is making any representationsto any other Party (or to any other Party’s counsel, accountants or otherrepresentatives) concerning the consequences of the transactions contemplatedhereby under applicable tax laws. Each Party has relied solely upon the taxadvice of its own employees or of representatives engaged by such Party and noton any such advice provided by any other Party hereto.

 

10.19.                  No Rescission.  No Party shall be entitled to rescind thetransactions contemplated hereby by virtue of any failure of any Party’srepresentations and warranties herein to have been true or any failure by anyParty to perform its obligations hereunder.

 

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10.20.                  Counterparts.  This Agreement may be executed in multiplecounterparts (including by means of telecopied signature pages), any one ofwhich need not contain the signatures of more than one Party, each of whichshall be enforceable against the Parties executing such counterparts, and allof which together shall constitute one instrument.

 

IN WITNESS WHEREOF,the parties hereto have duly executed this Agreement as of the day and yearfirst above written.

 
|   | **PARTHENON MANAGEMENT****PARTNERS****, LLC** |
|--------|-----------------------------------------------|
|   |                                          |   |
|   |                                          |   |
|   | By:                                           | /s/ Randhir S. Tuli |
|   |                                          |   |
|   | Title:                                        | Managing Member |
|   |                                          |   |
|   |                                          |   |
|   | /s/ Andrew A. Brooks, M.D.                    |
|   | **Andrew A. Brooks, M.D.**                    |
|   |                                          |
|   | 14159 Beresford Dr.                           |
|   | Beverly Hills, California 90210               |
|   |                                          |
|   |                                          |
|   | *Address for Notices*                         |
|   |                                          |
|   |                                          |
|   | /s/ Randhir S. Tuli                           |
|   | **Randhir S. Tuli**                           |
|   |                                          |
|   | 19248 Allandale Dr.                           |
|   | Tarzana, California 91356                     |
|   |                                          |
|   |                                          |
|   | *Address for Notices*                         |
|   |                                          |
|   | **SYMBIONARC MANAGEMENT SERVICES,  INC.**     |
|   |                                          |
|   |                                          |
|   | By:                                           | /s/ William Webb |
|   |                                          |   |
|   | Title:                                        | Chief Development Officer and Senior Vice President |

 

The undersigned joins herein solely for the purposesof Article VIII hereof.

 

**SYMBION AMBULATORY RESOURCE****CENTRES, INC.**

 
| By:    | /s/ William Webb                                     |   |
|--------|------------------------------------------------------|--------|
|   |                                                 |   |
| Name:  | William Webb                                         |   |
|   |                                                 |   |
| Title: | Chief Development Officer and  Senior Vice President |   |

 

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**EXHIBIT 1.2**

 

**Form of Management Agreement**

 

**(Attached as Exhibit 6.9A tothe Purchase Agreement)**

 

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**EXHIBIT 6.9A**

** **

**FORM OFMANAGEMENT AGREEMENT**

** **

**THIS MANAGEMENT AGREEMENT**(this “Agreement”) is made and entered into as of the         day of                          ,2005, by and between **SYMBIONARC MANAGEMENTSERVICES, INC.**, a Tennessee corporation (the “Manager”), and [[1]],a California limited liability company (the “Owner”).

 

**RECITALS:**

** **

WHEREAS, Owner owns and operates, directly orthrough a partnership of which it is the general partner, the ambulatorysurgery center(s) located at the address identified on Schedule Ahereto (the “Center”).

 

WHEREAS, the Manager has certain expertise inthe management of ambulatory surgery centers; and

 

WHEREAS, the Owner and Manager each desirethat the Owner engage the Manager to assist with the management of the Centerand to provide certain non-medical services to the Center, pursuant to theterms of this Agreement.

 

NOW, THEREFORE, in consideration of theforegoing premises, which are hereby incorporated into this Agreement as anintegral part hereof and not as mere recitals hereto, and of the promises andmutual covenants contained herein, and for other good and valuableconsideration, the receipt and sufficiency of which is hereby acknowledged, theparties hereby agree as follows:

 

**I.**                                         GENERAL

** **

1.1.                              Asof the Effective Date, as defined in Section 2.1 below, the Owner herebyretains the Manager as the sole and exclusive manager of the Center, for thepurpose of rendering management, administration and purchasing services andsupport, and other management support needed for the operation of the Center onthe basis hereafter set forth, subject to the written policies established bythe Owner, which policies shall be consistent with applicable state and federallaw, and subject to the terms, conditions, authorizations and limitations setforth in this Agreement.

 

1.2.                              TheManager shall perform all of the services described in Article III and Article IVhereof for the account of and as agent of the Owner. All such services shall berendered using the Manager’s commercially reasonable efforts and subject to thecontrol of the Owner, which shall have final authority in all matters relatingto the Center’s operations.

 

1.3.                              Forthe term hereof, the Owner hereby irrevocably appoints the Manager to be theOwner’s attorney-in-fact with full power on the Owner’s behalf and in its name,or in the name of the Center, to enter into any and all contracts relating tothe affairs of the Center so long as such contracts are not with affiliates ofManager, unless otherwise permitted under that certain Amended and RestatedOperating Agreement of the Owner, effective as of the date hereof. The Managermay incur, in the name of the Owner or Center, any obligation for repairs,equipment, additions or betterments to the Center, as the Manager reasonablydeems necessary. The Owner agrees to execute a limited power of attorney and/orany other instrument reasonably requested by the Manager to evidence suchappointment.

 

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1.4                                 TheOwner operates a licensed surgical facility and shall have all authority to actin accordance with applicable law. The Manager shall have no authoritywhatsoever with respect to the actual rendition of surgical and/or othermedical and professional services at the Center.

 

1.5.                              Theparties hereby acknowledge and agree that no benefits to the parties hereunderrequire or are in any way contingent upon the admission, recommendation,referral or any other arrangement for the provision of any item or serviceoffered by the Owner or any of its affiliates, to any patients of the Center,or the Owner’s employees or agents. The Manager shall neither have nor exerciseany control or direction over the number, type, or recipient of patientreferrals made by physicians, and nothing in this Agreement shall be construedas directing or influencing such referrals. None of the Manager’s activitiescontemplated under this Agreement or otherwise shall constitute obligations ofthe Manager to generate patient flow or business to the Center. Further, thereis absolutely no intent for the Manager in any manner to be compensated togenerate patients for the Center. Rather, the Owner has engaged the Manager tomanage the business aspects of the Center in order to enable the Owner to focuson delivering the highest quality of patient care.

 

**II.**                                     TERMAND TERMINATION

** **

2.1.                              Theterm of this Agreement shall commence as of the date first above written (the “EffectiveDate”), and unless this Agreement is earlier terminated pursuant to theprovisions hereof, shall continue for a term of the greater of: (i) fifteen(15) years, (ii) until any loans made by the Manager or an affiliate ofthe Manager to the Owner have been paid, or (iii) until any liability ofthe Manager or an affiliate of the Manager for any debt or obligation of theOwner has been released. This Agreement shall automatically renew for two (2) additionalterms of five (5) years each, unless one party gives the other party onehundred eighty (180) days’ prior written notice of termination before theexpiration of the then- current term. Nothing herein shall require the Manageror any affiliate of the Manager to loan money to the Owner or otherwise becomeliable for any debt or obligation of the Owner.

 

2.2.                              TheOwner shall have the right to terminate this Agreement upon the Manager’smaterial breach of this Agreement. In the event termination is for an allegedmaterial breach by the Manager, the Owner shall provide the Manager writtennotice of such material breach. Such notice shall describe in reasonable detailthe basis upon which the Owner believes such termination is justified and asuggested method for curing such breach. Upon receipt of such notice, theManager shall have sixty (60) days during which to attempt to cure the materialbreach under this Agreement, and upon such cure being effected, the Owner’sright to terminate shall cease and this Agreement will continue in full forceand effect. Furthermore, if upon expiration of such cure period the Manager isstill diligently pursuing effectuation of such cure, or if the Manager hasdiligently attempted to effect such a cure within such cure period but cannotcomplete such cure because of the failure of a third party (such as agovernmental agency) to act within such period, then the Manager shall have areasonable time (not to exceed in any event an additional 180 days) beyond suchcure period to complete its cure of the alleged basis for the Owner’s electionto terminate. Failure of the Owner to deliver a notice of termination of breachpursuant to this Section 2.2 shall not relieve the Manager of anyliability on account of the breach.

 

2.3.                              TheManager shall have the right to terminate this Agreement upon the Owner’smaterial breach of this Agreement. In the event termination is for an allegedmaterial breach by the Owner, the Manager shall provide the Owner writtennotice of such alleged material breach. Such notice shall describe in detailthe basis upon which the Manager believes such termination is justified and asuggested method for curing such breach. Upon receipt of such notice, the Ownershall have the applicable cure period listed below during which to attempt tocure any alleged default under this Agreement, and upon such cure beingeffected, the Manager’s right to terminate shall cease and this Agreement willcontinue in full force and effect. The cure periods for a breach of thisAgreement shall be as follows: (i) ten (10) days for the 

 

2

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failure of the Owner to pay money hereunder, (ii) thirty(30) days in the event that the Owner’s breach materially and adversely affectspatient safety and quality of care, and (iii) ninety (90) days for allother breaches. Furthermore, if upon expiration of the applicable cure periodthe Owner is still diligently pursuing effectuation of such cure, or if theOwner has diligently attempted to effect such a cure within such cure periodbut cannot complete such cure because of the failure of a third party (such asa governmental agency) to act within such period, then the Owner shall have areasonable time beyond such cure period to complete its cure of the allegedbasis for the Manager’s election to terminate; provided, however, that thisextension of the applicable cure period shall only apply with respect to thebreaches described in items (ii) and (iii) directly above.Notwithstanding the foregoing, the Manager shall have the right to suspend theprovision of services under this Agreement in the event that the Owner fails topay any of the compensation payable pursuant to Article V as and when due.The Manager shall also have the right to terminate this Agreement by givingwritten notice to the Owner if: (w) the Owner is suspended or prohibitedfrom participating in the Medicare or Medicaid programs or is excluded fromentering into health care provider agreements with any material portion of themanaged care or health care insurance industry and such suspension, prohibitionor exclusion is not rescinded within thirty (30) days following thecommencement thereof, (x) the Owner allows any physician to be or remainon the Center’s medical staff who does not comply or no longer complies withthe requirements for membership on such medical staff, (y) the Ownerdissolves or liquidates, or (z) the Owner fails to pay any money owedunder any other arrangement between the Manager and Owner or between the Ownerand any third party.

 

2.4.                             Ifeither party shall appoint or consent to the appointment of a receiver, trusteeor liquidator of such party or of all or a substantial part of its assets, filea voluntary petition in bankruptcy, make a general assignment for the benefitof creditors, file a petition seeking reorganization or arrangements withcreditors or to take advantage of any insolvency law, or if an order, judgmentor decree shall be entered by any court of competent jurisdiction, on theapplication of a creditor, adjudicating such party bankrupt or insolvent, andsuch order, judgment or decree shall continue unstayed and in effect for anyperiod of ninety (90) days, then, in case of any such event, the term of thisAgreement shall terminate, at the option of the other party, upon writtennotice to the first party.

 

2.5.                             Upontermination of this Agreement, the Owner shall owe to the Manager the fullamount of any fees owing pursuant to the terms hereof, up through and includingthe date of termination, and any sums of money owed by the Owner to the Managershall be paid immediately, prorated through the termination date. Upontermination hereof, the Manager’s obligations to perform services hereunder shallcompletely cease; provided, however, that the Owner and Manager shall performsuch matters as are necessary to wind up their activities under this Agreementin an orderly manner. Each party shall have the right to pursue legal orequitable relief, as may be available depending upon the circumstances of thetermination.

 

**III.**                                 MANAGEMENTSERVICES

** **

3.1.                             Subjectto the provisions of this Agreement, the Manager shall during the term hereofprovide the following services and assistance to the Owner in connection withthe operation of the Center:

 

(a)           Assistingthe Owner to maintain the accreditation of the Center (if the Center isaccredited) with the proper agencies and insurance companies, including JCAHOor AAAHC;

 

(b)           Hiringand providing certain non-physician personnel to perform services at theCenter, including the administrator of the Center, all as further describedbelow in Section 3.2;

 

(c)           Negotiatingreimbursement and fee payment methods, in coordination with the Owner, with theappropriate third party payors and state and federal agencies;

 

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(d)           Establishingstaffing schedules, wage structures and personnel policies for allnon-physician personnel;

 

(e)           Recommendingto the Owner patient charges for services provided by the Center;

 

(f)            AssistingOwner in developing operating policies and procedures, and providing standardoperating manuals for operating and procedure rooms, provided Owner shall havefinal authority to adopt and implement same;

 

(g)           Providingstandard formats for all charts, invoices, and other forms used in theoperation of the Center;

 

(h)           Assistingthe Owner in the Owner’s purchase, lease or disposition of all supplies andequipment including information systems hardware and software used in theoperation of the Center;

 

(i)            Directingthe day-to-day non-medical operations of the Center to ensure the operationsare conducted in a businesslike manner;

 

(j)            Performingall non-medical oversight responsibilities for the Owner;

 

(k)           Assistingthe Owner in the Owner’s negotiation or retention of contractual relationshipsfor anesthesia services, radiology services, and pathology services, asappropriate; and

 

(l)            Assistingthe Center to operate in compliance with all laws and assisting the Center andOwner to develop a comprehensive compliance policy and implement same.

 

3.2.                             TheManager shall furnish to the Owner the services of all personnel reasonablynecessary for the effective operation of the Center, other than: (i) physiciansand (ii) any and all allied health professionals determined by the Managerand the Owner to be most properly employed or contracted by the Owner forpurposes of payor requirements or applicable provisions of law. Consistent withapplicable laws, the Manager shall make all hiring, retention, and terminationdecisions, determine compensation and staffing levels, individual work hours,personnel policies, employee benefit programs, and the terms, conditions,obligations and privileges of employment or retention for all personnel who areemployed or retained by the Manager and who provide services to the Owner. Withrespect to any and all clinical personnel (meaning the personnel referenced initems (i) and (ii) above) (collectively the “Clinical Personnel”)providing services to, through or on behalf of the Owner, the Owner shall makeall hiring, retention, and termination decisions, determine compensation andstaffing levels, individual work hours, personnel policies, employee benefitprograms, and the terms, conditions, obligations and privileges of employmentor retention of such Clinical Personnel. Furthermore, the Owner shall have theright and obligation to direct and supervise the delivery of clinicalassistance (if any) by any personnel furnished by the Manager. To the extent(if any) that an employee of the Manager assists any Clinical Personnel inperforming clinical functions, such employee of the Manager shall be subject tothe professional direction and supervision of such Clinical Personnel withrespect to such assistance only, and in his or her performance of such clinicalfunctions, shall not be subject to any direction or control by the Manager,except as may be specifically authorized by the Owner. However, the precedingsentence does not in any way create an employment relationship between theOwner and the Manager’s employee and does not in any way modify the employmentrelationship between the Manager and such employee. The Owner shall be solelyresponsible for the payment of its Clinical Personnel’s compensation andbenefits (if any), any applicable payroll taxes and all other taxes and chargesnow or hereafter applicable to them.

 

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**IV.**                                ACCOUNTINGAND BOOKKEEPING SERVICES

** **

4.1.                             TheManager agrees to perform the following accounting and bookkeeping services forthe Owner in the operation of the Center:

 

(a)           Receivefor and deposit in a bank account (the “Center Account”) as directed by theOwner, separate from any monies of the Manager, all funds received from theoperation of the Center and supervise the disbursement of such funds for theoperation of the Center. The Center Account shall be in the Owner’s name andsole custody without the Manager having the right to draft checks on suchaccount. The Owner and Manager will ensure that the Center Account is managedin accordance with applicable law regarding the assignment and reassignment ofMedicare accounts receivable. In addition, the Manager, through its on-sitebilling personnel, shall prepare bills for the Owner, with all billing in thename of and on behalf of the Owner;

 

(b)           Maintainthe books of account, including all journals and ledgers, check register andpayroll records;

 

(c)           Postall patient and other charges, including necessary analysis and corrections;

 

(d)           Establishbilling, receivables, credit and collection policies and procedures and overseesuch activity;

 

(e)           Processvendors’ invoices and other accounts payable; prepare cheeks for such payablesand obtain the signature of the Owner’s authorized representatives;

 

(f)            Prepareor contract for processing payroll checks from time sheet summaries preparedunder the Manager’s supervision including applicable tax deposits;

 

(g)           Contractfor preparation of the Owner’s tax returns provided that the fees paid toindependent accountants will be the responsibility of the Owner;

 

(h)           Preparemonthly bank reconciliations;

 

(i)            Preparemonthly and annual financial statements, including without limitation,unaudited balance sheet, profit and loss statements and statement of cash flow,the format of which shall be compatible with the information systems of theOwner;

 

(j)            Conductmeetings, no less than quarterly, or as otherwise necessary with the Owner’spersonnel, either telephonically or on-site as required; and

 

(k)           Respondto patient complaints.

 

**V.**                                    FEEFOR SERVICES

** **

5.1.                             Commencingupon the Effective Date of this Agreement, for each month during which theManager renders services in accordance herewith, the Owner shall pay theManager for such services a fee of [      ]percent ([      ]%) **[Note: forIrvine, Arcadia and AH/TO, this will be: “a fee equal to the greater of (a) *percent (*%) of Net Revenues (as hereinafter defined), and (b) $*; forBeverly Hills it’s *%; for Encino it’s *%]** of Net Revenues (ashereinafter defined), payable monthly (the “Accrued Fee”); provided, however,for purposes of the monthly payment of fees under this Article V, in noevent will actual fees paid to Manager in any month exceed[      ] percent([      ]%) **[Note, this**

 

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**will be identical to the percentage usedabove.]** of actual cash receipts in such month (the “CashPayment”). In addition, upon termination of this Agreement, Owner shall payManager an amount equal to the difference between the Accrued Fees less theCash Payment calculated over the term of this Agreement. “Net Revenues” shallmean all of the gross revenues of the Owner calculated in accordance with GAAP(as hereinafter defined), less contractual adjustments and bad debtadjustments. “GAAP” means United States generally accepted accountingprinciples and practices as in effect from time to time, applied consistentlyby the Owner throughout the periods involved. A partial month will be proratedbased on a thirty (30) day period. On or before the tenth (10th) day of eachcalendar month, the Owner shall deliver to the Manager the fee owed for theimmediately preceding calendar month. In the event of the termination orexpiration of this Agreement, the Manager shall be paid all earned and accruedcompensation provided for hereunder. Notwithstanding the foregoing, contractualadjustments and had debt allowance shall be evaluated no less than monthlybased on actual experience to be applied to the current period with respect todetermining Manager’s fee.

 

5.2.                              TheManager shall be reimbursed on a monthly basis for its direct expensesreasonably incurred for the benefit of Owner in connection with the managementof the Center (it being agreed that where such expenses are also attributableto other operations of the Manager unrelated to the Owner or the Center, theyshall be allocated among all such operations in a reasonable manner), including(i) legal fees, consulting, and other professional fees incurred on behalfof the Owner, (ii) the cost of all of the Manager’s personnel who are onsite at the Center and furnish day to day services to the Owner, (iii) thecost of the Manager’s personnel who are not onsite, not regularly assigned toprovide services to the Owner and who provide specialized services (e.g.off-site billing and coding consulting) to the Owner, and (iv) feesrelated to monthly closing processes and reporting services provided to theOwner by Manager’s Nashville-based closing team, and (v) other direct expensesincurred on behalf of the Owner; including any of Manager’s out-of-pocketexpenses of Manager’s personnel who provide services of benefit to the Ownerbut who are not on-site at the Center full-time incurred in connection with itsmanagement of the Center, such as, without limitation, travel expenses such astransportation, meals, hotels, Manager’s entertainment expenses (not salary)related to Manager’s in-market personnel who are performing services forpurposes of developing the Center, etc. Subject to the applicable provisionsabove, reimbursement shall not include salary and benefits of Manager’svisiting personnel assigned to oversee the Center’s operations. Anyreimbursable expenses and unpaid fees due to matters outside the control ofManager or its affiliate (e.g., financial or operating results, payor problems,reimbursement rates, etc.) shall accrue interest at the lesser of eight (8%)percent per annum or the highest rate allowed by law.

 

5.3.                              Owneracknowledges that, pursuant to a Consulting Agreement, of even date herewith(the “Consulting Agreement”) among Manager and the prior “Managing Members” ofthe Owner (the “Consultants”), the Consultants are entitled to receive aportion of the fees described under Section 5.1 as consideration forcertain services performed by the Consultants for the benefit of the Owner andthe Center, under the terms and conditions set forth in the ConsultingAgreement. At the request of the Manager (revocable at any time), Owner shallremit directly to the Consultants that portion of the fees under Section 5.1to which the Consultants are entitled (as calculated by the Manager) pursuantto the Consulting Agreement, and the fees payable to the Manager shall bereduced by the amount paid directly to the Consultants. In no event shall Ownerbe required to pay in excess of the amount set forth in Section 5.1.

 

**VI.**                                INSURANCE

** **

6.1.                              Duringthe term of this Agreement, the Owner and the Manager shall, at the Owner’ssole cost and expense, obtain and maintain with commercial carriers reasonablyacceptable to the Manager (the Owner’s carriers are hereby deemed acceptable toManager) the following insurance coverage:

 

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(a)           appropriateworkers’ compensation coverage for all personnel who are working at the Centerand who are employed by either the Owner or the Manager; and

 

(b)           professional,casualty and comprehensive general liability insurance covering the Owner andpersonnel working at the Center in such amounts, on such basis and upon suchterms and conditions as the Owner and the Manager deem appropriate; and

 

(c)           casualtyand comprehensive general liability insurance which shall insure against lossof or physical damage to the Center and the furniture, fixtures and equipmenttherein, under standard all-risk coverage (including but not limited to fire,smoke, lightening, wind storm, explosion, vehicle damage, riot, civilcommotion, vandalism and malicious mischief) and shall also include damage dueto flood and earthquake unless waived by the Manager.

 

6.2.                             TheManager shall be named an additional insured under all insurance policiesprocured by the Owner hereunder. The right of the Manager to invoke theprotection of such policies shall be severable from and independent of theOwner’s rights, and these policies shall not be terminable or non-renewableexcept upon thirty (30) days’ written notice to the Manager. No later thanthirty (30) days following the execution of this Agreement and thirty (30) daysfollowing the end of each policy year, the Owner shall give to the Manager acopy of the endorsements naming the Manager an additional insured. Suchinsurance policies shall contain endorsements which reflect the primaryliability of the Owner’s insurance carrier for all covered losses provided forherein, notwithstanding any insurance which may be maintained by the Manager orany affiliate of the Manager. The Owner hereby waives any right of contributionwith respect to the loss covered under such policies (or with respect to deductiblesthereunder) against the Manager or any of the Manager’s insurance carriers.

 

**VII.**                            DUTIESAND RESPONSIBILITIES OF THE OWNER

** **

7.1.                             TheOwner shall operate the Center on a full-time basis and, in conjunction withthe medical staff, shall be responsible for the medical care of the patients ofthe Center and shall provide professional medical services to such patients ina manner that is in accordance with the prevailing standards and practices inthe community and in compliance with all applicable laws and regulations. TheOwner shall establish clinical standards and oversee the performance of suchstandards.

 

7.2.                             TheOwner shall admit physicians (the “Medical Staff Physicians”) to the medicalstaff of the Center to render the surgical and other medical services at theCenter. The Owner shall ensure that each such Medical Staff Physician shallmaintain: (i) an unrestricted license to practice medicine in the State ofCalifornia, (ii) good standing with the medical board of the State ofCalifornia, (iii) a Federal Drug Enforcement Administration certificate, (iv) aState of California controlled dangerous substance certificate withoutrestrictions, (v) such hospital medical staff memberships and clinicalprivileges appropriate to his or her specialty, as determined by the Owner andsufficient to meet the requirements of payors, (vi) his or her skillsthrough continuing education and training, (vii) professional liabilityinsurance for his or her specialty in such amounts as agreed upon by theManager and the Owner from time to time, and (viii) such otherrequirements as are reasonably requested by the Center of its medical staff.

 

7.3.                             TheOwner, with the assistance of the Manager, may recruit members to the medicalstaff of the Center and will carry out such administrative functions as may beappropriate for such recruitment, including advertising for and identifyingpotential candidates, examining and investigating the credentials of suchpotential candidates, arranging interviews with such potential candidates, andinterviewing and making the ultimate decision as to whether to admit suchindividual to the medical staff of the Center. Any expenses incurred in therecruitment of medical staff to the Center shall be expenses of the Owner.

 

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7.4.                              TheOwner shall ensure that at all times during the term, each Medical StaffPhysician complies with the bylaws of the medical staff and the rules andregulations of the Center. The rendition of all medical services and thesupervision of all personnel rendering medical services at the Center shall bethe sole and exclusive responsibility of the Owner, acting in conjunction withthe Medical Staff Physicians.

 

7.5.                              Subjectto compliance with confidentiality and other applicable laws, if anydisciplinary actions or professional liability actions are initiated againstany Medical Staff Physician or any physician extender or other personnel of theCenter, the Owner shall promptly inform the Manager of such action and the underlyingfacts and circumstances after the Owner becomes aware thereof.

 

7.6.                              TheOwner, with the assistance of Manager, shall comply with any and all federal,state and local statutes, regulations, rules, orders or other requirements thatthe Owner is responsible for undertaking which affect the Center and/or itsoperations, including without limitation the Center’s billing, coding andcollection practices and systems. The Owner, with the assistance of Manager,shall obtain and maintain all licenses and accreditations as are necessary forthe provision of medical and health care services and the operation of anambulatory surgery center.

 

7.7.                              Withrespect to legal compliance issues, the Owner understands and agrees that theOwner shall be solely responsible for complying with, and ensuring itscompliance with, all applicable federal and state laws, rules andregulations, including without limitation, all Medicare, Medicaid, billing andcoding laws, rules and regulations related to the obligations of Owner hereunder.Manager shall be responsible for complying with, and ensuring the Center’scompliance with, all applicable federal and state laws, rules andregulations with respect to those actions Manager is solely responsible forundertaking pursuant to this Agreement. Although the Owner may consult with theManager regarding compliance issues, the parties hereby explicitly acknowledgeand agree that it shall be the Owner’s sole responsibility to comply with, andto determine whether the Owner and the Center are in compliance with, anyapplicable Medicare or Medicaid laws, rules or regulations or any otherapplicable federal or state laws, rules or regulations.

 

7.8.                              TheOwner shall ensure that the Medical Staff Physicians participate in variousaspects of the managed care arrangements of the Center as required by theapplicable payor contracts. The professional services provided by the Centerand the medical staff shall at all times be provided in accordance withapplicable standards, laws and regulations applying to the medical profession.The Center and the medical staff shall comply with all payor contracts.Notwithstanding the foregoing, no physician shall be required to become a partyto any payor contract.

 

**VIII.**                        INDEPENDENTCONTRACTOR STATUS

** **

Notwithstanding any provision containedherein to the contrary, each of the Owner and the Manager understand and agreethat the parties hereto intend to act and perform as independent contractorsand that therefore neither the Owner nor the Manager is an employee, partner,joint venturer, or agent of the other. Nothing in this Agreement shall beconstrued as placing the parties in a relationship of employer-employee,partners, joint venturers, or principal-agent. Neither party shall have theright to make any promises, warranties or representations, or to assume orcreate any obligations, on behalf of the other party, except as otherwiseexpressly provided herein. The Owner and Manager agree to be solely andentirely responsible for their respective acts and for the acts of any of itsemployees and agents.

 

**IX.**                                CONFIDENTIALINFORMATION

** **

9.1.                              Forthe purpose of this Agreement, the term “Manager Confidential Information”shall include the following: (a) all documents and other materialsprimarily developed by the Manager, including but 

 

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not limited to, all memoranda, clinicalmanuals, handbooks, production books, educational material and audio or visualrecordings primarily developed by the Manager which contain informationrelating to the Operation of the Center or its programs (excluding writtenmaterials distributed to patients in the operation of the Center as promotionfor the Center), (b) all methods, techniques and procedures primarilydeveloped by the Manager which are utilized in providing services to patientsin the Center and are not readily available through sources in the publicdomain and (c) all trademarks, trade names, service marks, or protectedsoftware of the Manager and their related data files. Additionally, thespecific items listed on Schedule 13 hereto, shall be Manager ConfidentialInformation. For purposes of this Agreement, the term “Owner Confidentialinformation” shall include the following: (i) financial information of theOwner or the Center, (ii) medical records of patients receiving servicesat the Center, (iii) data relating to patient care and outcomes (whetherindividually identifiable with respect to any one patient or aggregated withinformation relating to multiple patients), (iv) risk management records,and (v) such other information that specifically pertains to the Owner andis proprietary to the Owner. Notwithstanding anything herein to the contrary,unless otherwise specified under applicable law, the Owner shall be deemed therecords owner for purposes of California law of all patient records at theCenter. The confidentiality of patient records is governed by the HealthInsurance Portability and Accountability Act (“HIPAA”) and the BusinessAssociate Agreement discussed in Section 11.2. To the extent of anyconflict between any of this Article IX, Section 11.2 and theBusiness Associate Agreement, Section 11.2 shall control, then theBusiness Associate Agreement, then this Article IX.

 

9.2.                              TheOwner acknowledges and agrees that the Manager Confidential Information isowned by the Manager and has been disclosed to it in confidence and with theunderstanding that it constitutes valuable business information developed bythe Manager at great expenditure of time, effort and money. The Owner agreesthat it shall not, without the express prior written consent of the Manager,use the Manager Confidential information for any purpose other than theperformance or enforcement of this Agreement or the operation of the Center norallow anyone access to such except on a need to know basis. The Owner furtheragrees to keep strictly confidential and hold in trust all Manager ConfidentialInformation and not disclose or reveal such information to any third partywithout the express prior consent of the Manager or in connection withenforcement of this Agreement. The Manager agrees that the Owner shall have anon-exclusive, royalty-free right to use the Manager Confidential Information,subject to the foregoing restrictions, during the term of this Agreement andfor up to twelve months (12) after the expiration or termination of thisAgreement as is reasonably needed to maintain patient quality standard untilsuch time as replacement materials that do not constitute Manager ConfidentialInformation may be created and implemented.

 

9.3.                              TheManager acknowledges and agrees that the Owner Confidential Information isowned by the Owner and has been disclosed to it in confidence and with theunderstanding that it constitutes valuable business information developed bythe Owner at great expenditure of time, effort and money. The Manager agreesthat it shall not, without the express prior written consent of the Owner, usethe Owner Confidential Information for any purpose other than the performanceof this Agreement or the operation of the Center nor allow anyone access tosuch except on a need to know basis. The Manager further agrees to keepstrictly confidential and hold in trust all Owner Confidential Information andnot disclose or reveal such information to any third party (other than theaffiliates of the Manager) without the express prior written consent of theOwner or in connection with enforcement of this Agreement. In connection withthe foregoing, the Manager shall ensure that its affiliates also maintain theconfidentiality of the Owner Confidential Information in accordance with theterms hereof.

 

9.4.                              Ifthe Owner or the Manager or any of their respective representatives arerequested by a person or entity to disclose the Manager Confidential Informationor the Owner Confidential Information, respectively, in any legal, quasi-legalor administrative proceeding, the Owner or the Manager shall promptly notifythe other party of such request so that the other party may take, at itsexpense, such steps

 

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necessary to protect the Manager ConfidentialInformation or Owner Confidential Information, as applicable. If the Owner orthe Manager is thereafter required to disclose the Manager ConfidentialInformation or the Owner Confidential Information, as applicable, to the personor entity compelling such disclosure only the part of such information as isrequired by law to be disclosed shall be disclosed.

 

9.5.          Upontermination of this Agreement by either party for any reason whatsoever, eachparty shall forthwith return to the other party all material constituting orcontaining Confidential Information of the other party, in a format that isusable or capable of conversion by such other party to a usable format, and noparty thereafter shall use, appropriate, or reproduce such information ordisclose such information to any third party, provided, however, Manager agreesto cooperate with Owner and the Center, after termination, in the transition todifferent management of the Center. All costs of converting ConfidentialInformation to a format useable by the recipient shall be borne by therecipient.

 

9.6.          TheManager and Owner shall each have the right to use any technical or businessexpertise obtained during the course of its engagement hereunder in connectionwith its management of any other facility.

 

**X.            NOTICES**

** **

Any notice, demand or communication required,permitted, or desired to be given hereunder shall be deemed effectively givenupon receipt or refusal to accept receipt when delivered personally, by facsimileor other electronic means or overnight courier, or five (5) days afterbeing deposited in the United States mail, with postage prepaid thereon, orcertified or registered mail, return receipt requested, addressed as follows:

 
|   | The Owner:   | [[1]]                                     |
|--------|--------------|-------------------------------------------|
|   |         | [[2]]                                     |
|   |         | Attn.: President/Chief Manager            |
|   |         |                                      |
|   | The Manager: | SymbionARC Management Services, Inc. |
|   |         | 40 Burton Hills Blvd., Suite 500     |
|   |         | Nashville, Tennessee 37215                |
|   |         | Attn.: President                          |

 

or to such other address, and to theattention of such other person or officer as any party may designate, withcopies thereof to the respective counsel thereof as notified by such party.

 

**XI.           COMPLIANCE PROGRAM/HIPAA**

** **

11.1.        TheOwner acknowledges that the Manager has implemented a compliance program forits employed staff, and the Owner agrees to refrain from any activities thatcould in any way cause the Manager’s staff to act in a manner that isinconsistent with such compliance program. Specifically, but withoutlimitation, the Owner agrees to abide by Medicare and Medicaid billing andcoding requirements, including proper documentation of services, and the Owneragrees to adopt by-laws for its medical staff which will prohibit the medicalstaff from engaging in any activities that could in any way cause the Manager’sstaff to act in a manner that is inconsistent with such compliance program.Prohibitions contained in the by-laws shall include an adequate remedy forbreach thereof by any member of the medical staff. The Owner will at all timescooperate with and assist the Manager’s staff in submitting complete and properbills on behalf of the Owner. The Manager may, but is not obligated to,recommend from time to time that the Owner take certain actions that theManager deems necessary to comply with applicable laws and regulations, and theOwner will promptly cooperate with the Manager in determining 

 

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whether such actions are appropriate andnecessary. The Manager may terminate this Agreement in accordance with Article IIupon its reasonable determination that the Owner’s failure to take therecommended action could cause the Manager to be in violation of its complianceprogram or in violation of applicable laws or regulations. Furthermore, theManager shall not be deemed in breach of this Agreement if it prohibits itsstaff from taking any actions that it reasonably deems to be in violation ofits compliance program or in violation of applicable laws or regulations.

 

11.2.        TheOwner acknowledges as part of Manager’s compliance program Manager shall beimplementing policies and procedures to comply with the Health InsurancePortability and Accountability Act (“HIPAA”). Both parties agree to abide byHIPAA, its regulations and the policies implemented by Manager as well as anyother applicable federal, state, or local privacy or patient confidentialitylaws, and the Manager shall use its commercially reasonable efforts to do thesame. The Owner agrees to adopt any necessary HIPAA provisions in its MedicalStaff by-laws applicable to Medical Staff. The Manager may, but is notobligated to, recommend from time to time that the Owner take certain actionsthat the Manager deems necessary to comply with HIPAA and its applicableregulations, and the Owner will promptly cooperate with the Manager indetermining whether such actions are appropriate and necessary. The partieswill enter into a Business Associate Agreement mutually acceptable to Owner andManager. The Manager may also, if it determines such is necessary, enter intoBusiness Associate Agreements as defined in HIPAA in the Owner’s Nam and onbehalf of the Owner. Neither party shall be deemed in breach of this Agreementif fails to take or prohibits its staff from taking any actions that itreasonably deems to be in violation of HIPAA or its applicable regulations.

 

**XII.         INDEMNIFICATION**

** **

12.1.        TheOwner agrees to indemnify and hold harmless the Manager, its affiliates andshareholders, and their respective shareholders, directors, officers, employeesand agents (collectively, a “Manager Indemnified Party”) from and against anyand all losses, claims, damages, liabilities, costs and expenses (includingreasonable attorneys’ fees and expenses related to the defense of any claims)(a “Loss”), which may be asserted against any of the Manager IndemnifiedParties, in connection with the Manager’s provisions of services to Owner,including Manager’s performance of its duties hereunder if such Loss has notbeen caused by the gross negligence or willful misconduct of a Manager IndemnifiedParty, including without limitation matters relating to: (i) alleged oractual failure by the governing body, board of directors and/or similar body ofthe Owner to perform any of its duties, (ii) any pending or threatenedmedical malpractice or other tort claims asserted against the Manager relatingto the Center, (iii) any action against the Manager brought by any medicalstaff members or former employees, or for matters occurring before thebeginning of the Term of this Agreement, (iv) any act or omission by anymedical staff member, or employee, or other personnel who were under thesupervision of a member of the medical staff as a result of providing medicalservices to such medical staff member’s patient, and (v) any violation ofany requirement applicable to the Center under any federal, state or localenvironmental, hazardous waste or similar law or regulation. In no event shallthe Owner have any liability for any special, exemplary, punitive orconsequential damages (including loss of profit or revenue) suffered orincurred by any Manager Indemnified Party, other than claims for thenon-payment of fees and expenses under Article V hereof.

 

12.2.        TheManager agrees to indemnify and hold harmless the Owner and its partners,members, governors, managers, officers, employees and agents (collectively, an “OwnerIndemnified Party”) from and against all Loss which may be asserted against anOwner Indemnified Party as a result of the gross negligence or willfulmisconduct of the Manager in connection with the performance by the Manager ofits duties hereunder if such Loss has not been caused by the gross negligenceor willful misconduct of an Owner Indemnified Party. *

 

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12.3.        Otherthan claims for the non-payment of fees and expenses under Article Vhereof, this Article XII shall constitute the sole remedy of the partieshereto with respect to any Loss and/or any claim (including any Loss resultingfrom a third party claim) if such Loss and/or claim arises out of thisAgreement, the services provided by the Manager and/or the relationship createdhereby, whether such claim is based in contract, tort, or otherwise, butexcluding claims arising out of willful misconduct or fraud.

 

**XIII.        USE OF NAME/PROPRIETARY PROPERTY**

** **

13.1.        TheOwner hereby grants to the Manager the nonexclusive right, license andprivilege to use the Owner’s logo, if any, and the name “[[1]]” alone or as aportion of or in connection with the corporate name of the Manager during theterm, and subject to all of the terms and conditions provided herein. The Owneragrees to provide the Manager with access, without charge, to the outcomes andother data developed by the Owner for use in the operation of the Center. TheManager may include its name and the name of the Owner on any letterhead,professional announcements, brochures, promotional materials, privateplacements, public offerings, and the like relating to the Owner or theManager.

 

13.2.        TheManager is and shall be the sole owner and holder of all right, title andinterest to the proprietary property of the Manager consisting of allcopyright, service mark and trademark rights and interests in the logo,management information and other systems, forms, form contracts, and policymanuals relating to the Center, but in all cases only if primarily developed bythe Manager and, in all events, excluding any logos purchased or created solelyby the Owner. The Owner agrees that it shall not at any time knowingly harm,misuse or bring into disrepute the proprietary property of the Manager. TheManager agrees that the Owner shall have a non-exclusive, royalty-free right touse such proprietary information, subject to the foregoing restrictions, duringthe term of this Agreement and for up to twelve months (12) after theexpiration or termination of this Agreement as is reasonably needed to maintainpatient quality standard until such time as replacement materials that do notconstitute proprietary information of Manager may be created and implemented.

 

**XIV.        CHANGES IN LAW**

** **

The parties hereto have made all reasonableefforts to ensure that this Agreement represents and memorializes the economicarrangement between the parties hereto and that it complies with all applicablelaws, including, but not limited to, all applicable health care laws. Theparties are aware that there may be no clear or definitive guidance withrespect to the applicability of various health care laws to the managementarrangement contained herein including, but not limited to, the management feearrangement. While the parties have attempted to review and analyze allapplicable laws in an effort to comply with same, the parties acknowledge thatthe applicable health care laws, and interpretations thereof, are often vagueand are constantly changing. The parties therefore understand and acknowledgethat as applicable law, and interpretations thereof, become more settled, thisAgreement may need to be amended in order to comply with such law, orinterpretations thereof, as the case may be. In the event there is such achange in law or the interpretations thereof, whether by statute, regulation,agency or judicial decision, or otherwise, that has any material effect on anyterm of this Agreement, or in the event that reputable counsel with experiencein health law matters to one (1) party determines that any term of thisAgreement poses a material risk of violating such laws, then the applicableterm(s) of this Agreement shall be subject to renegotiation and eitherparty may request renegotiation of the affected term or terms 

 

12

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of thisAgreement, upon written notice to the other party, to remedy such condition. Inthe interim, the parties shall perform their obligations hereunder in full compliancewith applicable law. The parties expressly recognize that upon request forrenegotiation, each party has a duty and obligation to the other only torenegotiate the affected term(s) in good faith and, further, the partiesexpressly agree that their consent to proposals submitted by the other partyduring renegotiation efforts shall not be unreasonably withheld. The partiesfurther expressly recognize that in any such renegotiation, the relativeeconomics to each of the parties shall be preserved. Should the parties beunable to renegotiate the term or terms so affected so as to bring it/them intocompliance with the statute, regulation, decision or interpretation thatrendered it/them unlawful or unenforceable within thirty (30) days of the dateon which notice of a desired renegotiation is given, then either party shall beentitled, after the expiration of said thirty (30) day period, to terminatethis Agreement upon sixty (60) additional days written notice to the otherparty, provided that such party has received an opinion of reputable legalcounsel, which legal counsel and opinion are reasonably acceptable to the otherparty, that it is more likely than not that this Agreement violates applicablelaw.

 

**XV.         MISCELLANEOUS**

** **

15.1.        Uponthe written request of the Secretary of Health and Human Services or theComptroller General or any of their duly authorized representatives, theManager and any of its affiliates providing services with a value or cost of$10,000 or more over a twelve (12) month period shall make available to theSecretary the contracts, books, documents and records that are necessary toverify the nature and extent of the cost of providing such services. Suchinspection shall be available up to four years after the rendering of such services.The parties agree that any applicable attorney-client, accountant-client orother legal privilege shall not be deemed waived by virtue of this Agreement.

 

15.2.        Theparties agree that this Agreement shall be governed by and construed inaccordance with the laws of the State of California. The parties hereto herebydesignate all courts of record sitting in Los Angeles County, California, bothstate and federal, as the exclusive forums where any action, suit or proceedingin respect of or arising out of this Agreement, or the transactionscontemplated by this Agreement shall be prosecuted as to all parties, theirsuccessors and assigns, and by the foregoing designations the parties heretoconsent to the jurisdiction and venue of such courts. In the event of anyaction, suit or proceeding brought by one party hereto against the other toenforce any provision of this Agreement, the prevailing party in suchlitigation shall be entitled to recover attorneys’ fees and costs of litigationin addition to all other remedies available at law or in equity.

 

15.3.        Subjectto provisions herein to the contrary, this Agreement shall inure to the benefitof and be binding upon the parties hereto and their respective legalrepresentatives, successors and permitted assigns.

 

15.4.        Noparty may assign this Agreement without the prior written consent of the otherparty, which consent shall not be unreasonably withheld; provided, however,that the Manager may, without the prior written consent of the Owner, assignits rights and delegate its duties hereunder: (i) to one (1) or moreof its affiliates, provided it is understood that Manager shall remain liablefor the obligations hereunder notwithstanding such assignment and (ii) toa third party as part of a sale of substantially all of the Manager’s assets.In addition, Manager may collaterally assign this Agreement to any lendinginstitution, for security purposes or as collateral, from which the Managerobtains financing. A merger, consolidation, change in shareholders or controllinginterest, or stock-for-stock exchange by the Manager shall not be deemed toconstitute an assignment of this Agreement.

 

15.5.        ThisAgreement is intended solely for the benefit of the parties hereto and is notintended to, and shall not create any enforceable third party beneficiaryrights.

 

13

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15.6.        ThisAgreement may only be amended in a writing signed by the parties. The waiver byany party of a breach or violation of any provision of this Agreement shall notoperate as, or be construed to constitute, a waiver of any subsequent breach ofthe same or any other provision hereof.

 

15.7.        Inthe event any provision of this Agreement is held to be invalid, illegal orunenforceable for any reason and in any respect, such invalidity, illegality,or unenforceability shall in no event affect, prejudice or disturb the validityof the remainder of this Agreement, which shall be and remain in full force andeffect, enforceable in accordance with its terms.

 

15.8.        Wheneverthe context of this Agreement requires, the gender of all words herein shallinclude the masculine, feminine and neuter, and the number of all words hereinshall include the singular and plural.

 

15.9.        Thedivisions of this Agreement into sections and subsections and the use ofcaptions and headings in connection therewith are solely for convenience andshall have no legal effect in construing the provisions of this Agreement.

 

15.10.      ThisAgreement supersedes all previous contracts, and constitutes the entireagreement of whatsoever kind or nature existing between or among the partiesrespecting the within subject matter and no party shall be entitled to benefitsother than those specified herein. As between or among the parties, no oralstatements or prior written material not specifically incorporated herein shallbe of any force and effect. The parties specifically acknowledge that inentering into and executing this Agreement, the parties rely solely upon therepresentations and agreements contained in this Agreement and no others. Allprior representations or agreements, whether written or verbal, not expresslyincorporated herein are superseded and no changes in or additions to thisAgreement shall be recognized unless and until made in writing and signed byall parties hereto. This Agreement may be executed in two (2) or morecounterparts, each and all of which shall be deemed an original and all ofwhich together shall constitute but one (1) and the same instrument.

 

15.11.      Eachparty hereto hereby irrevocably waives any and all rights it may have to demandthat any action, proceeding or counterclaim arising out of or in any wayrelated to this Agreement or the relationships of the parties hereto be triedby jury. This waiver extends to any and all rights to demand a trial by juryarising from any source including, but not limited to, the constitution of theUnited States or any State therein, common law or any applicable statute orregulation. Each party hereto acknowledges that is knowingly and voluntarilywaiving its rights to demand trial by jury.

 

15.12.      Theprovisions of Article IX, XII and XV and Article 13.2 shall surviveany termination or expiration of this Agreement.

 

15.13.      Eachparty shall, at the reasonable request and expense of any other party hereto,execute and deliver to such other party all such further instruments,assignments, assurances and other documents, and take such actions as suchother party may reasonably request in connection with the carrying out of thisAgreement.

 

15.14.      Thelanguage in all parts of this Agreement shall be construed, in all cases,according to its fair meaning. The parties acknowledge that each party and itscounsel have reviewed and revised this Agreement and that the normal rule ofconstruction to the effect that any ambiguities are to be resolved against thedrafting party shall not be employed in the interpretation of this Agreement.

 

15.15.      TheOwner shall at all times during the term, and at all times thereafter, makeavailable to the Manager for inspection by its authorized representativesduring regular business hours, at the principal place of business of the Owner,any records of the Owner determined by the Manager to be necessary to 

 

14

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perform its services and carry out itsresponsibilities hereunder or necessary for the defense of any legal oradministrative action or claim relating to said records or necessary for anyother reasonable purpose.

 

15.16.      Asused herein, “affiliate” means, as to the Person (as hereinafter defined) inquestion, any Person that directly or indirectly controls, is controlled by, oris under control with, the Person in question and any successors or assigns ofsuch Person; and the term “control” means possession, directly or indirectly,of the power to direct or cause the direction of the management and policies ofa Person whether through ownership of voting securities, by contract orotherwise. “Person” means an association, a corporation, a limited liabilitycompany, an individual, a partnership, a limited liability partnership, a trustor any other entity or organization.

 

**[Remainder of page intentionallyleft blank.]**

 

15

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IN WITNESS WHEREOF, the parties have executedthis Agreement on the date first above written.

 
|       | **MANAGER:**                                                   |
|------------|----------------------------------------------------------------|
|       |                                                           |   |
|       |                                                           |   |
|       | SYMBIONARC MANAGEMENT SERVICES, INC., a  Tennessee corporation |
|       |                                                           |   |
|       |                                                           |   |
|       | By:                                                            |   |
|       |                                                           | Charles T. Neal, President |
|       |                                                           |   |
|       |                                                           |   |
|       | **OWNER:**                                                     |
|       |                                                           | ** ** |
|       |                                                           |   |
|       | [[1]], a California limited liability company                  |
|       |                                                           |   |
|       |                                                           |   |
| ** ** | **By:**                                                        | [                              ] |
| ** ** | ** **                                                     |   |
|       |                                                           |   |
|       |                                                           | By: |   |
|       |                                                           |   |
|       |                                                           |   |
|       |                                                           | Its: |   |

 

16

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**SCHEDULE A**

** **

**CENTERS**

** **

[Beverly:

 

1.             9575Brighton Way, Suite 100, Beverly Hills, CA 90210.

 

2.             8670Wilshire Boulevard, Suite 300, Beverly Hills, CA 90211.]

 

[Encino: 16501 Ventura Boulevard, Suite 103,Encino, CA 91436]

 

[Irvine: 15825 Laguna Canyon Road, Suite 200,Irvine, CA 92618.]

 

[Arcadia: 51 North Fifth Avenue, Suite 101,Arcadia, CA 91006.]

 

[Thousand Oaks: 696 Hampshire Road, ThousandOaks, CA 91361.]

 

[Van Nuys: 6815 Noble Avenue, Van Nuys, CA91405.]

 

17

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**SCHEDULE B**

** **

SARC*/Manager’s Accounting Manual

 

SARC/Manager’s Administrators Manual

 

SARC/Manager’s Corporate Compliance Manual

 

SARC/Manager’s Human Resource Manual

 

SARC/Manager’s Job Description andPerformance Appraisal Manual

 

SARC/Manager’s Clinical Policy and Procedures

 

SARC/Manager’s HIPAA Manual

 

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*SARC = Symbion Ambulatory Resource Centers, Inc.

 

18

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**EXHIBIT 1.2(B)**

 

**Form of Escrow Agreement**

 

**(To be attached at Closing)**

 

----

 

**ESCROW AGREEMENT**

** **

THIS ESCROW AGREEMENT (this “Agreement”), datedas of                     ,2005, is by and among Parthenon Management Partners, LLC, a California limitedliability company (the “Company”), Andrew A. Brooks, M.D. and Randhir S.Tuli, both residents of the State of California (each an “Owner” and,collectively the “Owners”) (the Company and the Owners being,collectively, the “Sellers”), SymbionARC Management Services, Inc.,a Tennessee corporation (the “Purchaser”), and Bank of America, N.A. (the “Escrow Agent”).

 

**RECITALS**

** **

A.                                   Concurrentlywith the execution of this Agreement, the Purchaser is acquiring certainmanagement rights from the Sellers as described in the Management RightsPurchase Agreement dated                   ,2005 (the “Purchase Agreement”), a copy of which is attached hereto as Exhibit A.

 

B.                                     Theexecution and delivery of this Agreement is a condition to the consummation ofthe transactions contemplated by the Purchase Agreement.

 

C.                                     Capitalizedterms used in this Agreement but not defined are used in this Agreement asdefined in the Purchase Agreement.

 

NOW THEREFORE, in consideration of the mutual promisesand subject to the terms and conditions herein contained, and other good andvaluable consideration, had and received, the sufficiency and receipt of whichare hereby acknowledged, the parties hereto agree as follows:

 

1.                                       Appointmentof Escrow Agent.  The Purchaser andthe Sellers hereby appoint and designate the Escrow Agent as the escrow agentfor the purposes set forth in this Agreement, and the Escrow Agent herebyaccepts such appointment under the terms and conditions set forth in thisAgreement.  Notwithstanding thereferences in this Agreement to the Purchase Agreement, the Purchaser and theSellers acknowledge that the Escrow Agent is not a party to the PurchaseAgreement for any purpose or responsible for its interpretation or enforcement.

 

2.                                       Depositin Escrow.  Simultaneously with theexecution and delivery of this Agreement, the Purchaser shall deposit with theEscrow Agent (for the account of Sellers) an aggregate amount equal to THREEHUNDRED THIRTY THREE THOUSAND THREE HUNDRED THIRTY THREE AND NO/100 DOLLARS($333,333.00) (together with all income earned thereon, the “Escrow Funds”).The Escrow Agent shall hold and disburse the Escrow Funds in accordance withthe terms and conditions of this Agreement. The Escrow Funds shall not besubject to lien or attachment by any creditor of any party hereto and shall beused solely for the purpose set forth in the Purchase Agreement.  Except as expressly stated herein, the EscrowFunds shall not be available to, and shall not be used by, the Escrow Agent to setoff any obligations of either the Purchaser or the Sellers owing to the EscrowAgent in any capacity.

 

3.                                       Investment.  The Escrow Agent shall invest the EscrowFunds in such manner as is jointly specified in writing from time to time bythe Purchaser and the Sellers.  Absentsuch direction, the Escrow Agent shall invest the Escrow Funds in Bank ofAmerica Funds, National Tax-Free Money Market Fund.  Any investment income realized on the EscrowFunds shall be distributed to the Sellers quarterly in accordance with eachSeller’s respective “Pro Rata Share” as set forth on Exhibit B andshall not become part of the Escrow Funds. Promptly following the conclusion of each calendar quarter, the EscrowAgent shall deliver to each Seller a written statement of account with respectto any investment income realized on the Escrow Funds in accordance with theirPro Rata Shares.

 

In accordance withProposed Treasury Regulations §1.468B-8, the Purchaser shall be treated as theowner of the Escrow Funds for federal and state income tax purposes while it isheld by the Escrow Agent, and the Escrow Agent shall, for each calendar year(or portion thereof) for which the Escrow Fund is so held report the interestearned on the Escrow Funds on IRS Form 1099 and corresponding state incometax forms with applicable law and regulations, showing the Escrow Agent as thepayor and showing the Purchaser as the payee unless the Purchaser

 

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and Sellers’ Committees shall have delivered to the Escrow Agent astatement that specifies otherwise in accordance with Proposed TreasuryRegulations §1.468B-8(f).  As a matterbetween the Sellers and the Purchaser with which Escrow Agent need not beconcerned, the Sellers and the Purchaser agree that upon distribution of anyportion of the Escrow Fund to the Sellers (i) a portion of eachdistribution made to a Seller out of the Escrow Fund shall be considered acontingent payment to the Seller by the applicable Purchaser with respect to adebt instrument described to which Internal Revenue Code Section 1274applies, (ii) the appropriate portion of each distribution so made to theSeller shall be treated as original issue discount on a debt instrument issuedby the applicable Purchaser to the Seller, calculated in accordance withTreasury Regulations Section 1.1275-4(c) based on the short-termapplicable federal rate (as defined in Section 1274(d) of theInternal Revenue Code) for July, 2005, and (iii) the Purchaser shall nottake any position on a tax return inconsistent with the foregoing orinconsistent with installment sale reporting by the Sellers with respect to theportion of distributions to the Sellers out of the Escrow Fund not so treatedas original issue discount.

 

4.                                       Distributions.

 

(a)                                  The Escrow Agent shall disburse theEscrow Funds not later than the second business day next following receipt of astatement signed by Purchaser (the “Instruction Letter”) instructing theEscrow Funds to be distributed to the Sellers in accordance with their Pro RataShares.  Disbursements to each Sellershall be paid by wire transfer of immediately available funds to the bankaccount listed for such Seller on Exhibit A hereto, or as otherwiseindicated by such Seller in a written notice to the Escrow Agent in accordancewith the provisions of Section 10. Upon such payment, this Agreement (other than Section 5, 6, 8(b) and9) shall automatically terminate.

 

(b)                                 If the Escrow Agent shall not havereceived an Instruction Letter from the Purchaser on or before December 31,2005, it will disburse the Escrow Funds to the Purchaser not later than the secondbusiness day next following December 31, 2005.  Upon such payment, this Agreement (other thanSection 5, 6, 8(b) and 9) shall automatically terminate.

 

(c)                                  Without limiting the foregoing, the Escrow Agent shallnot make any payment or distribution of Escrow Funds except as and in themanner expressly provided by this Escrow Agreement.

 

5.                                       EscrowAgent Compensation.  The Escrow Agentis to be compensated $1,500.00 for the performance of its duties under thisAgreement (the “Escrow Fees”). All initial Escrow Fees shall be paid in equal amounts by the Purchaseron the one hand and the Sellers on the other hand, and they shall be jointlyand severally responsible therefor (with a right of contribution as between thePurchaser for 50% of such fees and the Sellers for 50% of such fees, whichshall be pro rated among the Sellers in accordance with the Sellers’ Pro RataShares).  If any fees or expenses of theEscrow Agent are not paid in full when due, the Escrow Agent may deduct theunpaid portion of such additional fees or expenses, if any, from any payment tobe made to the Purchaser or the Sellers hereunder.  This Section shall survive anytermination of this Agreement.

 

6.                                       Obligationsand Liabilities of the Escrow Agent.

 

(a)                                  TheEscrow Agent has no duties or obligations other than those specifically setforth in this Agreement.

 

(b)                                 TheEscrow Agent is not responsible in any manner whatsoever for any failure orinability of any party other than the Escrow Agent to honor any of theprovisions of this Agreement.

 

(c)                                  TheEscrow Agent is fully protected in acting or refraining from acting upon andrelying upon any written notice (including, without limitation, any Certificateof Instruction, Resolution Certificate or Litigation Certificate), direction,request, waiver, consent, receipt or other paper or document that the EscrowAgent in good faith believes to have been signed or presented by the properparty or parties.  The Escrow Agent shallnot be responsible for or have any duty to ascertain or inquire into thecontents of any written notice (including, without limitation, any Certificateof Instruction, Resolution Certificate or Litigation Certificate), direction,request, waiver, consent, receipt or other paper or document deliveredhereunder.  Without limiting thegenerality of the foregoing, the Escrow Agent shall not be responsible for orhave any duty to ascertain or inquire as to the validity,

 

----

 

enforceability, sufficiency or genuineness of any Certificate ofInstruction, Resolution Certificate or Litigation Certificate.

 

(d)                                 TheEscrow Agent will not be liable for any error of judgment or for any act doneor step taken or omitted by it in good faith or for any mistake in fact or lawor for anything that it may do or refrain from doing in connection with thisAgreement, except for its own gross negligence, willful misconduct or act ofbad faith.

 

(e)                                  Inthe event that the Escrow Agent (i) shall be uncertain as to its duties orrights hereunder or (ii) shall receive conflicting instructions, claims ordemands from the Purchaser or the Sellers, the Escrow Agent shall be entitledto refrain from taking any action other than to keep safely all property heldin escrow as to which a dispute exists until (A) the Escrow Agent shall bedirected otherwise in writing by the Sellers and the Purchaser or (B) inany event, until the Escrow Agent shall be directed by a court order.

 

(f)                                    TheEscrow Agent may consult with, and obtain advice from, legal counsel in theevent of any dispute or construction of any of the provisions of this Agreementor its duties under this Agreement, and the Escrow Agent will incur noliability and will be fully protected in acting or refraining from acting ingood faith in accordance with the advice of such counsel.

 

7.                                       AutomaticSuccession; Resignation and Removal of Escrow Agent.

 

(a)                                  Any company into which the Escrow Agentmay be merged or with which it may be consolidated or any company to whom theEscrow Agent may transfer a substantial amount of its global escrow business,will be the successor to the Escrow Agent without the execution or filing ofany paper or further act on the part of any parties, except that written noticemust be provided to the Purchaser and the Sellers, notwithstanding anything inthis Agreement to the contrary.

 

(b)                                 The Escrow Agent may resign as escrowagent at any time with or without cause by giving written notice to thePurchaser and the Sellers, such resignation to be effective 30 calendar daysfollowing the date such notice is given. In addition, the Purchaser and the Sellers jointly may remove the EscrowAgent as escrow agent at any time with or without cause by an instrument (whichmay be executed in counterparts), given to the Escrow Agent, which instrumentmust designate the effective date of such removal.  If any such resignation or removal occurs, asuccessor escrow agent will be appointed by the Purchaser and the Sellers.  Any such successor escrow agent shall deliverto the Purchaser and the Sellers a written instrument accepting suchappointment and upon such delivery it will succeed to all of the rights andduties of the Escrow Agent under this Agreement and will be entitled to receivethe Escrow Funds.

 

(c)                                  If the Purchaser and all of the Sellersare unable to agree upon a successor escrow agent or have failed to appoint asuccessor escrow agent prior to the expiration of 30 calendar days followingthe date of the notice of resignation or removal, the then acting escrow agentshall appoint as a successor escrow agent a banking institution of national orregional prominence.  Any suchappointment will be binding upon all of the parties to this Agreement.

 

(d)                                 Upon acknowledgment by any successorescrow agent of the receipt of the Escrow Funds, the then replaced escrow agentwill be fully relieved of all duties, responsibilities and obligations underthis Agreement except (i) with respect to actions previously taken oromitted by such replaced escrow agent and (ii) the provisions of Articles5, 6, 8(b) and 9 shall continue in effect for the benefit of such replacedescrow agent and its affiliates, officers, directors, employees, agents andadvisors with respect to actions previously taken or omitted by such replacedescrow agent.

 

8.                                       Disputes.

 

(a)                                  In the event of any dispute between theparties hereto, the Escrow Agent may tender into the registry or custody of anycourt of competent jurisdiction all money or property in its hands delivered toit pursuant to this Agreement, together with such pleadings as it deemsappropriate, and shall, thereupon, be discharged from all further duties andliabilities under this Agreement; provided, however, that the filing of anysuch

 

----

 

legal proceedings shallnot deprive Escrow Agent of its compensation hereunder earned prior to suchfiling and discharge of Escrow Agent of its duties hereunder.

 

(b)                                 Notwithstanding anything in thisAgreement to the contrary, in the event that the Escrow Agent incurs any feesand expenses in connection with any dispute under this Agreement for which itis entitled to reimbursement under this Agreement, the Purchaser and theSellers shall promptly reimburse the Escrow Agent therefor in equal amounts bythe Purchaser on the one hand and the Sellers on the other hand, and they shallbe jointly and severally responsible therefor (with a right of contribution asbetween the Purchaser for 50% of such expenses and the Sellers for 50% of suchexpenses, which shall be pro rated among the Sellers in accordance with theSellers’ Pro Rata Shares).  If any feesor expenses of the Escrow Agent are not paid in full when due, the Escrow Agentmay deduct the unpaid portion of such additional fees and expenses, if any,from any payment to be made to the Purchaser or the Sellers hereunder.  This Section shall survive anytermination of this Agreement.

 

9.                                       Indemnificationof Escrow Agent.  In partialconsideration of the Escrow Agent’s acceptance of this appointment, thePurchaser and the Sellers shall indemnify the Escrow Agent and its affiliates,officers, directors, employees, agents and advisors (each an “Indemnitee”),and hold each Indemnitee harmless from, any and all losses, claims, damages,liabilities and related expenses (including, among other things, reasonableattorneys’ fees and expenses) incurred by it to any person or party (includingPurchaser or any Seller) by reason of its having accepted such appointment orin carrying out the terms of this Agreement, all of which shall be borne inequal amounts by the Purchaser on the one hand and the Sellers on the otherhand, and they shall be jointly and severally responsible therefor (with aright of contribution as between the Purchaser for 50% of such indemnificationand the Sellers for 50% of such indemnification, which shall be pro rated amongthe Sellers in accordance with the Sellers’ Pro Rata Shares).  Notwithstanding the foregoing, no indemnityneed be paid in case of the Escrow Agent’s gross negligence or willfulmisconduct.  If any amounts owing underthis Section 9 are not paid in full when due, the Escrow Agent may deductthe unpaid portion of such amounts, if any, from any payment to be made to thePurchaser or the Sellers hereunder.  ThisSection shall survive any termination of this Agreement.

 

10.                                 Notices.  All notices must be in writing and will bedeemed to have been given (i) if delivered in person or by a nationallyrecognized overnight courier service or (ii) upon confirmation of receiptif sent by facsimile, to the following addresses:

 

(a)                                  If to the Purchaser:

 

c/o Symbion, Inc.40 Burton Hills Boulevard, Suite 500Nashville, Tennessee  37215Attention:  PresidentFacsimile No: (615) 234-5999

 

with a copy to:

 

Waller Lansden Dortch &Davis, PLLC

511 Union Street, Suite 2700

Nashville, Tennessee37219

Attention:  Joseph A. Sowell, III, Esq.

Facsimile No.:  (615) 244-6804

 

(b)                                 If to the Sellers:

 

To the addresses setforth on the signature page

with copies to counsel tothe LLCs and the Sellers, respectively:

 

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Sheppard, Mullin, Richter & HamptonLLP333 South Hope Street, 48th FloorLos Angeles, California 90071Attention:  Lawrence M. BraunFacsimile No: (213) 443-2776

 

and

 

Guth | Christopher LLP10866 Wilshire Blvd, Suite 1250Los Angeles, California 90024Attention: Theodore E. GuthFacsimile No: (310) 470-8354

 

(c)                                  If to the Escrow Agent:

 

Bankof America, N.A.

414Union Street

Nashville,Tennessee 37219

Attention:  Elizabeth Knox

FacsimileNo.:  (615) 749-4951

 

with acopy to:

 

Moore & Van Allen PLLC

100 N. Tryon St., Floor 47

Charlotte, North Carolina 28202-4003

Attention: Win Porter

Facsimile No.: (704)331-1032

 

11.                                 BindingEffect.  This Agreement is bindingand inures to the benefit of the parties and their respective successors andpermitted assigns.

 

12.                                 Assignment.  This Agreement may not be assigned ortransferred, by operation of law or otherwise except pursuant to Section 7(a) orupon a written agreement executed by the Sellers, the Purchaser and the EscrowAgent; provided, however, that the Purchaser may assign thisAgreement to any of its lenders or any Affiliate of the Purchaser and eachSeller may assign this Agreement to any partner, member or owner (direct orindirect) of such Seller or any entity controlled by such Seller or itspartner, member or owner.

 

13.                                 ThirdParty Beneficiaries.  Nothing in thisAgreement is intended or will be construed to confer on any person other thanthe parties or their successors and assigns any rights or benefits under thisAgreement.

 

14.                                 Headings.  The headings in this Agreement are intendedsolely for the convenience of reference and will be given no effect in theconstruction or interpretation of this Agreement.

 

15.                                 Exhibits.  The Exhibits and other attachments heretowill be deemed to be a part of this Agreement.

 

16.                                 Counterparts.  This Agreement may be executed in multiplecounterparts, each of which will be deemed an original, and all of whichtogether will constitute one and the same document.

 

17.                                 GoverningLaw and Venue.  This Agreement mustbe governed by and construed under California law, without regard to conflictof laws principles.  The parties heretohereby designate all courts of record sitting in Los Angeles County,California, both state and federal, as the exclusive forums where any action,suit or proceeding in respect of or arising out of this Agreement, or thetransactions contemplated by this Agreement shall be

 

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prosecuted as to allparties, their successors and assigns, and by the foregoing designations theparties hereto consent to the exclusive jurisdiction and venue of such courts.

 

18.                                 Amendment.  No amendment of this Agreement is bindingunless made in a written instrument that specifically refers to this Agreementand is signed by the Purchaser, the Sellers and the Escrow Agent.

 

19.                                 EntireAgreement.  This Agreement and thePurchase Agreement (solely with respect to the Sellers and the Purchaser)contain the entire understanding among the parties and supersede any priorunderstanding and agreements between them, in each case respecting this subjectmatter.  There are no representations,agreements or understandings, oral or written, between or among the parties tothis Agreement relating to the subject matter of this Agreement that are notfully expressed in this Agreement or the Purchase Agreement (solely withrespect to the Sellers and the Purchaser).

 

****Signature page follows.****

 

----

 

IN WITNESS WHEREOF, the partieshereto have executed this Agreement as of the date first above written.

 
|   | ESCROW AGENT:                        |
|--------|--------------------------------------|
|   |                                 |
|   | BANK OF AMERICA, N.A.                |
|   |                                 |
|   | By:                                  |   |
|   | Name:                                |   |
|   | Title:                               |   |
|   |                                 |
|   |                                 |
|   | PURCHASER:                           |
|   |                                 |
|   | SYMBIONARC MANAGEMENT SERVICES, INC. |
|   |                                 |
|   | By:                                  |   |
|   | Name:                                |   |
|   | Title:                               |   |
|   |                                 |
|   |                                 |
|   | SELLERS:                             |
|   |                                 |
|   | PARTHENON MANAGEMENT PARTNERS, LLC   |
|   |                                 |
|   | By:                                  |   |
|   | Name:                                |   |
|   | Title:                               |   |
|   |                                 |
|   | Address for notices:                 |
|   |                                 |
|   |                                 |
|   |                                 |
|   |                                 |
|   |                                 |
|   |                                 |
|   | Andrew A. Brooks, M.D.               |
|   | Address for notices:                 |
|   |                                 |
|   |                                 |
|   |                                 |
|   |                                 |
|   |                                 |
|   |                                 |
|   | Randhir S. Tuli                      |
|   | Address for notices:                 |
|   |                                 |
|   |                                 |
|   |                                 |

 

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** **

**EXHIBIT A**

** **

**Purchase Agreement**

 

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**EXHIBIT B**

 
| **Sellers**                         | ** ** | **Wiring Instructions** | ** ** | **Pro Rata Share** | ** ** |
|-------------------------------------|------------|-------------------------|------------|--------------------|------------|
| Andrew  A. Brooks, M.D.             |       |                    |       |               |       |
|                                |       |                    |       |               |       |
| Randhir  S. Tuli                    |       |                    |       |               |       |
|                                |       |                    |       |               |       |
| Parthenon  Management Partners, LLC |       |                    |       |               |       |

 

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**EXHIBIT 1.3**

 

**Form of Assignment**

 

**(See Attached)**

 

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**EXHIBIT1.3**

** **

**FORM OF ASSIGNMENT**

** **

This ASSIGNMENT (this “Assignment”)dated as of                          ,2005 is between Parthenon Management Partners, LLC, a California limitedliability company, Andrew A. Brooks, M.D., a resident of the state ofCalifornia and Randhir S. Tuli, a resident of the state of California****(collectively, “Assignors” and eachindividually an “Assignor”) and SymbionARC Management Services, Inc., aTennessee corporation (“Assignee”). Capitalized terms used and not otherwise defined herein shall have themeanings ascribed to such terms in the Management Rights Purchase Agreement (ashereinafter defined).

 

W I T N E S S E T H :

 

WHEREAS, as of the datehereof, Assignors own rights in and to certain economic interests (the “ManagementRights”) that entitle Assignors to receive consideration for and obligateAssignors to perform certain management responsibilities for each of theBrighton Center, the Wilshire Center, the Encino Center, the Irvine Center, theArcadia Center and the Thousand Oaks Center; and

 

WHEREAS, Assignors andAssignee are parties to that certain Management Rights Purchase Agreement,dated as of July 27, 2005 (the “Management Rights Purchase Agreement”),providing for, among other things, the transfer and assignment to Assignee byAssignors of all of Assignors’ Management Rights, in consideration of thepayment of the Purchase Price therefor, in the amount and manner and on theterms and conditions provided in the Management Rights Purchase Agreement; and

 

WHEREAS, the parties nowdesire to carry out the intent and purpose of the Management Rights PurchaseAgreement by Assignors’ execution and delivery to Assignee of this instrumentevidencing the vesting in Assignee of all of Assignors’ Management Rights, inaddition to such other instruments as Assignee shall have otherwise received ormay hereafter request.

 

NOW, THEREFORE, inconsideration of the foregoing premises, and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereby agree as follows:

 

1.             Transfer and Assignment.  Assignorshereby convey, assign, transfer and deliver to Assignee, its successors andassigns, to have and to hold all and singular to its and their use and benefitall right, title and interest, legal and equitable, in and to Assignors’Management Rights, free and clear of any and all claims, liens, securityinterests, rights of first refusal, options, warrants or other encumbrances ofany nature.

 

2.             Purchase Price.  On the datehereof, Assignee shall deliver to Assignor the portion of the Purchase Price towhich Assignor is entitled, as provided in the Management Rights PurchaseAgreement.

 

3.             Cooperation.  The parties,from time to time after the delivery of this Assignment, will to the extentpermitted by law and agreements to which they are a party, upon the reasonablerequest of the other party hereto, execute, acknowledge and deliver all suchfurther documents as may be reasonably required for the assignment and transferof the Management Rights to Assignee.

 

4.             Benefit; Purpose; Modification. This Assignment shall inure to the benefit of Assignors, Assignee andtheir respective legal representatives, successors and assigns.  The sole purpose hereof is to assign andtransfer the Management Rights to Assignee and not to create third partybeneficiary rights. Therefore, this Assignment may be modified by a writingsigned by Assignors and Assignee without the consent of any third party.

 

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IN WITNESS WHEREOF, theparties hereto have caused this Assignment to be duly executed in severalcounterparts (each of which shall constitute an original hereof) by theirrespective duly authorized officers as of the date first above written.

 

 
|   | **PARTHENON  MANAGEMENT PARTNERS, LLC**   |
|--------|-------------------------------------------|
|   |                                      |
|   | By:                                       |   |
|   | Name:                                     |   |
|   | Title:                                    |   |
|   |                                      |
|   |                                      |
|   |                                      |
|   | ANDREW A. BROOKS, M.D.                    |
|   |                                      |
|   |                                      |
|   |                                      |
|   | **RANDHIR  S. TULI**                      |
|   |                                      |
|   |                                      |
|   | **SYMBIONARC  MANAGEMENT SERVICES, INC.** |
|   |                                      |   |
|   | By:                                       |   |
|   | Name:                                     |   |
|   | Title:                                    |   |

 

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**EXHIBIT 6.7**

 

**Form of Consulting Agreement**

 

**(See Attached)**

 

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**CONSULTINGAGREEMENT**

 

This CONSULTING AGREEMENT (this “Agreement”), dated asof                        ,2005 (the “Effective Date”), is by and between SymbionARC Management Services, Inc.,a Tennessee corporation (the “Manager”) and Parthenon Management Partners, LLC, a California limited liability company****(the “Contractor”), Andrew A. Brooks, M.D. and Randhir S.Tuli (each an “Owner” and, together, the “Owners”).  The Owners own all of the outstanding equitysecurities of the Contractor.

 

**W I T NE S S E T H:**

** **

WHEREAS, the Manager manages each of those ambulatorysurgery centers or other healthcare facilities identified on Schedule 1hereto (each a “Center” and, collectively, the “Centers”), which Centers shallbe classified on such Schedule 1 as being an “Existing Center” or a “DevelopingCenter” ; and

 

WHEREAS, pursuant to that certain Management RightsPurchase Agreement, dated                  ,2005 (the “MRPA”), Contractor and the Owners have sold to Manager all of theirrights in and to those certain economic interests that entitle Contractor andthe Owners to receive consideration for and obligate them to perform certainmanagement responsibilities for each Center; and

 

WHEREAS, the Manager desires to enter into thisAgreement with the Contractor pursuant to which Contractor will provide theManager with (A) consulting and oversight services relating to theoperation of the Centers and the transition of management of the Centers, and (B) assistancein the identification and consummation of opportunities to develop and acquireSurgical Businesses (as defined below), and the Contractor desires to providesuch all such services to the Manager.

 

NOW, THEREFORE, the Manager, the Contractor and theOwners agree as follows:

 

**ARTICLE IDUTIES OF THE CONTRACTOR**

** **

**1.1.****        ****Generally.** The Manager hereby retains the Contractor and the Owners for the purposeof providing consulting and oversight services to the Manager relating to theoperation of the Centers identified on Schedule 1 hereto and the transitionof management of such Centers.  Inperforming their obligations under this Agreement, the Contractor and theOwners shall act in good faith and with reasonable diligence and devote theirreasonable best efforts to the duties set forth herein, in all respects subjectto the reasonable control of the Manager. The Manager and the Contractor agree and acknowledge that the Manager isrelying on the efforts and expertise of the Contractor and the Owners.  Contractors will not be required to pay forany operating costs of the Centers.

 

**1.2.****        ****Duties of the Contractor.** The Contractor and the Owners covenant and agree:

 

a.             to provide those services set forth on Exhibit 1.2attached hereto for each Center during that Center’s Payment Period;

 

b.             that the Contractor and the Owners shallperform such services in a business-like manner in accordance with suchreasonable policies and directives adopted by the Manager from time to time andcommunicated in writing to the Contractor and the Owners; and

 

c.             to take all reasonable actions andexecute all documents necessary to carry out the terms and purposes of thisAgreement.

 

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**1.3.****        ****Duties of the Manager.** The Manager covenants and agrees:

 

a.       to provide such information and guidanceas is reasonably necessary for the Contractor to satisfy its contractualobligations under this contract in a timely manner; and

 

b.       to take all reasonable actions andexecute all documents necessary to carry out the terms and purposes of thisAgreement.

 

**1.4.****        ****No Partnership.** The Contractor, the Owners and the Manager affirmatively state that theydo not have the intention and are not forming a joint venture or partnershipfor tax or any other purposes.  Therelationship created hereby is that of agents (the Contractor and the Owners)contracting with a principal (the Manager) as independent contractors.

 

**1.5****         ****DEA and CLIA Certificates**. The Manager shall use commercially reasonable efforts to transitionpromptly the DEA and CLIA certificates currently in place at the ExistingCenters and Developing Centers held in Dr. Brooks’ name to the name of therespective Centers.  Until suchcertificates are so reissued, Dr. Brooks agrees to have such registrationsand certificates continue in his name, to take any actions required inconnection therewith as reasonably requested by the Manager and to execute anynecessary and appropriate power of attorney or other document to effectuatethis arrangement.  The Manager shallreimburse Dr. Brooks for his reasonable expenses in connection with thisarrangement.

 

**ARTICLE IIFEES PAYABLE TO THE CONTRACTOR**

** **

**2.1.****        ****Consulting and Oversight Fee. **During all Payment Periods (as defined below), theManager shall pay the Contractor for the services rendered under Article Ihereof a fee (the “Consulting and Oversight Fee”) equal to the sum of:

 

(A)          fifty percent (50%) of the aggregategross amount of all Management Fees (as defined below) actually collected byManager from an Existing Center during such Existing Center’s Payment Period;and

 

(B)           forty percent (40%) of the aggregategross amount of all Management Fees actually collected by Manager from aDeveloping Center during such Developing Center’s Payment Period.

 

“Payment Period” shall mean, with respect to anyCenter, the period commencing on the Payment Commencement Date and ending onthe earlier of (x) the date, if any, on which Manager and/or itsaffiliates purchase all of the “Option Interests” (as defined in the MIPA)owned by Owners and Contractor in such Center pursuant to Section 1.4 ofthe Purchase Agreement, dated            , 2005,to which Owners, several affiliates of Manager and others are parties (the “MIPA”),(y) the termination of Contractor’s obligations under Section 1.2hereof with respect to such Center or (z) the termination of the Agreementunder Section 3.2, 3.3 or 3.4 hereof. The “Payment Commencement Date” shall be (I) the Effective Datewith respect to (a) any Existing Center and (b) any Developing Centerat which procedures are being regularly performed as of the Effective Date, and(II) with respect to any other Developing Center, the date on which thefirst procedure is performed at such Developing Center.

 

**2.2.****        ****Calculation of Management Fees. **As used herein, “Management Fees” means all fees (butnot the amount of any reimbursements made under the Management Agreements)payable, without any deductions whatsoever, under Section 5.1 of each ofthose certain Management Agreements (the 

 

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“ManagementAgreements”) entered into or to be entered into between the Manager and each ofthe Centers.  No amendment of anyManagement Agreement will affect the calculation of the Management Fees, whichwill continue to be calculated based on the terms of the Management Agreementin force on the date hereof unless otherwise consented in writing by theContractor.  The expiration in accordancewith its terms of the term of a Management Agreement shall not be an amendmentfor purposes of the preceding sentence. The Consulting and Oversight Fee shall be payable monthly on or beforethe fifteenth (15th) day following the month in question andwill be accompanied by a statement setting forth in reasonable detail thecalculation of the amount due (a “Statement”). No party will take any steps intended to delay collection of ManagementFees, nor shall the assignment of this Agreement eliminate any obligation ofthe Manager to pay to Contractor the amounts provided for herein.  The Contractor shall be entitled to cause anindependent certified public accountant reasonably satisfactory to the Managerto perform an audit of the books and records of the Manager and its affiliatesupon which any Statement is based.  TheContractor shall pay all costs and expenses of the audit unless suchexamination shows an underpayment of at least five percent (5%) or more of thetotal amount payable during the period covered by the audit, in which case thecosts of the audit shall be paid by the Manager.  Any underpayment (or overpayment) will bearinterest at prime plus 2%, and the amount of each underpayment (or overpayment)shall be paid by Manager (or Contractor, as the case may be) within two (2) businessdays of its calculation.

 

**2.3.****        ****Reimbursement of Contractor. **The Contractor shall be also reimbursed on a monthlybasis for its reasonable, out of pocket, direct expenses incurred in connectionwith the services provided hereunder as are reasonably approved in advance bythe Manager or consistent with its policies for reimbursement of expensesgenerally applicable to its senior managers.

 

**ARTICLE IIITERM AND TERMINATION**

** **

**3.1.**         **Term.**  The term (the “Term”) of this Agreement shallcommence as of the Effective Date and, unless this Agreement is terminatedpursuant to this Article III, shall continue until the latest to occur of (i) thedate on which all Payment Periods shall have ended, (ii) the fifthanniversary of the Effective Date and (iii) the date on which there remainno outstanding Development Notices and Acquisition Notices (as definedbelow).  As used herein, the “Initial Term”shall consist of the period between the Effective Date and the secondanniversary of the Effective Date.  Inthe event of the termination or expiration of this Agreement, the Contractorshall be paid all earned and accrued compensation (but only upon and promptlyafter Manager’s receipt of the Management Fees for which Contractor has earnedsuch compensation) and reimbursements provided for hereunder.

 

**3.2.**         **Termination for the Contractor’s Breach.**  The Managershall have the right to terminate this Agreement following the occurrence of aContractor/Owner Material Breach (as defined below).  In the event termination is for an allegedContractor/Owner Material Breach, the Manager shall provide the Contractorwritten notice of such alleged Contractor/Owner Material Breach describing indetail the basis upon which the Manager believes such termination isjustified.  The Contractor shall haveforty five (45) days (but only five (5) days in the case of any paymentdefault) from receipt of such notice during which to attempt to cure anyalleged Contractor/Owner Material Breach. Furthermore, if the Contractor has diligently attempted to effect such acure within such cure period but cannot complete such cure because of thefailure of a third party (such as a governmental agency) to act within suchperiod, then the Contractor shall have a reasonable time (not to exceed 180days) beyond such cure period to complete its cure of the alleged basis for theManager’s election to terminate.  Upon acure being effected, the Manager’s right to terminate shall cease, and thisAgreement will continue in full force and effect. As used herein, a “Contractor/OwnerMaterial Breach” means (a) a breach by any Covered Party of the provisionsof Section 4.4 hereof, (b) a material breach by any Covered Party ofany restrictive covenant to

 

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which a Covered Party is subject that is contained inany of the agreements identified on Exhibit 3.2 hereto or, to theextent not more restrictive than the terms of those covenants, any operatingagreement or partnership agreement of an entity that succeeds any entityidentified thereon or any operating agreement or partnership agreement enteredinto as a part of an Acquisition Project or Development Project, (c) thehabitual breach of an Owner to perform the duties set forth on Exhibit 1.2hereto in any material respect or (d) or the material breach by an Ownerof its obligations under Sections 5.2. In addition to the termination right in this Section 3.2, upon anyContractor/Owner Material Breach which is not cured within the time periodprovided for cure (if any), Manager shall recover from the Contractor andOwners: (I) any and all damages and remedies to which it may be entitled,and (II) at the option of Manager exercised in writing within sixty (60)days after discovery of any breach described in clause (a) of thedefinition of Contractor/Owner Material Breach which either (i) is aknowing or willful breach or (ii) occurs during the Initial Term, Managermay step into (without payment to any Covered Party therefor) the entireposition of any and all Covered Parties (with respect to all interests,management contracts, remuneration, fees, etc.) in any project or activitiesundertaken in violation of Section 4.4. The parties acknowledge and agree that clause (II) is provided forherein because of the inherent uncertainty of the damages that may be provenunder clause (I), and such damages may be claimed not to the exclusion ofdamages under clause (I).  The partieshave made provision therefor, not as a penalty, but to compensate the Managerfor the significant damages that would be suffered by the Manager as a result.

 

**3.****3.**         **Termination for Manager’s Breach.**  The Contractorshall have the right to terminate this Agreement following the occurrence of aManager Material Breach (as defined below) of this Agreement.  In the event termination is for an allegedManager Material Breach, the Contractor shall provide the Manager writtennotice of such alleged Manager Material Breach describing in detail the basisupon which the Contractor believes such termination is justified.  The Manager shall have forty five (45) days(but only five (5) days in the case of any payment default) from receiptof such notice during which to attempt to cure any alleged Manager MaterialBreach, and upon such cure being effected, the Contractor’s right to terminateshall cease and this Agreement will continue in full force and effect.  Furthermore, if the Manager has diligently attemptedto effect such a cure within such cure period but cannot complete such curebecause of the failure of a third party (such as a governmental agency) to actwithin such period, then the Manager shall have a reasonable time (not toexceed 180 days) beyond such cure period to complete its cure of the allegedbasis for the Contractor’s election to terminate.  As used herein, a “Manager Material Breach”means Manager’s failure to pay when due any fee payable to Contractor under Section 2.1or Section 4.3 or its material breach of its obligations under Sections4.2 or 5.1.

 

**3.4.****        ****Terminationon Transfer**.  If at anytime Manager or an affiliate of Manager either ceases to own an interest in anyCenter identified on Schedule 1 hereto or ceases to be obligated toperform the services to such center required pursuant to the applicableManagement Agreement (whether because such Management Agreement is terminated,amended, assigned or Manager or its affiliate otherwise disposes of itsinterest therein), then the Manager shall give written notice to Contractor notlater than ten (10) days prior to the disposition of Manager’s or itsaffiliate’s interest in such Center and/or the assignment, termination ordisposition of Manager’s (or its affiliates) interest in such ManagementAgreement, and during the ninety (90) period thereafter, Contractor may declareits obligations under Section 1.2 with respect to such Center thereafternull, void and of no further force and effect, upon which Manager’s obligationsunder Section 2 with respect to such Center shall terminate.  In the event that Symbion, Inc., aDelaware corporation, or its successor or acquiror (by any form oftransaction), shall cease to own, directly or indirectly, all of theoutstanding equity interests of Manager, then Contractor may treat such eventas a disposition of Manager’s interest each of the Centers for purposes of thisSection 3.4; provided, for the avoidance of doubt, a change in control,acquisition of, or sale of all assets by Symbion, Inc. shall not give riseto the right of Contractor to treat such event as a disposition of Manager’sinterest under this provision.

 

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**ARTICLE IVSPECIAL RIGHTS REGARDING DEVELOPMENT; RESTRICTIVE COVENANTS**

** **

**4.1.****        ****Generally**. The Contractor and the Owners will not be required to provide serviceson a full-time or (except as provided in this Article IV) exclusive basis,but shall devote such time and effort as are reasonably required to perform theContractor’s duties hereunder.  TheOwners shall, during the Term, devote such time and effort as reasonablynecessary for identifying and pursuing Development Projects and AcquisitionProjects in the Restricted Area, and shall use reasonable diligence to identifySuitable Opportunities.  As used in this Article IV:“Covered Parties” means the Contractor, the Owners, any entity controlled bythe Contractor or an Owner, a member of an Owner’s immediate family, or anyentity controlled by or under common control with an Owner or a member of anOwner’s immediate family or any combination of the foregoing; “SurgicalBusiness” means any health care business which provides a facility in whichsurgical procedures are performed and shall include, without limitation, aspecialty hospital, hospital or ambulatory surgery center; and “Restricted Area”means the territory described on Exhibit 4.1 attached hereto.

 

**4.2.****        ****Development Opportunities**. If Contractor or either Owner, anytime prior to the fifth anniversary ofthe Effective Date, identifies or learns of a SuitableOpportunity (as defined below) to develop a Surgical Business within theRestricted Area, the Contractor shall give written notice to the Manager ofeach such Suitable Opportunity (the “Development Notice”).  The Manager shall consult with the Contractorregarding each such Suitable Opportunity, and Contractor shall reasonablycooperate with the Manager in ascertaining all information about each suchSuitable Opportunity as Manager shall reasonably request.  Each such Suitable Opportunity that Managerelects to pursue (a “Development Project”) shall be operated pursuant to theterms of an Operating Agreement substantially in the form of Exhibit 4.2(A) heretoand managed by Manager (or an affiliate of Manager) pursuant to a ManagementAgreement substantially in the form of Exhibit 4.2(B) hereto,in each case with such amendments as Manager shall reasonably request withoutchanging thesubstance of the economic relationships or (in any material respects) therights or obligations of the Contractor contained in such Exhibits 4.2(A) and4.2(B).  The Contractor and theManager shall initially have equal levels of ownership (prior to the offeringof any ownership interests therein to qualified and suitable third partypurchasers thereof) inany Development Project; provided, however, to acquire suchownership, Contractor shall (i) contribute cash for equity in the sameproportion as the Manager (or its affiliate) and on the same basis asphysicians investing in such Development Project and (ii) provide orguaranty its proportion (based on its ownership interest) of such DevelopmentProject’s indebtedness provided by or guaranteed by the Manager (or itsaffiliate), in all cases such amounts to be reasonably determined by theManager in good faith.  The Manager shallnot be required to permit ownership by the Contractor as to a particularDevelopment Project, if neither the closing of an initial investment in orcommencement of material construction on such Development Project shall havecommenced within 18 months after the giving of the Development Notice.  If (i) Manager fails to indicate its interest in pursuing ingood faith and with reasonable diligence any opportunity for developing aSurgical Business by written notice to Contractor within 45 days after receiptof the Development Notice, (ii) Manager subsequently decides that it does not intend topursue such opportunity in good faith and with reasonable diligence (in whichcase Manager will promptly send a written notice to Contractor) or (iii) atany time Contractor sends Manager a written notice stating that Contractorbelieves that Manager has not been pursuing such opportunity in good faith andwith reasonable diligence and describing the action(s) that, if taken byManager, would cause Contractor to believe that Manager is pursuing suchopportunity in good faith and with reasonable diligence, and Manager fails togive reasonable assurances to Contractor of Manager’s good faith and reasonablediligence in pursuing such opportunity within 20 days of receipt of suchnotice, then such opportunity shall bedeemed to be a “Rejected Development”; provided, however, no Development Project shall be deemed to be aRejected Development any time prior to the second anniversary of the EffectiveDate.  As used herein, “Suitable Opportunity” means anopportunity that is reasonably consistent (as determined in

 

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good faith by Owners) with parameters established fromtime to time by Manager such that a reasonable person might conclude thatSymbion would be interested in pursuing such opportunity.  Consultant and Owners will not have anyobligation to provide services with respect to any Development Project after itsopening unless they reach agreement with Manager on a sharing of the managementfees for that Development Project.

 

**4.3.****        ****Acquisition Opportunities**. If Contractor or either Owner, anytime prior to the fifth anniversary ofthe Effective Date, identifies or learns of a Suitable Opportunity for Manageror any affiliate of Manager to acquire (by any form of transaction, including the purchaseof securities from any Person, including existing owners thereof) an interestin the equity or the assets of an existing Surgical Business within the RestrictedArea, the Contractor shall give written notice to the Manager of each such SuitableOpportunity (the “AcquisitionNotice”).  The Manager shall consult withthe Contractor regarding each such Suitable Opportunity, and Contractor shall reasonably cooperatewith the Manager in ascertaining all information about each such SuitableOpportunity asManager shall reasonably request.  TheManager and/or its affiliates and the Contractor will work in good faith withregard to such Suitable Opportunity that Manager elects to pursue(an “Acquisition Project”). Upon the closing of the acquisition of an interest in or the assetsof a Qualified Acquisition Project, the Contractor shall receive from theManager a fee, payable in cash, equal to * percent (*%) of the gross purchaseprice paid by Manager for its interest in the Qualified Acquisition Project(inclusive of a proportionate amount of assumed indebtedness but exclusive of aproportionate amount of any working capital acquired in excess of a normalizedworking capital amount, such proportionate amount being equal to the percentageinterest acquired by Manager in the Qualified Acquisition Project).  Additionally, Contractor shall be entitled toreceive from Manager a share of all Management Fees actually collected byManager, as and when collected, from an Acquired Facility during the two yearsafter the later of (x) the closing of the acquisition or (y) withrespect to any center at which procedures are not being regularly performed asof the closing of the acquisition, the date on which the first procedure isperformed at such center, which share shall equal * percent of the net revenuesof such Acquired Facility (or a comparable share relative to the Manager’smanagement fees if based on some other amount). As used herein, “Qualified Acquisition Project” shall mean anAcquisition Project identified in an Acquisition Notice with respect to whichthe Manager or its affiliate acquires an interest in the equity or the assetsof within 18 months after the giving of the Acquisition Notice. If (i) Managerfails to indicate its interest in pursuing in good faith and with reasonablediligence any opportunity for acquiring such SurgicalBusiness by written notice to Contractor within 45 days after receipt of theAcquisition Notice, (ii) Managersubsequently decides that it does not intend to pursue such opportunity in goodfaith and with reasonable diligence (in which case Manager will promptly send awritten notice to Contractor) or (iii) at any time Contractor sends Managera written notice stating that Contractor believes that Manager has not beenpursuing such opportunity in good faith and with reasonable diligence anddescribing the action(s) that, if taken by Manager, would cause Contractorto believe that Manager is pursuing such opportunity in good faith and withreasonable diligence, and Manager fails to give reasonable assurances toContractor of Manager’s good faith and with reasonable diligence in pursuingsuch opportunity within 20 days of receipt of such notice, then such opportunity shall be deemed to be a “RejectedAcquisition”;  provided, however, noAcquisition Project shall be deemed to be a Acquisition Development any timeprior to the second anniversary of the Effective Date. Consultant and Owners will not have anyobligation to provide services with respect to any Acquisition Project afterits acquisition unless they reach agreement with Manager on a sharing of themanagement fees for that Project.

 

**4.4.****        ****Exclusivity; Restrictions onOwnership; Nonsolicitation**.

 

(a)           *Restriction onActivities in Connection with Surgical Businesses. *Prior to the fifth anniversary of the Effective Date,Contractor and Owners hereby covenant and agree with Manager that Contractorand Owners will not, and will cause all Covered Parties to not, directly orindirectly, except in

 

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connection with (I) Acquisition Projects andDevelopment Projects being pursued with Manager and/or its affiliates, (II) (after the second anniversary ofthe Effective Date) Rejected Developments or Rejected Acquisitions thatare not in any Symbion Facility Zone (as defined below) or (III) the “Centerfor Orthopedic Surgery” located at 6815 Noble Avenue, Van Nuys, CA 91405: (i) develop,acquire or own an interest in, lease, manage, joint venture with or be employed bya Surgical Business in the Restricted Area, or commence or agree to do any ofthe foregoing or enter into discussions with any other person with respect tothe foregoing; or (ii) render any service to (as an employee, independent contractor orotherwise) intended to assist any person, partnership, corporation or otherentity (other than Manager and/or its affiliates) in any of the activities inthe foregoing clause (i); provided, however, that the purchase ofa publicly traded security of a corporation engaged in such business or serviceshall not in itself be deemed violative of this Agreement so long as CoveredParties do not own, directly or indirectly, more than five percent (5%) of suchcorporation.  As used herein, a “SymbionFacility Zone” means the geographic radius or other defined area that surroundsany healthcare facility in which Manager or any of its affiliates owns aninterest on the date of the delivery of a Development Notice or an AcquisitionNotice (as the case may be) in which physician members or partners who owninterests in such facility are prohibited, by the terms of an operatingagreement or partnership agreement, from owning interests in and conductingcertain other activities with respect to businesses in competition with suchfacility, but in any case not more than a 25 mile radius.

 

(b)                 *Nonsolicitation and Interference.*  Prior to the fifth anniversary of theEffective Date, Contractor and Owners hereby covenant and agree with Managerthat Contractor and Owners will not, and will cause all Covered Parties to not,directly or indirectly, except in connection with Acquisition Projects andDevelopment Projects being pursued with Manager and/or its affiliates, (i) interferewith, disrupt or attempt to disrupt any past, present or prospectiverelationship, contractual or otherwise, related to or arising from anyagreement, relationship or contractual arrangement between the Manager or anyof its affiliates and any customer, client, supplier, owner or prospectiveowner of any Surgical Business of which Manager or its affiliates is also anowner or employee of the Surgical Business or any of its subsidiaries oraffiliates or (ii) solicit, entice or induce any employee (including allcorporate officers and managers) of the Manager or any of its affiliates toleave their employment with the Manager or its affiliates, or hire any suchemployee to work in any capacity.  For solong as Manager or its affiliates continues to manage an Existing Center, aDeveloping Center, or a center resulting from a Acquisition Project orDevelopment Project, Contractor and Owners hereby covenant and agree withManager that Contractor and Owners will not, and will cause all Covered Partiesto not, directly or indirectly, except in connection with Acquisition Projectsand Development Projects being pursued in conjunction with Manager and/or itsaffiliates, solicit, entice or induce any physician who owns an interest inthat center to cease or reduce his or her business relationships with suchcenter.

 

(c)           *Other Provisions. *The Owners and the Contractor agree that the covenants andagreements contained herein are, taken as a whole, reasonable and necessarywith respect to the activities covered and will not challenge the geographicscope and duration of any such covenants in any proceeding to enforce such covenants.  If a judicial determination is made that anyof the provisions of this Section 4.4 constitutes an unreasonable orotherwise unenforceable restriction against the Owners and the Contractor, theprovisions of this Section 4.4 shall be rendered void only to the extentthat such judicial determination finds such provisions to be unreasonable orotherwise unenforceable.  In this regard,the parties hereto hereby agree that any judicial authority construing thisAgreement shall be empowered to reduce any portion of the territory orprohibited business activity from the coverage of this Section 4.4 and toapply the provisions of this Section 4.4 to the remaining portion of theterritory or the remaining business activities not so reduced by such judicialauthority.

 

(d)           *Acknowledgement of Reliance and Inducement. *The Contractor and the Ownersacknowledge and agree that their execution, delivery and performance of thisAgreement, and specifically

 

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the covenants and obligations set forth in this Article IV,were a material inducement for the affiliates of Manager to enter into and toconsummation the transactions contemplated by the MIPA and the MRPA, and thatthe affiliates of Manager who were “Purchasers” thereunder would not haveentered into or consummated the transaction contemplated by the MIPA and theMRPA unless the Contractor and the Owners had agreed to the provisions of this Article IV.  This acknowledgement is not intended to implyor support any increased damages for any breach of this Agreement, nor shall itbe used for such purpose.

** **

**ARTICLE VINDEMNIFICATION**

** **

**5.1.         Indemnificationby the Manager.**  The Manager agrees to indemnify and holdharmless the Contractor and the Owners, their affiliates and their respectiveshareholders, members, directors, officers, employees and agents (each, a “ContractorIndemnified Party”) from and against any and all losses, claims, damages,liabilities, costs and expenses (including reasonable attorneys’ fees andexpenses related to the defense of any claims) (a “Loss”), which may beasserted against any of the Contractor Indemnified Parties, in connection withthe Contractor’s provisions of services, including the Contractor’s performanceof its duties hereunder, if such Loss has not been caused by the grossnegligence or willful misconduct of a Contractor Indemnified Party.  In no event shall the Manager have anyliability for any special, exemplary, punitive or consequential damages(including loss of profit or revenue) suffered or incurred by any ContractorIndemnified Party.

** **

**5.2.         Indemnificationby the Contractor and Owners. **The Contractor and each Owner agrees toindemnify and hold harmless the Manager and its members, shareholders,partners, directors, and officers, employees and agents (each, a “ManagerIndemnified Party”) from and against all Loss which may be asserted against anManager Indemnified Party as a result of the gross negligence or willfulmisconduct of the Contractor in connection with the performance by theContractor of its duties under Article I hereof if such Loss has not beencaused by the gross negligence or willful misconduct of an Manager IndemnifiedParty.  *.  In no event shall the Contractor or Ownershave any liability for any special, exemplary, punitive or consequentialdamages (including loss of profit or revenue) suffered or incurred by anyManager Indemnified Party.

** **

**5.3.         Exclusivityof Remedy. **Other than claims arising under Article IVhereof and claims for the non-payment of fees and expenses under Article IIhereof, and except as provided in Section 3.2 hereof, this Article Vshall constitute the sole remedy of the parties hereto with respect to any Lossand/or any claim (including any Loss resulting from a third party claim) ifsuch Loss and/or claim arises out of this Agreement, whether such claim isbased in contract, tort, or otherwise, but excluding claims arising out ofwillful misconduct or fraud.

** **

**ARTICLE VIMISCELLANEOUS**

** **

**6.1.        **This Agreement shall be construed to bein accordance with any and all federal and state laws, including laws relatingto Medicare, Medicaid, and other third party payers.  In the event there is a change in such laws,whether by statute, regulation, agency or judicial decision, that has any materialeffect on any term of this Agreement, or in the event that counsel to one partydetermines that any term of this Agreement poses a risk of violating such laws,then the applicable term(s) of this Agreement shall be subject torenegotiation and either party may request renegotiation of the affected termor terms of this Agreement, upon written notice to the other party, to remedysuch condition. In the interim, the parties

 

8

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shall perform their obligations hereunder in fullcompliance with applicable law.  Theparties expressly recognize that upon request for renegotiation, each party hasa duty and obligation to the other only to renegotiate the affected term(s) ingood faith and, further, the parties expressly agree that their consent toproposals submitted by the other party during renegotiation efforts shall notbe unreasonably withheld.

** **

**6.2.        **Should the parties be unable torenegotiate the term or terms so affected so as to bring it/them into compliancewith the statute, regulation or judicial opinion that rendered it/them unlawfulor unenforceable within thirty (30) days of the date on which notice of adesired renegotiation is given, then either party shall be entitled, after theexpiration of said thirty (30) day period, to terminate this Agreement uponsixty (60) additional days written notice to the other party.

** **

**6.3.        **Upon the written request of the Secretaryof Health and Human Services or the Comptroller General or any of their dulyauthorized representatives, the Contractor and any of its affiliates providingservices with a value or cost of $10,000 or more over a twelve (12) monthperiod shall make available to the Secretary the contracts, books, documentsand records that are necessary to verify the nature and extent of the cost ofproviding such services.  Such inspectionshall be available up to four years after the rendering of such services.  The parties agree that any applicableattorney-client, accountant-client or other legal privilege shall not be deemedwaived by virtue of this Agreement.

** **

**6.4.        **Section and Article headingsare for convenience of reference only and shall not be used to construe themeaning of any provision of this Agreement.

** **

**6.5.        **This Agreement may be executed in any numberof counterparts, each of which shall be an original and all of which shalltogether constitute one Agreement.

** **

**6.6.        **Should any part of this Agreement beinvalid or unenforceable, such invalidity or unenforceability shall not affectthe validity and enforceability of the remaining portions.

** **

**6.7.        **The execution and performance of thisAgreement by each party has been duly authorized by all applicable laws andregulations and all necessary corporate action, and this Agreement constitutesthe valid and enforceable obligation of each party in accordance with itsterms.

** **

**6.8.        **This Agreement and the rights of theparties shall be construed and enforced in accordance with the laws of theState of California without regard to its principles of conflicts of laws.  Each party hereby irrevocably andunconditionally consents to venue in any state or federal court located in (orthe district of which includes) Los Angeles, California (the “Los AngelesCourts”) for any litigation arising out of or relating to this Agreement, andeach party hereby waives any objection to the laying of venue of any suchlitigation in the Los Angeles Courts and agrees not to plead or claim in anyLos Angeles Court that such litigation brought therein has been brought in aninconvenient forum.  Each party herebyirrevocably and unconditionally consents to a Los Angeles Court applyingCalifornia law to any litigation arising out of or relating to this Agreement.

** **

**6.9.        **This Agreement may not be modified exceptin writing executed by the party to be charged.

** **

**6.10.      **This Agreement constitutes the entireAgreement of the parties hereto and supersedes all prior Agreements andrepresentations with respect to the subject matter hereof.

** **

**6.11.      **The parties hereto have each negotiatedthe terms hereof and reviewed this Agreement carefully.  It is the intent of the parties that eachword, phrase, and sentence and other part hereof shall be

 

9

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given its plain meaning, and that rules ofinterpretation or construction of contracts that would construe any ambiguityof any part hereof against the draftsman, by virtue of being the draftsman,shall not apply.

** **

**6.12.      **This Section 6.13 shall becomeeffective upon such date as the Manager is required to be in full compliancewith the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”)and the applicable privacy regulations at 45 C.F.R. Parts 160 and 164, asamended (“Federal Privacy Regulations”), or at any earlier date mutually agreedupon in writing by the parties, and shall remain in effect for so long asrequired by law.  The Contractor agreesto comply with the following:

 

a.       TheContractor shall not use any of the Centers’ “protected health information” asdefined in 45 C.F.R. Section 164.501 (“Protected Health Information”)other than: (a) as required to perform the Contractor’s obligations underthis Agreement; (b) as is necessary for the Contractor’s proper managementand administration; and (c) as permitted by law.

 

b.       TheContractor may only disclose the Centers’ Protected Health Information: (a) toits “workforce” as defined in 45 C.F.R. Section 160.103 (the “Workforce”)for the purposes of performing its obligations under this Agreement; (b) asis necessary for the Contractor’s proper management and administration; and (c) toperform its legal responsibilities.

 

c.       If theContractor carries out any of its duties under this Agreement through asubcontractor, which duties, by their nature, involve the use, custody,disclosure, creation of or access to the Centers’ Protected Health Information,the Contractor shall enter into a written contract for such work and thecontract shall contain provisions substantially identical to the restrictionsand conditions set forth in this Section 13.

 

d.       The Contractormay use or disclose the Centers’ Protected Health Information as is necessaryfor the Contractor’s proper management and administration only if: (a) theContractor obtains reasonable written assurances from the person or entity towhom the Centers’ Protected Health Information is disclosed that such person orentity shall hold the Centers’ Protected Health Information confidentially andonly use or further disclose the Centers’ Protected Health Information asrequired by law or for the purpose for which it was disclosed to the person orentity; and (b) the person or entity agrees to notify the Contractor ofany unauthorized use or disclosure of the Centers’ Protected Health Informationof which the person or entity becomes aware.

 

e.       TheContractor will implement appropriate safeguards to prevent the use ordisclosure of the Centers’ Protected Health Information by the Contractor orits subcontractors other than as provided for in this Agreement.  If the Contractor becomes aware of any use ordisclosure of the Centers’ Protected Health Information by the Contractor orits subcontractors not provided for in this Agreement, the Contractor shallreport such information to the Center.

 

f.        Upon apatient’s request, the Contractor shall make available all or a portion of thedesignated record sets as defined in 45 C.F.R. Section 164.501, containingthe Centers’ Protected Health Information which is stored or maintained by the Contractor or otherwise in thepossession of the Contractor or its subcontractors (“Designated Record Sets”)in accordance with 45 C.F.R. Section 164.524 and 45 C.F.R. Section 164.526.  Upon a patient’s request, the Contractorshall make available such information in the Contractor’s possession, custodyor control that is required to make the accounting required by 45 C.F.R. Section 164.528.

 

10

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g.       To theextent required by the Federal Privacy Regulations, the Contractor shall makeits internal practices, books, and records relating to the use and disclosureof the Centers’ Protected Health Information received from, or created orreceived by the Contractor on behalf of the Centers available to the Secretaryof the Department of Health and Human Services to the extent required fordetermining compliance with 45 C.F.R. 164.504(e). Notwithstanding theforegoing, no attorney-client, accountant-client, or other legal privilegeshall be deemed waived by virtue of this Section 13.

 

h.       Uponexpiration or termination of this Agreement, the Contractor shall return all ofthe Centers’ Protected Health Information. In the event that the Contractor determines that returning or destroyingall copies of the Protected Health Information is not feasible, the Contractorshall extend the protections contained in this Section 13 to that portionof the Centers’ Protected Health Information which is not returned or destroyedand limit further uses and disclosures of such Protected Health Information tothose purposes that make the return or destruction of such Protected HealthInformation not feasible.

** **

**6.13.      **All notices permitted or required by thisAgreement shall be deemed given when in writing and delivered personally viaovernight courier or deposited in the United States mail, postage prepaid,return receipt requested, addressed to the other party at the address set forthbelow or such other address as the party may designate in writing:

 
|   | To the Manager:    | SymbionARC Management Services, Inc.        |
|--------|--------------------|--------------------------------------------------|
|   |               | 40 Burton Hills Blvd., Suite 500            |
|   |               | Nashville, Tennessee 37215                       |
|   |               | Attn: President                                  |
|   |               |                                             |
|   | With a copy to:    | Joseph A. Sowell, III, Esq.            |
|   |               | Waller Lansden Dortch & Davis, PLLC     |
|   |               | 511 Union Street, Suite 2700                |
|   |               | Nashville, Tennessee 37219                       |
|   |               |                                             |
|   | To the Contractor: | To the addresses set forth on the signature page |
|   |               |                                             |
|   | With a copy to:    | Guth | Christopher LLP                           |
|   |               | 10866 Wilshire Blvd, Suite 1250             |
|   |               | Los Angeles, California 90024                    |
|   |               | Attention: Theodore E. Guth                      |

 

**6.14.      **EACH PARTY HERETO HEREBY IRREVOCABLYWAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION,PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THISAGREEMENT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY.  THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TODEMAND A TRIAL BY JURY ARISING FROM ANY SOURCE INCLUDING, BUT NOT LIMITED TO,THE CONSTITUTION OF THE UNITED STATES OR ANY STATE THEREIN, COMMON LAW OR ANYAPPLICABLE STATUTE OR REGULATIONS.  EACHPARTY HERETO ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITSRIGHT TO DEMAND TRIAL BY JURY.

** **

**6.15.**       TheContractor shall not assign this Agreement without the written consent of theManager, which consent shall not be unreasonably withheld.  Except in the event of the merger orconsolidation of the Manager, or the sale by the Manager of substantially allof its assets in which all of

 

11

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the Management Agreements are also being assigned, theManager shall not assign this Agreement, other than to a subsidiary corporationor other entity controlled by or under common control with the Manager and towhich all of the Management Agreements are being assigned, without the writtenconsent of the Contractor, which consent shall not be unreasonably withheld.

** **

**[Remainder of page intentionally left blank.]**

 

12

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IN WITNESS WHEREOF, the undersigned have executed thisAgreement as of the date and year first hereinabove written.

 

 
| ** ** | **“MANAGER”**                   |
|------------|-------------------------------------------|
|       |                                      |
|       | **SYMBIONARC MANAGEMENT SERVICES,  INC.** |
|       |                                      |
|       |                                      |
|       | By:                                       |   |
|       |                                      |   |
|       | Title:                                    |   |
|       |                                      |   |
|       | ** **                                | ** ** |
|       | **“CONTRACTOR”**                |
|       | ** **                                | ** ** |
|       |                                      |   |
|       | **PARTHENON  MANAGEMENT PARTNERS, LLC**   |
|       | ** **                                | ** ** |
|       |                                      |   |
|       | By:                                       |   |
|       |                                      |   |
|       | Title:                                    |   |
|       |                                      |
|       |                                      |
|       | “OWNERS”                        |
|       |                                      |
|       |                                      |
|       |                                      |
|       | **Andrew  A. Brooks, M.D.**               |
|       |                                      |
|       |                                      |
|       |                                      |
|       |                                      |
|       |                                      |
|       | *Address  for Notices*                    |
|       |                                      |
|       |                                      |
|       |                                      |
|       | **Randhir  S. Tuli**                      |
|       |                                      |
|       |                                      |
|       |                                      |
|       |                                      |
|       |                                      |
|       | *Address for Notices*                     |

 

13

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**SCHEDULE 1**

** **

**List of Centers**

**(as of the Effective Date)**

** **

**ExistingCenters**

 

1.                                       an outpatient surgery center located at9575 Brighton Way, Suite 100, Beverly Hills, CA 90210 (the “BrightonCenter”).

 

2.                                       an outpatient surgery center located at16501 Ventura Boulevard, Suite 103, Encino, CA  91436 (the “Encino Center”).

 

3.                                       an outpatient surgery center located at8670 Wilshire Boulevard, Suite 300, Beverly Hills, CA 90211 (the “WilshireCenter”).

** **

**DevelopingCenters**

 

1.                                       an outpatient surgery center located at 15825Laguna Canyon Road, Suite 200, Irvine, CA 92618 (the “Irvine Center”).

 

2.                                       an outpatient surgery center located at51 North Fifth Avenue, Suite 101, Arcadia, CA 91006 (the “Arcadia Center”).

 

3.                                       an outpatient surgery center located at696 Hampshire Road, Thousand Oaks, CA 91361 (the “Agoura Hills Center”).

 

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**EXHIBIT 1.2**

** **

**Services of Andrew A. Brooks, M.D.**

 

Ownershall use good faith and reasonable diligence in providing consulting andmanagement advisory services to assist Manager in its oversight of theefficient operation of the Existing Centers, and Developing Centers.

 

**Services of Randhir S. Tuli**

 

Ownershall use good faith and reasonable diligence in providing consulting andmanagement advisory services to assist Manager in the day to day operationof  the Existing Centers and DevelopingCenters, including, without limitation, monitoring and/or assisting Manager, asManager may reasonably request, with the following:

 

A.                                   obtaining or maintaining theaccreditation of a Center (if the Center is accredited) with the properagencies and insurance companies, including JCAHO or AAAHC;

 

B.                                     the hiring, employing,supervising, directing, leasing and discharging all non-physician personnelperforming services at a Center;

 

C.                                     the negotiation by Centersof reimbursement and fee payment methods, in coordination with Manager with theappropriate third party payers and state and federal agencies;

 

D.                                    the establishment ofstaffing schedules, wage structures and personnel policies for all personnel ata Center;

 

E.                                      the determination andsetting of patient charges for services provided by a Center;

 

F.                                      the development andprovision by Manager of policies and operating procedures to all departments ofa Center;

 

G.                                     the development of standardformats for all charts, invoices, and other forms used in the operation of aCenter;

 

H.                                    the purchase, lease ordisposition by a Center of all supplies and equipment used in the operation ofthe Center;

 

I.                                         the day-to-day operations ofa Center;

 

J.                                        the negotiatingor retention of contractual relationships for anesthesia services, radiologyservices, and pathology services, at a Center.

 

K.                                    theestablishment and functioning of accounting, billing, receivables, credit andcollection policies and procedures for the Centers.

 

L.                                    the development of systemsfor handling patient complaints.

 

2

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**EXHIBIT 3.2**

 

**Agreements**

 

1.                                     Amended and Restated Operating Agreementof Specialty Surgical Center, LLC, a California limited liability company

 

2.                                     Amended and Restated Operating Agreementof Specialty Surgical Center of Encino, LLC, a California limited liabilitycompany

 

3.                                     Amended and Restated Operating Agreementof Specialty Surgical Center of Irvine, LLC, a California limited liabilitycompany

 

4.                                     Amended and Restated Operating Agreementof Specialty Surgical Center of Arcadia, LLC, a California limited liabilitycompany

 

5.                                     Amended and Restated Operating Agreementof Specialty Surgical Center of Thousand Oaks, LLC, a California limitedliability company

 

3

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**EXHIBIT 4.1**

** **

**Restricted Area**

 

The Restricted Area shall consist of the followingcounties in California:

 

| Fresno          |
|-----------------|
| Imperial        |
| Inyo            |
| Kern            |
| Kings           |
| Los Angeles     |
| Madera          |
| Mariposa        |
| Merced          |
| Mono            |
| Monterrey       |
| Orange          |
| Riverside       |
| San Benito      |
| San Bernardino  |
| San Diego       |
| San Jose        |
| San Luis Obispo |
| San Mateo       |
| Santa Barbara   |
| Santa Cruz      |
| Stanislaus      |
| Tulare          |
| Ventura         |

 

4

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**EXHIBIT 4.2(A)**

 

**Form of Operating Agreement**

 

**The Form of Operating Agreement shall besubstantially the same as the Operating Agreement of Specialty Surgical Centerof Arcadia, LLC executed and delivered at the closing of the transactionscontemplated by the MIPA, except that the provisions in respect of the “SecondOption” contained in the Operating Agreement of Specialty Surgical Center ofThousand Oaks, LLC executed and delivered at the closing of the transactionscontemplated by the MIPA shall be incorporated therein.  Alternatively, it is agreed that a limitedpartnership agreement containing substantially the same provisions shallqualify as such an Operating Agreement if the entity through which suchopportunity is pursued is determined to be a limited partnership rather than alimited liability company.**

 

5

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**EXHIBIT 4.2(B)**

** **

**Form of Management Agreement**

 

**The Form ofManagement Agreement shall be substantially the same as the ManagementAgreement attached as Exhibit 6.9A to the MIPA providing for a * percent (*%)management fee.**

 

6

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**EXHIBIT 6.10**

 

**Form of Sellers’ Opinion**

 

**(To be attached at Closing)**

 

----

 

FORM OF LEGAL OPINION

 

SymbionARC Management Services, Inc.

Symbion Ambulatory Resource Centres, Inc.

c/o Symbion, Inc.

40 Burton Hills Boulevard, Suite 500

Nashville, Tennessee 37215

 

Ladies and Gentlemen:

 

We have acted ascounsel to Parthenon Management Partners, LLC (the “**Company**”)and Andrew A. Brooks, M.D. and Randhir S. Tuli (each an “**Owner**”and, collectively the “**Owners**” inconnection with the Management Rights Purchase Agreement (the “**Purchase Agreement**”) between thoseparties and SymbionARC Management Services, Inc.. This opinion is given toyou pursuant to section 6.10 of the Purchase Agreement. Unless defined herein,terms that are defined in the Purchase Agreement have the meanings herein giventhem in the Purchase Agreement. The term “**Management Documents**”means the Purchase Agreement, the Consulting Agreement between the Owners andSymbionARC Management Services, Inc. and Symbion Ambulatory Resource Centres, Inc.and the Escrow Agreement as defined in Section 1.2 (b) of thePurchase Agreement.

 

Inconnection with this opinion letter we have examined certain corporate records,certificates and documents in rendering this opinion. In making such examinations,we have made certain customary assumptions, such as the genuineness of allsignatures, the authenticity of all documents submitted to us as originals, thelack of any undisclosed modifications, waivers or amendments to any agreementsreviewed by us, the conformity to authentic originals of all documentssubmitted to us as certified or photostatic copies and the truth and accuracyof factual statements contained in such documents and certificates. Except asexpressly set forth herein, we have also assumed that the execution, deliveryand performance of any agreements or consents are within the powers of eachsignatory and have been duly authorized and validly carried out. We havefurther assumed without investigation the legal capacity of each Owner signingdocuments in his individual capacity.

 

Basedupon and subject to the assumptions, limitations, qualifications and exceptionsstated herein, we are of the opinion that:

 

1.                                     The Company is a limited liabilitycompany duly formed and validly existing and in good standing as a limitedliability company under the laws of the State of California and has allrequisite company power and authority to execute, deliver and perform all ofits obligations under the Management Documents to which it is party:

 

2.                                     The execution, delivery and performanceby the Company of the Management Documents to which it is party have been dulyauthorized by all necessary company action.

 

3.                                     Each Management Document constitutes avalid and binding agreement in accordance with its terms of each Owner and theCompany to which it is party.

 

----

 

4.                                     The execution and delivery by the Companyand each Owner of the Management Documents to which each is a party do not toour knowledge violate or conflict with any law or governmental regulation.

 

Theopinions expressed herein are subject to the following assumptions,limitations, qualifications and exceptions:

 

Weexpress no opinion with respect to:

 

(a)           the effect of bankruptcy, insolvency,reorganization, moratorium and other similar laws and legal and equitableprinciples relating to, limiting or affecting the enforcement of creditors’rights generally including, without limitation, preferences and fraudulentconveyances and concepts of materiality, reasonableness, good faith, fairdealing and unconscionability;

 

(b)           the discretion of courts in awardingequitable remedies (regardless of whether considered in a proceeding in equityor at law), including, but not limited to, specific performance or injunctiverelief;

 

(c)           the unenforceability under certaincircumstances of provisions stipulating a liquidated damages or imposingpenalties or forfeitures upon delinquency in payment or the occurrence of adefault or failure to perform certain acts, including, but not limited to,provisions imposing penalties, forfeitures, reinstatement of rights or anincrease in interest or dividend rate upon the occurrence of a default orfailure to perform certain acts;

 

(d)           the enforceability of theindemnification provisions of the Management Documents;

 

(e)           the enforceability of therestrictions on competition of the Management Documents;

 

(e)           the application or contravention of Section 548of the federal Bankruptcy Code and comparable provisions of state law or of anyantifraud laws, antitrust or trade regulation laws;

 

(f)            the enforceability of the choice oflaw or choice of forum clauses, or any waiver of any right to trial by jury;and

 

(g)           the effect of judicial decisions orapplicable law which permit the introduction of extrinsic evidence to modifythe terms or the interpretation of any agreement.

 

Forpurposes of the opinions set forth in paragraph 1 with respect to good standingof the Company, we are relying solely upon a certificate of good standing fromthe State of California (a copy of which is attached hereto as **Exhibit A**). We express noopinion with respect to such matters beyond the date of that certificate.

 

Theopinions set forth above in paragraph 4 are based upon our consideration ofonly those statutes, rules and regulations which in our experience arenormally applicable to transactions such as those contemplated by theManagement Documents. We have not undertaken any research for purposes ofdetermining whether the Company or any Owner is 

 

2

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subject to any law or other governmental requirement other than tothose laws and other requirements which in our experience a lawyer in the Stateof California exercising customary professional diligence would reasonablyrecognize to be directly applicable to persons in their circumstances as weunderstand them.

 

We arerelying in part as to certain factual matters on a Certificate of the Companyand of each Owner, a copy of which is attached hereto as **Exhibit B**.We have not undertaken any independent investigation to determine the existenceor nonexistence of such facts. Similarly, whenever our opinion herein withrespect to the existence or nonexistence of facts is qualified by the phrase “toour knowledge”, or any similar phrase implying a limitation on the basis ofknowledge, such phrase means only that the individual attorneys in this firmwho devoted substantive attention to the matters involving the ManagementDocuments do not have actual knowledge that the facts as stated herein areuntrue. Such persons have not undertaken any investigation to determine theexistence or nonexistence of such facts in connection with the preparation ofthis opinion, and no inference as to the extent of their investigation shouldbe drawn from the fact of our representation of the Company and the Owners. Wehave not represented those entities in other matters.

 

We areadmitted to the bar in the State of California. Our opinions are limited to thelaws of the State of California and the United States of America, and we expressno opinion as to the laws of any other jurisdiction.

 

Ouropinion is rendered as of the date hereof and is based solely on existing laws,present judicial interpretations and the facts as we understand them. We assumeno obligation to revise or supplement this opinion should those change, whetherby legislative action, judicial decision or otherwise.

 

Thisopinion letter is rendered solely for your benefit in connection with theManagement Documents, and may not be relied upon by you for any other purposeor furnished to, used, circulated, quoted or referred to, or relied upon by,any other person without our prior written consent. Without our writtenconsent: (i) no person other than you may rely on this letter for anypurpose; (ii) this letter may not be cited or quoted in any financialstatement, prospectus, private placement memorandum or other similar document; (iii) thisletter may not be cited or quoted in any other document or communication whichmight encourage reliance upon this letter by any person or for any purposeexcluded by the restrictions in this paragraph; and (iv) copies of thisletter may not be furnished to anyone for purposes of encouraging suchreliance.

 
|   | Very truly yours,      |
|--------|------------------------|
|   |                   |
|   |                   |
|   | Guth I Christopher LLP |

 

3

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**Exhibit A**

** **

**Certificate of GoodStanding of Parthenon Management Partners, LLC**

 

4

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**Exhibit B**

** **

**CERTIFICATE OF PARTHENON MANAGEMENT PARTNERS, LLC,ANDREW BROOKS AND RANDHIR TULI IN SUPPORT OF OPINION OF GUTH | CHRISTOPHER LLP**

** **

**August 1, 2005**

** **

Theundersigned, Andrew Brooks and Randhir Tuli hereby certify that they are,respectively, the duly elected, qualified and acting Manager(s) ofParthenon Management Partners, LLC, a California limited liability company (the“**Company**”), and further certify insupport of the Opinion of Guth I Christopher LLP being renderedpursuant to that certain Management Rights Purchase Agreement (the “**Purchase Agreement**”), dated as of July 27,2005. Capitalized terms used but not defined herein or in the Opinion shallhave the meanings given them in the Purchase Agreement.

 

1.             Attachedhereto as **Exhibit 1** are true,complete and correct copies of resolutions duly adopted at meetings or bywritten consents of the managers and members of the Company approving theterms, conditions and provisions of the Management Documents. Said resolutionshave not been modified, amended or rescinded and remain in full force andeffect as of the date hereof. No other resolutions have been adopted by themanagers or members of the Company with respect to the Management Documents andthe transactions contemplated thereby and referred to therein.

 

2.             AndrewBrooks and Randhir Tuli are the sole owners and managers of the Company. No otherperson has any right to vote or consent with respect to any decision by themembers or managers of the Company.

 

3.             Attachedhereto as **Exhibit 2** is a true,complete and correct copy of the currently effective Operating Agreement of theCompany dated     . There has been no further amendment tothe Operating Agreement since such date, and no further amendment has beenauthorized or approved by the managers or the members of the Company as of thedate hereof.

 

4.             Attachedhereto as **Exhibit 3** is a true, completeand correct copy of a certificate of good standing of the Company from thestate of California

 

5.             TheCompany’s representations in the Purchase Agreement and each of the ManagementDocuments are true and correct in all respects as of the date hereof and may berelied upon by Guth l Christopher LLP in rendering its Opinion.

 

5

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INWITNESS WHEREOF, the undersigned have executed this Certificate as of the datefirst  above written.

 

| **PARTHENON MANAGEMENT PARTNERS,  LLC**                          |   |                                                            |
|------------------------------------------------------------------|--------|-----------------------------------------------------------------|
|                                                             |   |                                                            |
|                                                             |   |                                                            |
| Andrew Brooks,  individually and as managing member of Parthenon |   | Randhir Tuli,  individually and as managing member of Parthenon |

 

6

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EXHIBIT 1

 

Resolutions

 

(see attached document)

 

7

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EXHIBIT 2

 

Operating Agreement

 

(see attached document)

 

8

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EXHIBIT 3

 

Certificate of Good Standing

 

(see attached document)

 

9

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**EXHIBIT 7.9**

 

**Form of Purchasers’ Opinion**

 

**(To be attached at Closing)**

 

----

 

August 1, 2005

 

To the Persons SetForth on Exhibit A Hereto

 

Ladies andGentlemen:

 

We have acted as counsel to Symbion Ambulatory Resource Centers, Inc.,a Tennessee corporation (“SARC”), SymbionARC Management Services, Inc., aTennessee corporation (the “Manager”), SymbionARC Support Services, LLC, aTennessee limited liability company (“Symbion Support”), and SMBISS BeverlyHills, LLC, a Tennessee limited liability company, SMBISS Encino, LLC, aTennessee limited liability company, SMBISS Irvine, LLC, a Tennessee limitedliability company, and SMBISS Arcadia, LLC, a Tennessee limited liabilitycompany (each a Purchaser and collectively, the “Purchasers”), in connectionwith the preparation, execution anddelivery of the Purchase Agreement, dated July 27, 2005 (the “PurchaseAgreement”) among SARC, the Purchasers and the members of Specialty SurgicalCenter, LLC, a California limited liability company, Specialty Surgical Centerof Encino, LLC, a California limited liability company, Specialty SurgicalCenter of Irvine, LLC, a California limited liability company, and SpecialtySurgical Center of Arcadia, LLC, a California limited liability company (eachan “LLC” and collectively, the “LLCs”) identified on Exhibit A tothe Purchase Agreement (each a “Seller” and, collectively, the “Sellers”), andthe Management Rights Purchase Agreement, dated July 27, 2005 (the “ManagementRights Purchase Agreement”) among SARC, the Manager and Parthenon ManagementPartners, LLC, a California limited liability company (the “Company”), AndrewA. Brooks, M.D. and Randhir S. Tuli (each an “Owner” and, collectively, the “Owners”)and certain other agreements, instruments and documents related to the PurchaseAgreement and the Management Rights Purchase Agreement. This opinion is beingdelivered to you at the request of the SARC pursuant to Section 7.9 of theManagement Rights Purchase Agreement. Capitalized terms used herein and nototherwise defined herein shall have the same meanings herein as defined in thePurchase Agreement.

 

In rendering the opinions set forth herein, we have examined and reliedon originals or copies, certified or otherwise identified to our satisfaction,of the following:

 

(a)                                  the Purchase Agreement;

 

----

 

(b)**                                **the ManagementRights Purchase Agreement;

 

(c)                                  the Consulting Agreement by and among theManager, the Company and the Owners;

 

(d)                                 Escrow Agreement by and among Bank ofAmerica, N.A. (the “Escrow Agent”), the Manager, the Company and the Owners;

 

(e)                                  a certified copy of the Charter of SARC, as filed with the TennesseeSecretary of State on August 9, 1995, as amended, and a certified copy ofthe current Bylaws of SARC (collectively, the “SARC Governing Documents”);

 

(f)                                    a certified copy of the Charter of the Manager, as filed with theTennessee Secretary of State on April 15, 1998, as amended, and acertified copy of the current Bylaws of the Manager (collectively, the “ManagerGoverning Documents”);

 

(g)                                 a certified copy of the Articles ofOrganization of Symbion Support, as filed with the Tennessee Secretary of Stateon July 20, 2005 and a certified copy of the current Operating Agreementof Symbion Support (collectively, the “Symbion Support Governing Documents”);

 

(h)                                 a certified copy of the Articles of Organization of each of thePurchasers, as filed with the Tennessee Secretary of State on July 20,2005, as amended, and a certified copy of the current Operating Agreement ofeach of the Purchasers (collectively, the “Purchasers Governing Documents”,together with the SARC Governing Documents, the Symbion Support GoverningDocuments and the Manager Governing Documents the “Governing Documents”);

 

(i)                                     a certified copy of certain resolutionsof the Board of Directors of each of SARC and the Manager adopted on July 27,2005;

 

(j)                                     a certified copy of certain resolutionsof the respective sole member of Symbion Support and each of the Purchasersadopted on July 27, 2005;

 

(k)                                  a Certificate of Existence from theTennessee Secretary of State, dated July 25, 2005 attesting to the “goodstanding” of the Manager and Symbion Support in such jurisdiction;

 

(l)                                     a Certificate of Existence from theTennessee Secretary of State, dated July 28, 2005 attesting to the “goodstanding” of the SARC in such jurisdiction;

 

(m)                               a Certificate of Existence from theTennessee Secretary of State, dated July 27, 2005 attesting to the “goodstanding” of each of the Purchasers in such jurisdiction;

 

2

----

 

(n)                                 a Certificate of Status from theCalifornia Secretary of State, dated July 26, 2005 attesting to the “goodstanding” as a foreign corporation of the Manager in such jurisdiction; and

 

(o)                                 a Certificate of Good Standing from theCalifornia Secretary of State, dated July 27, 2005 attesting to the “goodstanding” as a foreign limited liability company of each the Purchasers andSymbion Support in such jurisdiction.

 

In addition, we have examined such other documents, agreements, andcertificates as we have deemed necessary or appropriate as a basis for theopinion set forth below.

 

The documents described in clauses (a) through (d) above arecollectively referred to as the “Transaction Documents.”  References in opinion this to (i) “ApplicableLaws” shall mean those laws, rules and regulations of the State of Tennessee and of the UnitedStates of America which, in our experience, are normally applicable totransactions of the type contemplated by the Agreement without considering theparticipation by SARC, the Manager, Symbion Support or any of the Purchasers(collectively, the “Opinion Parties”) in any regulated industry; (ii) theterm “Governmental Authorities” means any Tennessee or federal executive, legislative, judicial,administrative or regulatory body having jurisdiction over the Opinion Partieswithout considering the participation by the Opinion Parties in any regulatedindustry; (iii) the term “Governmental Approval” means any consent,approval, license, authorization or validation of, or filing, recording or registrationwith, any Governmental Authority without considering the participation by theOpinion Parties in any regulated industry; and (iv) the term “ApplicableOrders” means those orders or decrees of Governmental Authorities which havebeen specifically disclosed to us in writing by the Opinion Parties in Exhibit 1hereto.

 

**Assumptions**

 

In our examination we have assumed the genuineness of all signatures(other than those on behalf of the Opinion Parties), the legal capacity ofnatural persons, the authenticity of all documents submitted to us asoriginals, the conformity to original documents of all documents submitted tous as certified or photostatic copies, and the authenticity of the originals ofsuch copies.  As to any facts material tothis opinion which we did not independently establish or verify, we have reliedupon statements and representations of the Opinion Parties and each of theirofficers and other representatives and of public officials, and have assumedthat such matters remain true and correct through the date hereof.

 

We have further assumed, that:

 

(i)                                     The execution, delivery and performanceby each of the Opinion Parties of the Transaction Documents to which each is aparty does not and will not conflict with, contravene, violate or constitute adefault under (i) any lease, indenture, instrument or other agreement to 

 

3

----

 

which each of theOpinion Parties or its property is subject, (ii) any rule, law orregulation to which each of the Opinion Parties is subject (other thanApplicable Laws as to which we express our opinion in paragraph 7 herein) or (iii) anyjudicial or administrative order or decree of any governmental authority (otherthan Applicable Orders as to which we express our opinion in paragraph 7herein).

 

(ii)                                  No authorization, consent or otherapproval of, notice to or filing with any court, governmental authority orregulatory body (other than Governmental Approvals as to which we express ouropinion in paragraph 7 herein) is required to authorize or is required inconnection with the execution, delivery or performance by each of the OpinionParties of any Transaction Documents to which it is a party or the transactionscontemplated thereby.

 

(iii)                               There is no action, suit or proceedingpending or threatened against or affecting the Opinion Parties before anycourt, governmental department, or other authority (other than ApplicableOrders as to which we express our opinion in paragraph 7 herein) which purportsto affect the legality, validity or enforceability of any Transaction Documentor the transactions contemplated thereby.

 

(iv)                              Each Transaction Document is the legal,valid, and binding obligation of each party thereto other than the OpinionParties, enforceable against such other parties in accordance with its terms.

 

Members of this Firm preparing this Opinion areadmitted to practice in the State of Tennessee. We express no opinion as to the laws of any jurisdiction other than (i) thelaws of the State of Tennessee and (ii) the federal laws of the UnitedStates of America to the extent specifically referred to herein.** **Wecall to your attention that all of the Transaction Documents specify that theyare to be governed by the laws of the State of California. In rendering theopinions set forth herein, we have assumed, with your permission, thatTennessee law governs the Transaction Documents notwithstanding contractualchoice of law clauses or conflicts of law principles to the contrary.  We call to your attention that the foregoingassumption does not bind any court and is made solely to facilitate therendering of this opinion.  We furthercall to your attention that we have made no investigation regarding thedifferences, if any, between California law and Tennessee law, and we expresslydisclaim responsibility to do so.

 

Based upon the foregoing and subject to the limitations,qualifications, exceptions, and assumptions set forth herein, we are of theopinion that:

 

(1)                                  Each of SARC and the Manager is acorporation existing and in good standing under the laws of the State of Tennessee.  The Manager is qualified to do business andis in good standing as a foreign corporation under the laws of the State ofCalifornia**.**

 

4

----

 

(2)                                  Each of Symbion Support and thePurchasers is a limited liability company existing in good standing under thelaws of the State of Tennessee.  Each ofSymbion Support and the Purchasers is qualified to do business and is in goodstanding as a foreign limited liability company under the laws of the State ofCalifornia.

 

(3)                                  Each of SARC and the Manager has thecorporate power and authority to execute, deliver and perform all of itsobligations under each of the Transaction Documents to which it is a party.  Each of Symbion Support and the Purchasers hasthe limited liability company power and authority to execute, deliver andperform all of its obligations under each of the Transaction Documents to whichit is a party.

 

(4)                                  The execution and delivery of each of theTransaction Documents to which each of SARC and the Manager is a party, and theperformance of all of its obligations under each such Transaction Document havebeen authorized by all requisite corporate action on the part of SARC and theManager.

 

(5)                                  The execution and delivery of each of theTransaction Documents to which each of Symbion Support and the Purchasers is aparty, and the performance of all of its obligations under each suchTransaction Document have been authorized by all requisite limited liabilitycompany action on the party of each of Symbion Support and the Purchasers.

 

(6)                                  The Transaction Documents to which eachof the Opinion Parties is a party have each been executed and delivered by eachof the Opinion Parties.

 

(7)                                  The execution, delivery, and performanceby each of the Opinion Parties of each of the Transaction Documents to which itis a party do not (i) conflict with each such party’s Governing Documents,(ii) contravene any provision of any Applicable Law, (iii) requireany Governmental Approval, which has not been obtained or taken and is not infull force and effect, except as set forth in the Purchase Agreement, or (iv) contraveneany applicable provision of any Applicable Order.

 

(8)                                  Each Transaction Document to which eachof the Opinion Parties is a party constitutes the valid and binding obligationof such party, enforceable against such party in accordance with its terms.

 

5

----

 

**Qualifications**

 

Theopinions expressed above are subject to the following qualifications:

 

(i)                                     Enforcement may be limited by applicablebankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium orsimilar laws affecting creditors’ rights generally.

 

(ii)                                  Enforcement may be limited by generalprinciples of equity (regardless of whether enforcement is sought in equity orat law).

 

(iii)                               We express no opinion as to: (a) theenforceability of the indemnification provisions in the Transaction Documentsor (b) the enforceability of any rights to liquidated damages, penalties,punitive damages, indemnification, or contribution insofar as such rightspurport to limit or affect a claim based on tort or duty imposed by law.

 

(iv)                              We express no opinion as to provisionsthat specify the law of a particular jurisdiction as governing law.

 

(v)                                 We express no opinion with respect to theenforceability of (a) a requirement that provisions of the TransactionDocuments may only be waived in writing, (b) provisions stating that thefailure to exercise or delay in exercising rights or remedies will not operateas a waiver of such right or remedy, (c) rights to attorneys’ fees to theextent limited by applicable laws that provide that any recovery of attorneys’fees is limited to reasonable attorneys’ fees, (d) provisions by which anyof the Opinion Parties waives the right to become a debtor under the U.S.Bankruptcy Code or other bankruptcy law, (e) provisions stating that theprovisions of the Transaction Documents are severable, and (f) provisionsregarding confession of judgment which violate public policy.

 

(vi)                              We express no opinion as to the effect ofcompliance or non-compliance of any party (other than the Opinion Parties) toany of the transactions contemplated by any of the Transaction Documents withany laws or regulations applicable because of the legal or regulatory status orthe nature of the business of any party (other than the Opinion Parties) tosuch transactions.

 

(vii)                           We express no opinion regardingprovisions of the Transaction Documents that purport to confer jurisdictionupon any court or which lay venue in a specific court or courts.

 

(viii)                        We express no opinion regarding theenforceability of any covenants regarding confidentiality contained orreferenced in the Transaction Documents.

 

6

----

 

This opinion is given as of the date hereof, and we disclaim anyobligation to update this opinion letter after the date hereof.  This opinion is rendered only to theaddressee and is solely for its benefit in connection with the abovetransactions.  This opinion may not berelied upon by the addressee for any other purpose, or quoted to or relied uponby any other person, firm, corporation, or other entity for any purpose withoutour prior written consent.

 

Very truly yours,

 

7

----

 

**Exhibit A**

 

ParthenonManagement, LLC

Andrew A. Brooks,M.D.

Randhir S. Tuli

 

----

 

**Exhibit 1**

 

Applicable Orders

 

None

 

----

 

**SCHEDULE1**

 

**Affiliateof Purchaser**

 

SymbionARCManagement, Inc.

 

----

 

**SCHEDULE2.1**

 

**Consents**

 

None.

 

----

 

**SCHEDULE2.4(A)**

 

**UCCSearches**

 

See Attached.

 

----

 
| **[CHARLES  BACLET**   | *** *** | *** ***                                                        |
|------------------------|--------------|---------------------------------------------------------------------|
| **AND**                | *** *** | *** ***                                                        |
| **ASSOCIATES,  INC.]** | *** *** | ***CBA is an affiliate of  National Registered Agents, Inc.*** |

 

**Search Report**

 
| ** ** | **REPORT  DATE:**  | ** ** | **June 17,  2005** |
|------------|--------------------|------------|-------------------------|
| ** ** | **JOB  NUMBER:**   | ** ** | **54295**               |
| ** ** | **CLIENT REF. #:** | ** ** | **BROOKS / TULI**       |

 
| **SUBJECT  NAME:** |   | PARTHENON  MANAGEMENT PARTNERS, LLC |
|--------------------|--------|-------------------------------------|
|               |   |                                |
| **JURISDICTION:**  |   | SECRETARY OF STATE, CALIFORNIA      |

 
| **SEARCH:**                   | ** ** | **Through:** | ** ** | **Findings:**  | ** ** |
|-------------------------------|------------|--------------|------------|----------------|------------|
|                          |       |         |       |           |       |
| *U.C.C.  Filings*             | * *   | *06/13/05*   | ** ** | **NO  RECORD** |       |
|                          |       |         |       |           |       |
| *Federal  Tax Liens*          | * *   | *06/13/05*   | ** ** | **NO  RECORD** |       |
|                          |       |         |       |           |       |
| *State  Tax Liens*            | * *   | *06/13/05*   | ** ** | **NO  RECORD** |       |
|                          |       |         |       |           |       |
| *Abstracts of Judgment Liens* | * *   | *06/13/05*   | ** ** | **NO RECORD**  |       |
| * *                      | * *   | * *     | ** ** | ** **     |       |
| *Other:*                      | * *   | * *     | ** ** | ** **     |       |

 

*NOTE: SIMILAR NAMES FOUND, PLEASE SEE ATTACHED LISTING FOR DETAILS.*

 

***PLEASE NOTE******:****  “CBA”has made every possible effort to acquire accurate information from the recordssearched.  We guarantee the informationto be as accurate as **REASONABLE CARE**can make it.  Therefore, the ultimateresponsibility for the accuracy of maintaining files remains with the Stateagency from which the information was obtained and we accept **NO LIABILITY** beyond the exercise of **REASONABLECARE** in obtaining the above information.*

 

*2030 Main Street, Suite 1030*·*Irvine, California 92614* * Phone : (949) 955-9585* * (800) 562-6439* * Fax (800) 562-650*

*Internet Address:  cba@cbaclet.com*

 

----

 

***Search Date:        Jun. 17, 2005***

 

**CHARLES BACLET AND ASSOCIATES,INC.**

 

California Similar Name Addendum Report

 

**Truncated search name:  PARTHENON        Effective Index Date:  Jun 13, 2005**

 

**Contains all debtor names not included on the final results report.**

 
| **Filing #** | ** ** | **Debtor Name**                              | ** ** | **Debtor Address**                             |
|--------------|------------|----------------------------------------------|------------|------------------------------------------------|
|         |       |                                         |       |                                           |
| 199719560617 |       | THE PARTHENON                                |       | 7357 E ALONDRA  BLVD; PARAMOUNT                |
|         |       |                                         |       |                                           |
| 200030962638 |       | PARTHENON  ENTERPRISES INC. DBA BEAUTY FIRST |       | 10990 FOOTHILL  BLVD STE 120; RANCHO CUCAMONGA |
|         |       |                                         |       |                                           |
| 199913160386 |       | PARTHENON  ENTERTAINMENT                     |       | 2201 N.  HOLLYWOOD WY; BURBANK                 |
|         |       |                                         |       |                                           |
| 200032760519 |       | THE PARTHENON  GROUP LLC                     |       | 200 STTE ST;  BOSTON                           |
|         |       |                                         |       |                                           |
| 200032760523 |       | THE PARTHENON  GROUP LLC                     |       | 200 STATE ST;  BOSTON                          |
|         |       |                                         |       |                                           |
| 199428660193 |       | PARTHENON  RESTAURANT                        |       | 7357 ALONDRA  BLVD; PARAMOUNT                  |
|         |       |                                         |       |                                           |
| 199605860308 |       | PARTHENON  RESTAURANT                        |       | 7357 ALONDRA  BLVD; PARAMOUNT                  |
|         |       |                                         |       |                                           |
| 1992197633   |       | PARTHENON  RESTAURANT                        |       | 7357 E ALONDRA  BLVD; PARAMOUNT                |
|         |       |                                         |       |                                           |
| 1993138590   |       | PARTHENON  RESTAURANT                        |       | 7357 ALONDRA  BLVD; PARAMOUNT                  |
|         |       |                                         |       |                                           |
| 1994157769   |       | PARTHENON  RESTAURANT                        |       | 7357 ALONDRA  BLVD; PARAMOUNT                  |
|         |       |                                         |       |                                           |
| 200319660058 |       | PARTHENON  SOFTWARE, INC.                    |       | 13259 KIBBINGS  RD; SAN DIEGO                  |

 

----

 
| **[CHARLES  BACLET**   | *** *** | *** ***                                                        |
|------------------------|--------------|---------------------------------------------------------------------|
| **AND**                | *** *** | *** ***                                                        |
| **ASSOCIATES,  INC.]** | *** *** | ***CBA is an affiliate of  National Registered Agents, Inc.*** |

 

**Search Report**

 
| ** ** | **REPORT  DATE:**  | ** ** | **June 17,  2005** |
|------------|--------------------|------------|-------------------------|
| ** ** | **JOB  NUMBER:**   | ** ** | **54295**               |
| ** ** | **CLIENT REF. #:** | ** ** | **BROOKS / TULI**       |

 
| **SUBJECT  NAME:** |   | TULI, RANDHIR S.                |
|--------------------|--------|---------------------------------|
|               |   |                            |
| **JURISDICTION:**  |   | SECRETARY OF  STATE, CALIFORNIA |

 
| **SEARCH:**                   | ** ** | **Through:** | ** ** | **Findings:**  | ** ** |
|-------------------------------|------------|--------------|------------|----------------|------------|
|                          |       |         |       |           |       |
| *U.C.C.  Filings*             | * *   | *06/13/05*   | ** ** | **NO  RECORD** |       |
|                          |       |         |       |           |       |
| *Federal  Tax Liens*          | * *   | *06/13/05*   | ** ** | **NO  RECORD** |       |
|                          |       |         |       |           |       |
| *State  Tax Liens*            | * *   | *06/13/05*   | ** ** | **NO  RECORD** |       |
|                          |       |         |       |           |       |
| *Abstracts of Judgment Liens* | * *   | *06/13/05*   | ** ** | **NO RECORD**  |       |
| * *                      | * *   | * *     | ** ** | ** **     |       |
| *Other:*                      | * *   | * *     | ** ** | ** **     |       |

 

***PLEASE NOTE******:****  “CBA”has made every possible effort to acquire accurate information from the recordssearched.  We guarantee the informationto be as accurate as **REASONABLE CARE**can make it.  Therefore, the ultimateresponsibility for the accuracy of maintaining files remains with the Stateagency from which the information was obtained and we accept **NO LIABILITY** beyond the exercise of **REASONABLECARE** in obtaining the above information.*

 

*2030 Main Street, Suite 1030*·*Irvine, California 92614   Phone :(949) 955-9585   (800) 562-6439   Fax(800) 562-650*

*Internet Address:  cba@cbaclet.com*

 

----

 
| **[CHARLES  BACLET**   |         |                                                                |
|------------------------|--------------|---------------------------------------------------------------------|
| **AND**                |         |                                                                |
| **ASSOCIATES,  INC.]** | *** *** | ***CBA is an affiliate of  National Registered Agents, Inc.*** |

 

**Search Report**

 
| ** ** | **REPORT  DATE:**  | ** ** | **June 17,  2005** |
|------------|--------------------|------------|-------------------------|
| ** ** | **JOB  NUMBER:**   | ** ** | **54295**               |
| ** ** | **CLIENT REF. #:** | ** ** | **BROOKS / TULI**       |

 
| **SUBJECT  NAME:** |   | BROOKS, ANDREW  A. M.D.        |
|--------------------|--------|--------------------------------|
|               |   |                           |
| **JURISDICTION:**  |   | SECRETARY OF STATE, CALIFORNIA |

 
| **SEARCH:**                   | ** ** | **Through:** | ** ** | **Findings:**  |   |
|-------------------------------|------------|--------------|------------|----------------|--------|
|                          |       |         |       |           |   |
| *U.C.C.  Filings*             | * *   | *06/13/05*   | ** ** | **NO RECORD**  |   |
|                          |       |         |       |           |   |
| *Federal  Tax Liens*          | * *   | *06/13/05*   | ** ** | **NO  RECORD** |   |
|                          |       |         |       |           |   |
| *State  Tax Liens*            | * *   | *06/13/05*   | ** ** | **NO  RECORD** |   |
|                          |       |         |       |           |   |
| *Abstracts of Judgment Liens* | * *   | *06/13/05*   | ** ** | **NO RECORD**  |   |
| * *                      | * *   | * *     | ** ** | ** **     |   |
| *Other:*                      | * *   | * *     | ** ** | ** **     |   |

 

***PLEASE NOTE******:****  “CBA”has made every possible effort to acquire accurate information from the recordssearched.  We guarantee the informationto be as accurate as **REASONABLE CARE**can make it.  Therefore, the ultimateresponsibility for the accuracy of maintaining files remains with the Stateagency from which the information was obtained and we accept **NO LIABILITY** beyond the exercise of **REASONABLECARE** in obtaining the above information.*

 

*2030 Main Street, Suite 1030*·*Irvine, California 92614   Phone :(949) 955-9585   (800) 562-6439   Fax(800) 562-650*

*Internet Address:  cba@cbaclet.com*

 

----

 
| **[CHARLES  BACLET**   |         |                                                                |
|------------------------|--------------|---------------------------------------------------------------------|
| **AND**                |         |                                                                |
| **ASSOCIATES,  INC.]** | *** *** | ***CBA is an affiliate of  National Registered Agents, Inc.*** |

 

**Search Report**

 
| ** ** | **REPORT  DATE:**  | ** ** | **June 24,  2005** |
|------------|--------------------|------------|-------------------------|
| ** ** | **JOB  NUMBER:**   | ** ** | **54295**               |
| ** ** | **CLIENT REF. #:** | ** ** | **BROOKS / TULI**       |

 
| **SUBJECT  NAME:** |   | PARTHENON  MANAGEMENT PARTNERS, LLC     |
|--------------------|--------|-----------------------------------------|
|               |   |                                    |
| **JURISDICTION:**  |   | LOS ANGELES COUNTY RECORDER, CALIFORNIA |

 
| **SEARCH:**                   | ** ** | **Through:** | ** ** | **Findings:**  |   |
|-------------------------------|------------|--------------|------------|----------------|--------|
|                          |       |         |       |           |   |
| *U.C.C.  Filings*             | * *   | *06/17/2005* | ** ** | **NO  RECORD** |   |
|                          |       |         |       |           |   |
| *Federal  Tax Liens*          | * *   | *06/17/2005* | ** ** | **NO  RECORD** |   |
|                          |       |         |       |           |   |
| *State  Tax Liens*            | * *   | *06/17/2005* | ** ** | **NO  RECORD** |   |
|                          |       |         |       |           |   |
| *Abstracts of Judgment Liens* | * *   | *06/17/2005* | ** ** | **NO RECORD**  |   |
| * *                      | * *   | * *     | ** ** | ** **     |   |
| *Other:*                      | * *   | * *     | ** ** | ** **     |   |

 

***PLEASE NOTE******:****  “CBA”has made every possible effort to acquire accurate information from the recordssearched.  We guarantee the informationto be as accurate as **REASONABLE CARE**can make it.  Therefore, the ultimateresponsibility for the accuracy of maintaining files remains with the Stateagency from which the information was obtained and we accept **NO LIABILITY** beyond the exercise of **REASONABLECARE** in obtaining the above information.*

 

*2030 Main Street, Suite 1030*·*Irvine, California 92614   Phone :(949) 955-9585   (800) 562-6439   Fax(800) 562-650*

*Internet Address:  cba@cbaclet.com*

 

----

 
| **[CHARLES  BACLET**   |         |                                                                |
|------------------------|--------------|---------------------------------------------------------------------|
| **AND**                |         |                                                                |
| **ASSOCIATES,  INC.]** | *** *** | ***CBA is an affiliate of  National Registered Agents, Inc.*** |

 

**Search Report**

 
| ** ** | **REPORT  DATE:**  | ** ** | **June 24,  2005** |
|------------|--------------------|------------|-------------------------|
| ** ** | **JOB  NUMBER:**   | ** ** | **54295**               |
| ** ** | **CLIENT REF. #:** | ** ** | **BROOKS / TULI**       |

 
| **SUBJECT  NAME:** |   | TULI, RANDHIR S.                        |
|--------------------|--------|-----------------------------------------|
|               |   |                                    |
| **JURISDICTION:**  |   | LOS ANGELES COUNTY RECORDER, CALIFORNIA |

 
| **SEARCH:**                   | ** ** | **Through:** | ** ** | **Findings:**  | ** ** |
|-------------------------------|------------|--------------|------------|----------------|------------|
|                          |       |         |       |           |       |
| *U.C.C.  Filings*             | * *   | *06/17/2005* | ** ** | **NO  RECORD** |       |
|                          |       |         |       |           |       |
| *Federal  Tax Liens*          | * *   | *06/17/2005* | ** ** | **NO  RECORD** |       |
|                          |       |         |       |           |       |
| *State  Tax Liens*            | * *   | *06/17/2005* | ** ** | **NO  RECORD** |       |
|                          |       |         |       |           |       |
| *Abstracts of Judgment Liens* | * *   | *06/17/2005* | ** ** | **NO RECORD**  |       |
| * *                      | * *   | * *     | ** ** | ** **     |       |
| *Other:*                      | * *   | * *     | ** ** | ** **     |       |

 

***PLEASE NOTE******:****  “CBA”has made every possible effort to acquire accurate information from the recordssearched.  We guarantee the informationto be as accurate as **REASONABLE CARE**can make it.  Therefore, the ultimateresponsibility for the accuracy of maintaining files remains with the Stateagency from which the information was obtained and we accept **NO LIABILITY** beyond the exercise of **REASONABLECARE** in obtaining the above information.*

 

*2030 Main Street, Suite 1030*·*Irvine, California 92614   Phone :(949) 955-9585   (800) 562-6439   Fax(800) 562-650*

*Internet Address:  cba@cbaclet.com*

 

----

 
| **[CHARLES  BACLET**   |         |                                                                |
|------------------------|--------------|---------------------------------------------------------------------|
| **AND**                |         |                                                                |
| **ASSOCIATES,  INC.]** | *** *** | ***CBA is an affiliate of  National Registered Agents, Inc.*** |

 

**Search Report**

 
| ** ** | **REPORT  DATE:**  | ** ** | **June 24,  2005** |
|------------|--------------------|------------|-------------------------|
| ** ** | **JOB  NUMBER:**   | ** ** | **54295**               |
| ** ** | **CLIENT REF. #:** | ** ** | **BROOKS / TULI**       |

 
| **SUBJECT  NAME:** |   | BROOKS, ANDREW  A.  M.D.      |
|--------------------|--------|-----------------------------------------|
|               |   |                                    |
| **JURISDICTION:**  |   | LOS ANGELES COUNTY RECORDER, CALIFORNIA |

 
| **SEARCH:**                   | ** ** | **Through:** | ** ** | **Findings:**  | ** ** |
|-------------------------------|------------|--------------|------------|----------------|------------|
|                          |       |         |       |           |       |
| *U.C.C.  Filings*             | * *   | *06/17/2005* | ** ** | **NO  RECORD** |       |
|                          |       |         |       |           |       |
| *Federal  Tax Liens*          | * *   | *06/17/2005* | ** ** | **NO  RECORD** |       |
|                          |       |         |       |           |       |
| *State  Tax Liens*            | * *   | *06/17/2005* | ** ** | **NO  RECORD** |       |
|                          |       |         |       |           |       |
| *Abstracts of Judgment Liens* | * *   | *06/17/2005* | ** ** | **NO RECORD**  |       |
| * *                      | * *   | * *     | ** ** | ** **     |       |
| *Other:*                      | * *   | * *     | ** ** | ** **     |       |

 

*NOTE: THERE WERE NO RECORDS FOUND REFLECTING THE GIVEN NAME ANDADDRESS.****

 

***PLEASE NOTE******:****  “CBA”has made every possible effort to acquire accurate information from the recordssearched.  We guarantee the informationto be as accurate as **REASONABLE CARE**can make it.  Therefore, the ultimateresponsibility for the accuracy of maintaining files remains with the Stateagency from which the information was obtained and we accept **NO LIABILITY** beyond the exercise of **REASONABLECARE** in obtaining the above information.*

 

*2030 Main Street, Suite 1030*·*Irvine, California 92614   Phone :(949) 955-9585   (800) 562-6439   Fax(800) 562-650*

*Internet Address:  cba@cbaclet.com*

 

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**SCHEDULE2.8**

 

**Permits**

 

Business licenses in each local jurisdiction in which Parthenonoperates.  Copies of such businesslicenses are attached hereto.

 

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|                               |   |                              | CITY OF BEVERLY HILLS |           |     |   |
|-------------------------------|--------|-----------------------------------|-----------------------|----------------|----------|--------|
| 455 N. Rexford Dr.            |   | FINANCE ADMINISTRATION            |                  |           | **C**    |
| Beverly Hills, CA  90210-4817 |   | BUSINESS TAX REGISTRATION         |                  | Calendar Year: | **2005** |
| 310.285.2427                  |   | PROFESSIONAL /  SEMI-PROFESSIONAL |                  | Tax  No:       | New      |

 
| **Business  Address**                   |      | **Business  Information** |
|-----------------------------------------|-----------|---------------------------|
| ** **                              |      | ** **                |
| **Parthenon  Management Partners, LLC** |      | Starting Date:            | 6/29/05 |
| Business Name                           |      | Class:                    | 8999 |
| **8670 Wilshire Blvd.**                 | **# 301** |                      | Type: | Medical / Consulting |
| Street Address                          | Suite     |                      | Owner / Partners: | Randhir S. Tuli |
| **Beverly Hills**                       | **CA**    | **90212**                 |   |   | Andrew A. Brooks |
| City                                    | State     | Zip                       |   | Telephone: | 310-360-3824 |
|                                    |      | Fax:                      | 310-388-1552 |
| **Mailing  Address**                    |      | Proprietorship: (SS#)     |   |
| ** **                              |      | Partnership: (FIN)        |   |
| **Parthenon Management Partners, LLC**  |      | Corporation: (FIN)        |   |
| Business Name                           |      | Email Address:            |   |
| **8670 Wilshire Blvd.**                 | **# 301** |                      | Web Site: |   |
| Street Address                          |      |                      |   |
| **Beverly Hills**                       | **CA**    | **90212**                 |   |   |   |
| City                                    | State     | Zip                       |   |   |   |
|                                         |           |                           |  |  |  |  |

 

Please make account changes on reverse side

 

**TAXCALCULATION**

 
| 1.                                                          | This registration is for the period  from:  06/29/05 to 12/31/05                                                                          |       |     |     |
|-------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|----------|
| 2.                                                          | Tax basis: number of people  employed previous year                                                                                                 |       | 2.       | 1.60     |
| 3.                                                          | Base — 1st 2080 hrs. at $1,095.41                                                                                                         |       | 3.       | 1,095.41 |
| 4.                                                          | Each additional hr. Pro /  Semi at $0.52664                                                                                                         |       | 4.       | 0.00     |
| 5.                                                          | Each additional hr.  Non-Prof. at $0.10580                                                                                                          |       | 5.       | 110.03   |
| 6.                                                          | Penalty Charge  0%                                                                                                                        |       | 6.       | 0.00     |
| 7.                                                          | Previous Balance                                                                                                                                    |       | 7.       | 0.00     |
| 8.                                                          | Interest Charges (all)                                                                                                                              |       | 8.       | 0.00     |
| 9.                                                          | Credit or Debit (other)                                                                                                                             |       | 9.       | 0.00     |
|                                                        |                                                                                                                                                |       |     |     |
|                                                        |                                                                                                                                                | Total      |     | 1,205.44 |
|                                                        | Payment Date         /       /        | Payment(s) |     | 0.00     |
| Please  make check payable to:  City of Beverly  Hills | Balance Due                                                                                                                                         |       | 1,205.44 |

 

**MESSAGE**

 

ACCORDING TO SECTION 3-1.201 OF THEMUNICIPAL CODE, EVERY BUSINESS MUST REGISTER WITH THE CITY AND PAY ALL BUSINESSTAXES PRIOR TO THE FIRST DAY OF OPERATION. PAYMENTS WILL BE CONSIDEREDDELINQUENT AND A PENALTY WILL BE ASSESSED IF NOT RECEIVED WITHIN 30 DAYS OF THEFIRST DAY OF OPERATION. PENALTIES ACCRUE AT A RATE OF 10% PER MONTH, TO AMAXIMUM OF 50%, INTEREST AT 1.5% / MO.

 

I acknowledge that my receipt of a taxcertificate merely confirms that I have completed and filed the required taxregistration form with the Beverly Hills Department of Finance Administrationand paid the required taxes and other lawful charges.  I understand and agree that any tax certificatewhich may be issued to me by the Beverly Hills Department of FinanceAdministration does not authorize me to engage in any activity or to maintainany condition in the City of Beverly Hills which violates any municipal laws,including without limitation, building and zoning codes.  I fully understand that I am subject to allenforcement remedies for a violation of any municipal code sectionnotwithstanding the issuance of a valid tax certificate to me.

 
| 07/01/05 |   | /s/ Gaurav Singh     |   | Gaurav Singh |   | Controller |
|----------|--------|----------------------|--------|--------------|--------|------------|
| DATE     |   | AUTHORIZED SIGNATURE |   | PRINT NAME   |   | TITLE      |

 

**SIGN AND RETURN THIS COPYWITH PAYMENT  REGISTRATION MUST BE FULLYCOMPLETED PRIOR TO ISSUANCE OF CERTIFICATE**

 

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CITY OF BEVERLY HILLS

 
| RECVD BY: CS                 |   | CS100423101 |   |
|------------------------------|--------|-------------|--------|
| PAYOR: VM                    |   |        |   |
| TODAY’S DATE:  07/01/05 |   |        |   |
| REGISTER DATE:  07/01/05     |   | TIME: 13:37 |   |

 
| **DESCRIPTION**    | ** ** | **AMOUNT** | ** ** |
|--------------------|------------|------------|------------|
| BUSINESS TAX       |       | $          | 1,205.44   |   |
| CUST ID:  00008317 |       |       |       |
| TOTAL DUE:         |       | $          | 1,205.44   |   |
|               |       |       |       |
| CHECK PAID:        |       | $          | 1,205.44   |   |
| CHECK NO: 1105     |       |       |       |
| TENDERED:          |       | $          | 1,205.44   |   |
| CHANGE:            |       | $          | .00        |   |

 

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**SCHEDULE3.2**

 

**Consents**

 

None.

 

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