Nobilis Health Corp.: Exhibit 10.9 - Filed by newsfilecorp.com





 

 

AGREEMENT 

by and between 

FIRST SURGICAL PARTNERS HOLDINGS, INC. 

and 

NORTHSTAR HEALTHCARE INC. 

As of September 2, 2014 

 

 

 




TABLE OF CONTENTS 

	 	 	 	Page
	
      
	
      
	
      
	
	
      ARTICLE I CONSTRUCTION; DEFINITIONS 
	1 
		
      Section 1.1. 
	
      Definitions 
	1 
		
      Section 1.2. 
	
      Other Definitions 
	4 
		
      Section 1.3. 
	
      Construction 
	4 
		
      Section 1.4. 
	
      Accounting Terms 
	4 
	
       
	
      
	
      
	
	
      ARTICLE II NEWCO 
	4 
		
      Section 2.1. 
	
      Formation of Newco 
	4 
		
      Section 2.2. 
	
      Further Assurances 
	5 
	
       
	
      
	
      
	
	
      ARTICLE III REPRESENTATIONS AND WARRANTIES OF FIRST
      SURGICAL 
	5 
		
      Section 3.1. 
	
      Organization 
	5 
		
      Section 3.2. 
	
      Authorization 
	5 
		
      Section 3.3. 
	
      Absence of Restrictions and Conflicts 
	6 
		
      Section 3.4. 
	
      Title to Assets; Related Matters 
	6 
		
      Section 3.5. 
	
      Accounts Receivable 
	6 
		
      Section 3.6. 
	
      Licenses 
	6 
		
      Section 3.7. 
	
      Legal Proceedings 
	7 
		
      Section 3.8. 
	
      Brokers, Finders and Investment Bankers 
	7 
		
      Section 3.9. 
	
      No Additional Representations or Warranties 
	7 
	
       
	
      
	
      
	
	
      ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NORTHSTAR
      
	8 
		
      Section 4.1. 
	
      Organization 
	8 
		
      Section 4.2. 
	
      Authorization 
	8 
		
      Section 4.3. 
	
      Absence of Restrictions and Conflicts 
	8 
		
      Section 4.4. 
	
      Financial Capability 
	8 
		
      Section 4.5. 
	
      Legal Proceedings 
	9 
		
      Section 4.6. 
	
      No Additional Representations or Warranties 
	9 
		
      Section 4.7. 
	
      Brokers, Finders and Investment Bankers 
	9 
	
       
	
      
	
      
	
	
      ARTICLE V CERTAIN COVENANTS AND AGREEMENTS 
	10

		
      Section 5.1. 
	
      Reasonable Efforts; Further Assurances; Cooperation
      
	10 
		
      Section 5.2. 
	
      Public Announcements 
	11

		
      Section 5.3. 
	
      Financing 
	11 
	
       
	
      
	
      
	
	
      ARTICLE VI CONDITIONS TO CLOSING 
	11 
		
      Section 6.1. 
	
      Conditions to Obligations of Each Party 
	11

		
      Section 6.2. 
	
      Conditions to Obligations of First Surgical 
	13 
		
      Section 6.3. 
	
      Conditions to Obligations of Northstar 
	14

	
       
	
      
	
      
	
	
      ARTICLE VII CLOSING 
	14

		
      Section 7.1. 
	
      Closing 
	14 
		
      Section 7.2. 
	
      First Surgical Closing Deliveries and Action 
	14

		
      Section 7.3. 
	
      Northstar Closing Deliveries 
	15 


i 





		
      Section 7.4. 
	
      Northstar Capital Contribution 
	15
      
		
      Section 7.5. 
	
      Assignment by FS Surgical and FS Hospital 
	15
      
		
      Section 7.6. 
	
      Newco Payment 
	15
      
		
      Section 7.7. 
	
      Allocation of Receivables 
	15
      
		
      Section 7.8. 
	
      Post-Closing Payment 
	15
      
	
       
	
      
	
      
	
	
      ARTICLE VIII TERMINATION 
	16
      
		
      Section 8.1. 
	
      Termination 
	16
      
		
      Section 8.2. 
	
      Specific Performance and Other Remedies 
	16
      
		
      Section 8.3. 
	
      Effect of Termination 
	16
      
	
       
	
      
	
      
	
	
      ARTICLE IX NORTHSTAR SUBSCRIPTION RIGHT; OPTION
    
	17
      
		
      Section 9.1. 
	
      Northstar Subscription Right: 
	17
      
		
      Section 9.2. 
	
      Option 
	17
      
	
       
	
      
	
      
	
	
      ARTICLE X DISSOLUTION OF RELATIONSHIP 
	18
      
		
      Section 10.1. 
	
      Dissolution of Relationship 
	18
      
	
       
	
      
	
      
	
	
      ARTICLE XI MISCELLANEOUS PROVISIONS 
	19
      
		
      Section 11.1. 
	
      Notices 
	19
      
		
      Section 11.2. 
	
      Schedules and Exhibit 
	20
      
		
      Section 11.3. 
	
      Assignment; Successors in Interest 
	20
      
		
      Section 11.4. 
	
      Captions 
	20
      
		
      Section 11.5. 
	
      Mediation 
	20
      
	
      
	
      Section 11.6. 
	
      Governing Law; Consent to Jurisdiction; WAIVER OF TRIAL
      BY JURY; Etc 
	20
      
		
      Section 11.7. 
	
      Severability 
	21
      
		
      Section 11.8. 
	
      Counterparts 
	22
      
		
      Section 11.9. 
	
      Amendment 
	22
      
		
      Section 11.10. 
	
      Enforcement of Certain Rights 
	22
      
		
      Section 11.11. 
	
      Waiver 
	22
      
		
      Section 11.12. 
	
      Integration 
	22
      
		
      Section 11.13. 
	
      Cooperation Following the Closing 
	22
      
		
      Section 11.14. 
	
      Transaction Costs 
	22
      


ii 




AGREEMENT 

THIS AGREEMENT (this
“Agreement ”), dated as of September [2], 2014, is made and entered into
by and between First Surgical Partners Holdings, Inc., a Delaware corporation
(“First Surgical”), and Northstar Healthcare Inc., a British
Columbia corporation (“Northstar”). First Surgical and Northstar
are sometimes individually referred to herein as a “Party” and
collectively as the “Parties.” 

W I T N E S S E T H: 

WHEREAS, First Surgical is a
parent company of and indirectly owns all of the issued and outstanding equity
of First Street Surgical Center, L.P. (“FS Surgical) and First Street Hospital
L.P. (“FS Hospital”); 

WHEREAS, the Parties desire to enter into this Agreement
  pursuant to which a newly formed Texas limited liability company (“Newco”) shall
  assume the operations of FS Surgical and FS Hospital, on the terms set forth
  herein; 

NOW, THEREFORE, in consideration of the foregoing and the respective
  representations, warranties, covenants, agreements and conditions hereinafter
  set forth, and intending to be legally bound hereby, each Party hereby agrees: 

ARTICLE I 
CONSTRUCTION; DEFINITIONS


Section 1.1. Definitions.
The following terms, as used herein, have the following meanings:

“Affiliate” of any specified Person means any other Person directly or
  indirectly Controlling or Controlled by or under direct or indirect common
  Control with such specified Person. 

“Business Day” means any
day except Saturday, Sunday or any day on which banks are authorized by Law to
be closed in the City of Houston, Texas. 

“Closing Date” means the date on which the Closing
occurs. 

“Exhibit” means any exhibit attached to this Agreement. 

“Financing” means an
anticipated brokered private placement financing by Northstar for gross proceeds
of up to $7,500,000. Completion of the Financing is subject to the approval of
the Toronto Stock Exchange (“TSX”). 

“First Surgical Ancillary
Documents” means any certificate, agreement, document or other instrument,
other than this Agreement, to be executed and delivered by First Surgical or any
Affiliate of First Surgical in connection with the transactions contemplated
hereby. 




“First Street Credit
Agreement” means that certain loan agreement, dated December 20, 2013, by
and among Iberiabank and other lenders and FS Surgical and FS Hospital. 

“GAAP” means generally
accepted accounting principles in the United States of America. 

“Governmental
  Entity” means any federal, state, local or foreign government, any political
  subdivision thereof, or any court, administrative or regulatory agency,
  department, instrumentality, body or commission or other governmental authority
  or agency, or any self-regulating body, including a stock exchange, and any
  related arbitrator.

“Knowledge” means all
facts that are known, after reasonable inquiry, (a) with respect to Northstar,
by Dr. Donald Kramer, Harry Fleming and Doug Samuelson and (b) with respect to
First Surgical, by Dr. Jacob Varon and Jeff Holland. 

“Laws” means all statutes,
rules, codes, regulations, restrictions, ordinances, orders, decrees, approvals,
directives, judgments, injunctions, writs, awards and decrees of, or issued by,
any Governmental Entity. 

“Leased Real Property”
means the parcels of real property on which FS Surgical and FS Hospital are
located, 411 First Street, Bellaire, Texas 77401. 

“Leases” means the
following leases: (i) the lease, dated April1, 2003 between FS Surgical and
First Street Holdings Ltd. (formerly lslington, Ltd.), as amended April 1, 2013
and December 1, 2013; (ii) the lease dated March 1, 2005, between FS Surgical
and Lenox Hill Holdings, Ltd., as amended September 1, 2010, February 1, 2012
and November 19, 2013; (iii) the lease dated November 1, 2006, between FS
Surgical and Ranier Metroplex Partners LP, as amended November 1, 2009; (iv) the
lease dated September 17, 2006, between FS Hospital and First Street Holdings,
Ltd., as amended April 1, 2013 and December 1, 2013.

“Material Adverse Effect”
means any state of facts, change, event, circumstance, effect or occurrence,
individually or in the aggregate with other facts, change, event, effect or
occurrence, that is or would reasonably likely be materially adverse to the,
financial condition, results of operations, properties, assets or liabilities
(including contingent liabilities), or business of the a Party and its
Subsidiaries taken as a whole; provided, that none of the following, and
no changes, effects, events, circumstances, occurrences or states of facts
arising out of or resulting from the following, shall be deemed, either alone or
in combination, to constitute a Material Adverse Effect, or be taken into
account in determining whether there has been a Material Adverse Effect, to the
extent the following do not materially and disproportionately impact applicable
Party and its Subsidiaries, taken as a whole, compared to other companies in the
industry or industries in which the Company and its Subsidiaries operate, in
which case the extent of such material and disproportionate effect may be taken
in to account in determining whether a Material Adverse Effect has occurred: (a)
changes or effects in general economic conditions; (b) changes in Laws or GAAP
(or other analogous accounting standards) or the enforcement thereof; (c)
changes or effects, including legal, tax or regulatory changes, that generally
affect the industry or industry sectors in which the Company and its
Subsidiaries operate; (d) any changes or effects that arise out of or are
attributable to the commencement, occurrence, continuation or intensification of
any war, sabotage, armed hostilities or acts of terrorism; or (e) changes or
effects that arise out of or are attributable to the negotiation, execution, public
announcement, pendency or performance of this Agreement or the compliance with
the provisions thereof. 

2 




“Northstar Ancillary
Documents” means any certificate, agreement, document or other instrument,
other than this Agreement, to be executed and delivered by Northstar or any
Affiliate of Northstar in connection with the transactions contemplated hereby.


“Northstar Capital
Contribution” means the capital contribution in the amount of $7,500,000 to
be made by Northstar into Newco at Closing. 

“Ordinary Course” means
(a) the ordinary course of business of the applicable Party and its Subsidiaries
and consistent with the past practices of the applicable Party and its
Subsidiaries and (b) not required to be authorized by the board of directors or
other governing body or the applicable Party or its Subsidiaries, or by any
Person exercising similar authority; provided, that material violations
of Law or a material violation of the contractual rights of third parties shall
not be Ordinary Course. 

“Payables” means the
payables of FS Surgical and FS Hospital as listed on Schedule 1, or any payable
incurred by FS Surgical and FS Hospital which is incurred in the Ordinary Course
and within one of the categories of payables described in Schedule 1. 

“Permitted Liens” means
(a) Liens for Taxes not yet due and payable, (b) statutory Liens of landlords,
(c) Liens of carriers, warehousemen, mechanics, materialmen and repairmen and
other like Liens incurred in the Ordinary Course and not yet delinquent, and (d)
Real Property, zoning, building, or other restrictions, variances, covenants,
rights of way, easements, mineral leases and reservations, and other minor
irregularities in title, none of which, (i) interfere in any material respect
with the present use of or occupancy of the affected parcel by the applicable
Person, (ii) have more than an immaterial effect on the value thereof or its use
or (iii) impair the ability of such parcel to be sold, leased or subleased for
its present use. For the avoidance of doubt, except for Liens described in
clauses (a) and (b), Liens securing obligations for the payment of
money shall not constitute Permitted Liens hereunder. 

“Person” means any
individual, corporation, partnership, joint venture, limited liability company,
trust, unincorporated organization or Governmental Entity. 

“Receivables” means the
accounts receivable of FS Surgical and FS Hospital as of the Closing Date. 

“Representatives” means,
with respect to a Person, such Person’s respective parents, directors, managers,
officers, employees, attorneys, accountants, representatives, financial
advisors, lenders, consultants, and other agents. 

“Schedule” means any schedule attached to this
Agreement. 

“Subsidiary” or
“Subsidiaries” means any or all Persons of which either Party (or other
specified Person) shall own directly or indirectly through another Person, a
nominee arrangement or otherwise (a) at least a majority of the outstanding
capital stock (or other shares of beneficial interest) entitled to vote
generally or otherwise have the power to elect a majority of the board of directors or similar governing body or the legal power to
direct the business or policies of such Person or (b) a majority of the economic
interests of such Person. 

3 




“Varon Payable” means obligations
of FS Surgical and FS Hospital to Dr. Jacob Varon, in the aggregate amount of
$700,000, with respect to certain advances Dr. Varon previously made to FS
Surgical and FS Hospital. 

Section 1.2. Other
Definitions. Each of the following terms is defined in the Section set forth
opposite such term: T/B/S 

Section 1.3. Construction.
Unless the context of this Agreement clearly requires otherwise, (a) references
to the plural include the singular, and references to the singular include the
plural; (b) references to any gender include the other genders; (c) the words
“include,” “includes” and “including” do not limit the preceding terms or words
and shall be deemed to be followed by the words “without limitation”; (d) the
terms “hereof”, “herein”, “hereunder”, “hereto” and similar terms in this
Agreement refer to this Agreement as a whole and not to any particular provision
of this Agreement; (e) the terms “day” and “days” mean and refer to calendar
day(s); (f) the terms “year” and “years” mean and refer to calendar year(s) and
(g) all references in this Agreement to “dollars” or “$” shall mean United
States Dollars. Unless otherwise set forth herein, references in this Agreement
to (i) any document, instrument or agreement (including this Agreement) (A)
includes and incorporates all exhibits, schedules and other attachments thereto,
(B) includes all documents, instruments or agreements issued or executed in
replacement thereof and (C) means such document, instrument or agreement, or
replacement or predecessor thereto, as amended, modified or supplemented from
time to time in accordance with its terms and in effect at any given time, and
(ii) a particular Law means such Law as amended, modified, supplemented or
succeeded, from time to time and in effect at any given time. All Article,
Section, Exhibit and Schedule references herein are to Articles, Sections,
Exhibits and Schedules of this Agreement, unless otherwise specified. This
Agreement shall not be construed as if prepared by one of the Parties, but
rather according to its fair meaning as a whole, as if both Parties had prepared
it. 

Section 1.4. Accounting
Terms. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. 

ARTICLE II
NEWCO 

Section 2.1. Formation of
Newco. Upon the Closing, First Surgical (or one or more of its Subsidiaries)
and Northstar (or one or more of its Subsidiaries) shall execute and deliver a
limited liability company agreement for Newco (the “Company Agreement”) in form
to be agreed by the parties. Among other things, the Company Agreement shall
contain the following terms: 

	Board of Managers: 5 member board, initially comprised of two
  Northstar designees, two First Surgical designees and Dr. Jacob Varon. If at
  any time Dr. Varon ceases to serve on the board, the vacancy created shall be
  filled by Northstar.
    

   
  
	Certain Actions: A vote of holders of 80% of the holders of equity
of Newco shall be required to take certain critical actions, including:


4 





	 	1. 	
      Amendments to Company Agreement;

	 	2. 	
      Significant financings;

	 	3. 	
      Major additions or deletions of services;

	 	4. 	
      Major Capital projects;

	 	5. 	
      Acquisitions and dispositions of assets or businesses,
      outside the ordinary course of business;

	 	6. 	
      Entering into a different line of business, and

	 	7. 	
      Hiring and termination of any chief executive officer of
      Newco.



Upon the Closing, First Surgical (and/or one or more of its
Subsidiaries) shall be issued 49% of the outstanding membership interest (the
“Units”) issued by Newco and Northstar (and/or one or more of its Subsidiaries)
shall be issued 51% of the outstanding Units issued Newco. Newco shall have one
class of Units only, with identical economic and non-economic rights and
obligations. 

Section 2.2. Further
Assurances. Each Party shall on the Closing Date and from time to time
thereafter, at the other Party’s reasonable request and without further
consideration, execute and deliver (or cause to be executed and delivered) to
the other Party such instruments of transfer, conveyance and assignment as shall
be reasonably requested by the other Party to effect the transactions
contemplated by this Agreement. 

ARTICLE III 
REPRESENTATIONS AND WARRANTIES OF
FIRST SURGICAL 

First Surgical hereby represents
and warrants to Northstar as follows as of the date hereof and as of the Closing
Date: 

Section 3.1. Organization. Each of First Surgical and each of its
  Subsidiaries is a corporation, limited liability company or other organization
  duly formed, validly existing and in good standing, as applicable, under the
  laws of the jurisdiction of incorporation or organization, as applicable, and
  each has all requisite power and authority to own, lease and operate its
  properties and to carry on its business as now being conducted.

Section 3.2.
Authorization. Each of First Surgical and, as applicable, each of its
Subsidiaries has all necessary corporate power and authority to execute and
deliver this Agreement and the First Surgical Ancillary Documents, to carry out
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the First Surgical Ancillary Documents by First Surgical and/or its
Subsidiaries, the performance by First Surgical and/or its Subsidiaries of its
obligations hereunder and thereunder, and the consummation of the transactions
provided for herein and therein have been duly and validly authorized by all
necessary corporate action on the part of First Surgical and/or its
Subsidiaries. This Agreement has been and, as of the Closing Date, the First
Surgical Ancillary Documents shall be, duly executed and delivered by First
Surgical and/or its Subsidiaries and do or shall, as the case may be, constitute
the valid and binding agreements of First Surgical and/or its Subsidiaries,
enforceable against such Persons in accordance with their respective terms,
subject to applicable bankruptcy insolvency and other similar Laws affecting the
enforceability of creditors’ rights generally, general equitable principles and
the discretion of courts in granting equitable remedies. 

5 




Section 3.3. Absence of
Restrictions and Conflicts. Except as set forth on Schedule
3.31, the execution, delivery and performance by First Surgical
of this Agreement and the First Surgical Ancillary Documents and the
consummation of the transactions contemplated hereby and thereby: (a) will not
create in any party the right to prevent, enjoin or otherwise delay the
transactions contemplated by this Agreement and (b) do not or will not (as the
case may be) violate or conflict with, constitute a breach of or default under,
result in the loss of any benefit under, permit the acceleration of any
obligation under or create in any party the right to terminate, modify or
cancel, (i) any term or provision of the organizational or constituent documents
of First Surgical or any of its Subsidiaries, (ii) except as indicated on
Schedule 3.3, any other contract, agreement, permit, franchise, license
or other instrument applicable to which First Surgical or any of its
Subsidiaries is a party, (iii) any judgment, decree or order of any court or
Governmental Entity or agency to which First Surgical or any of its Subsidiaries
is a party or by which First Surgical, or any of its Subsidiaries or any of
their respective properties are bound, or (iv) any Law or arbitration award
applicable to First Surgical or any of its Subsidiaries. 

Section 3.4. Title to Assets; Related Matters. 

(a)
Except as set forth on Schedule 3.4,2 FS Hospital and FS
Surgical have good and valid title, a valid leasehold interest in, or a valid
license for, all of the property and assets owned, leased, licensed, operated or
used by them, free and clear of all Liens, except Permitted Liens. 

(b) All
material equipment and other items of tangible personal property and assets
owned, leased, licensed, operated or used by FS Hospital and FS Surgical (i) are
in good operating condition and in a state of good maintenance and repair in
accordance with normal industry practice, ordinary wear and tear excepted, (ii)
were acquired and are usable in the Ordinary Course, (iii) conform to all
applicable Laws applicable thereto. First Surgical has no Knowledge of any
material defect or problem with any of such equipment, tangible personal
property or assets other than ordinary wear and tear. Except as set forth on
Schedule 3.4 and except for leased items that are subject to personal
property leases, no Person other than the Company or its Subsidiaries owns any
equipment or other tangible personal property or assets situated on the premises
of the Company or any Subsidiary. 

(c)
Except as set forth on Schedule 3.4, neither First Surgical nor any of
its Affiliates (other than FS Surgical and FS Hospital) owns or holds any assets
or property (tangible or intangible) that are currently being used in connection
with the business of FS Surgical and FS Hospital. 

Section 3.5. Accounts
Receivable. All Receivables (billed and unbilled) and all Payables of the FS
Surgical and FS Hospital will have arisen from bona fide transactions by
such FS Surgical or FS Hospital, as the case may be, in the Ordinary Course.

Section 3.6. Licenses.
Schedule 3.6 is a correct and complete list of all Licenses held by the
FS Surgical and FS Hospital. FS Surgical and FS Hospital own or possess all
Licenses that are necessary to enable it to carry on its operations as presently
conducted. All such Licenses are valid, binding and in full force and
effect.

____________________

1 Iberia Bank will be listed on Schedule.
  

2 Liens held by Iberia will be listed. 

6 




Section 3.7. Legal Proceedings. 

(a) No
suit, action, claim, arbitration, proceeding or investigation is pending or, to
the Knowledge of First Surgical, threatened against, relating or involving First
Surgical or any of its Subsidiaries that will, either individually or in the
aggregate, impair or delay the ability of the First Surgical to consummate the
transactions contemplated hereby, or by any of the First Surgical Ancillary
Documents. First Surgical is not subject to any judgment, decree, injunction,
rule or order of any court or arbitration panel that will, either individually
or in the aggregate, impair or delay the ability of the First Surgical to
consummate the transactions contemplated hereby, or by the Northstar Ancillary
Documents. 

(b) No
actions, suits, claims, investigations or other legal proceedings are pending
or, to the Knowledge of First Surgical, threatened against or by First Surgical
or any Affiliate of First Surgical that challenge or seek to prevent, enjoin or
otherwise delay the transactions contemplated by this Agreement. 

Section 3.8. Brokers, Finders
and Investment Bankers. Neither First Surgical, any of its Subsidiaries, nor
any officer, member, director or employee of First Surgical or any of its
Subsidiaries nor any Affiliate of First Surgical or any of its Subsidiaries, has
employed any broker, finder or investment banker or incurred any liability for
any investment banking fees, financial advisory fees, brokerage fees or finders’
fees in connection with the transactions contemplated hereby.

Section 3.9. No Additional
Representations or Warranties. Except for the specific representations and
warranties expressly made by First Surgical in Article III, (a) Northstar
acknowledges and agrees that (i) neither First Surgical nor any Subsidiary is
making or has made any representation or warranty, express or implied, at law or
in equity, in respect of First Surgical or its Subsidiaries (including FS
Surgical and FS Hospital), or any of their respective businesses, assets,
liabilities, operations, prospects, or condition (financial or otherwise),
including with respect to merchantability or fitness for any particular purpose
of any assets, the nature or extent of any liabilities, prospects, the
effectiveness or the success of any operations, or the accuracy or completeness
of any confidential information memoranda, documents, projections, material or
other information (financial or otherwise) regarding FS Surgical or FS Hospital
furnished to Northstar or its Representatives or made available to the Northstar
or its Representatives in any “data rooms,” “virtual data rooms,” management
presentations or in any other form in expectation of, or in connection with, the
transactions contemplated by this Agreement, or in respect of any other matter
or thing whatsoever, and (ii) no Representative of First Surgical or any of its
Subsidiaries has any authority, express or implied, to make any statements,
representations, warranties or agreements regarding the transactions
contemplated by and the subject matter of this Agreement not specifically set
forth in this Agreement and subject to the express remedies and limitations
thereon herein provided; (b) Northstar specifically disclaims that it is relying
upon or has relied upon any such other statements, representations or warranties
that were made by any Person, and acknowledges and agrees that First Surgical
has specifically disclaimed and does hereby specifically disclaim any such other representation or
warranty made by any Person; (c) Northstar specifically disclaims any obligation
or duty by First Surgical or its Subsidiaries to make any disclosures of fact
not required to be disclosed pursuant to the specific representations and
warranties set forth in Article III; and (d) Northstar is entering into
the transaction contemplated by this Agreement subject only to the specific
representations and warranties set forth in Article III. 

7 




ARTICLE IV 
REPRESENTATIONS AND WARRANTIES OF
NORTHSTAR 

Northstar hereby represents and
warrants to First Surgical as follows as of the date hereof and as of the
Closing Date: 

Section 4.1. Organization. Northstar is a corporation
duly formed, validly existing and in good standing under the laws of the
Province of British Columbia and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. 

Section 4.2.
Authorization. Northstar has all necessary corporate power and authority
to execute and deliver this Agreement and the Northstar Ancillary Documents, to
carry out its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Northstar Ancillary Documents by Northstar, the performance by
Northstar of its obligations hereunder and thereunder, and the consummation of
the transactions provided for herein and therein have been duly and validly
authorized by all necessary corporate action on the part of Northstar. This
Agreement has been and, as of the Closing Date, the Northstar Ancillary
Documents shall be, duly executed and delivered by Northstar and do or shall, as
the case may be, constitute the valid and binding agreements of Northstar,
enforceable against Northstar in accordance with their respective terms, subject
to applicable bankruptcy insolvency and other similar Laws affecting the
enforceability of creditors’ rights generally, general equitable principles and
the discretion of courts in granting equitable remedies. 

Section 4.3. Absence of
Restrictions and Conflicts. The execution, delivery and performance of this
Agreement and the Northstar Ancillary Documents and the consummation of the
transactions contemplated hereby and thereby do not or will not (as the case may
be), violate or conflict with, constitute a breach of or default under, result
in the loss of any benefit under, permit the acceleration of any obligation
under, or create in any part the right to terminate, modify or cancel (a) any
term or provision of the organizational documents of the Northstar, (b) any
contract to which the Northstar is a party, (c) any judgment, decree or order of
any Governmental Entity to which the Northstar is a party or by which the
Northstar or any of its properties is bound, or (d) any Law or arbitration award
applicable to the Northstar. 

Section 4.4. Financial
Capability. Subject to the completion of the Financing, Northstar has access
to, and, on the Closing Date, will have, sufficient cash to make the Northstar
Capital Contribution on the terms and conditions contemplated by this Agreement
and the fees, expenses and other costs of Northstar incurred in connection with
the transactions contemplated by this Agreement. 

8 




Section 4.5. Legal Proceedings. 

(a) No
suit, action, claim, arbitration, proceeding or investigation is pending or, to
the Knowledge of Northstar, threatened against, relating or involving the
Northstar or any of its Subsidiaries that will, either individually or in the
aggregate, impair or delay the ability of the Northstar to consummate the
transactions contemplated hereby, or by any of the Northstar Ancillary
Documents. Northstar is not subject to any judgment, decree, injunction, rule or
order of any court or arbitration panel that will, either individually or in the
aggregate, impair or delay the ability of the Northstar to consummate the
transactions contemplated hereby, or by Northstar Ancillary Documents.

(b) No
actions, suits, claims, investigations or other legal proceedings are pending
or, to Knowledge of the Northstar, threatened against or by Northstar or any
Affiliate of Northstar that challenge or seek to prevent, enjoin or otherwise
delay the transactions contemplated by this Agreement. 

Section 4.6. No Additional
Representations or Warranties. Except for the specific representations and
warranties expressly made by Northstar in Article IV, (a) First Surgical
acknowledges and agrees that (i) neither Northstar nor any Subsidiary is making
or has made any representation or warranty, express or implied, at law or in
equity, in respect of Northstar or its Subsidiaries, or any of their respective
businesses, assets, liabilities, operations, prospects, or condition (financial
or otherwise), including with respect to merchantability or fitness for any
particular purpose of any assets, the nature or extent of any liabilities,
prospects, the effectiveness or the success of any operations, or the accuracy
or completeness of any confidential information memoranda, documents,
projections, material or other information (financial or otherwise) furnished to
First Surgical or its Representatives or made available to First Surgical or its
Representatives in any “data rooms,” “virtual data rooms,” management
presentations or in any other form in expectation of, or in connection with, the
transactions contemplated by this Agreement, or in respect of any other matter
or thing whatsoever, and (ii) no Representative of Northstar or any of its
Subsidiaries has any authority, express or implied, to make any statements,
representations, warranties or agreements regarding the transactions
contemplated by and the subject matter of this Agreement not specifically set
forth in this Agreement and subject to the express remedies and limitations
thereon herein provided; (b) First Surgical specifically disclaims that it is
relying upon or has relied upon any such other statements, representations or
warranties that were made by any Person, and acknowledges and agrees that
Northstar has specifically disclaimed and does hereby specifically disclaim any
such other representation or warranty made by any Person; (c) First Surgical
specifically disclaims any obligation or duty by Northstar or its Subsidiaries
to make any disclosures of fact not required to be disclosed pursuant to the
specific representations and warranties set forth in Article IV; and (d)
First Surgical is entering into the transaction contemplated by this Agreement
subject only to the specific representations and warranties set forth in
Article IV. 

Section 4.7. Brokers, Finders
and Investment Bankers. Neither Northstar, nor an officer, member, director
or employee of Northstar nor any Affiliate of Northstar, has employed any
broker, finder or investment banker or incurred any liability for any investment
banking fees, financial advisory fees, brokerage fees or finders’ fees in
connection with the transactions contemplated hereby, except that Northstar may
retain an investment banking firm, agent or broker in connection with the Financing. Any financial advisory fees,
brokerage fees or finders’ fees incurred in connection with the Financing shall
be born exclusively by Northstar. 

9 




ARTICLE V 
CERTAIN COVENANTS AND
AGREEMENTS 

Section 5.1. Reasonable
Efforts; Further Assurances; Cooperation. Subject to the other provisions
hereof, each Party shall each use its commercially reasonable, good faith
efforts to perform its obligations hereunder and to take, or cause to be taken,
and do, or cause to be done, all things necessary, proper or advisable under
applicable Law to obtain all required consents, waivers, approvals and
authorizations, including those set forth on Schedule 3.3 and Schedule
3.6, and all regulatory approvals and to satisfy all conditions to its
obligations hereunder and to cause the transactions contemplated herein to be
effected as soon as practicable, but in any event on or before the Expiration
Date, in accordance with the terms hereof (provided, however, that
neither of the Parties nor any of their respective Affiliates shall be required
to pay money to any third party, commence any litigation, grant any
accommodation (financial or otherwise) to any third party, dispose of any assets
or agree to any restriction in connection with such efforts), and shall
cooperate fully with the other Party and its Representatives in connection with
any step required to be taken as a part of its obligations hereunder, including
the following: 

(a) Each Party promptly shall make all
filings and submissions and shall take all other actions necessary, proper or
advisable under applicable Laws to obtain any required approval of any
Governmental Entity with jurisdiction over the transactions contemplated hereby.
Each Party shall furnish all information required for any application or other
filing to be made pursuant to any applicable Law in connection with the
transactions contemplated hereby. Without limiting the foregoing, First Surgical
shall cause FS Surgical and FS Hospital to execute, acknowledge and deliver to
Newco any and all other assignments, consents, approvals, conveyances,
assurances, documents and instruments reasonably requested by Newco and/or the
Texas Department of State Health Services (“DSHS”) at any time and shall take
any and all other actions reasonably requested by Newco and DSHS at any time for
the purpose of more effectively assigning, transferring, granting, conveying and
conferring to Newco, the Hospital and ASC licenses (“DSHS Obligations”). First
Surgical’s DSHS Obligations shall include, but not be limited to, cooperating
with Northstar and Newco to complete the hospital and ambulatory surgery center
change of ownership requirements described in 25 TAC 133 and 25 TAC 135. After
the Closing, the Parties agree to cooperate with each other and take such
further actions as may be necessary or appropriate to effectuate, carry out and
comply with all of the terms of this Agreement, the documents referred to in
this Agreement and the transactions contemplated hereby. 

(b) All
analyses, appearances, meetings, discussions, presentations, memoranda, briefs,
filings, arguments, and proposals made by or on behalf of either Party before
any Governmental Entity or the staff or regulators of any Governmental Entity,
in connection with the transactions contemplated hereunder shall be disclosed to
the other Party hereunder in advance of any filing, submission or attendance, it
being the intent that the Parties will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any such
analyses, appearances, meetings, discussions, presentations, memoranda,
briefs, filings, arguments, and proposals. Each Party shall give notice to the
other Party with respect to any meeting, discussion, appearance or contact with
any Governmental Entity or the staff or regulators of any Governmental Entity,
with such notice being sufficient to provide the other Party with the
opportunity to attend and participate in such meeting, discussion, appearance or
contact. 

10 




Section 5.2. Public Announcements. Notwithstanding
anything herein to the contrary, each Party hereby agrees that, except as may be
required to comply with the requirements of any applicable Laws, the rules and
regulations of each stock exchange upon which the securities of such Party are
listed, if any (in which case the Party proposing to issue such press release or
make such public announcement shall consult in good faith with the other Party
before issuing any such press release or making any such public announcement and
shall allow the other Party reasonable time to comment on such release or
announcement in advance of such issuance), no filing, press release or similar
public announcement or communication shall be made by it or caused to be made by
it concerning the execution or performance of this Agreement unless it shall
have consulted the other Party in advance with respect thereto and such other
Party consents in writing (which consent shall not be unreasonably withheld,
conditioned or delayed) to such filing, release, announcement or communication;
provided, however, each Party and its Affiliates may make internal
announcements regarding this Agreement to its directors, officers and employees
without the consent of the other Party. If either Party determines that any of
this Agreement, the Northstar Ancillary Agreements or the First Surgical
Ancillary Agreements must be filed with any Governmental Authority pursuant to
applicable Law, then before making such filing, such Party shall provide the
other Party with a version of any document it intends to file with any necessary
redactions, and shall give due consideration to the other Party’s comments
regarding the redacted version and use commercially reasonable efforts to ensure
confidential treatment by the applicable authority of any sections specified by
such Party. 

Section 5.3. Financing.
First Surgical agrees to provide such assistance with the Financing as is
reasonably requested by Northstar.

ARTICLE VI
CONDITIONS TO CLOSING 

Section 6.1. Conditions to
Obligations of Each Party. The respective obligations of each Party to
effect the transactions contemplated hereby are subject to the following
conditions: 

(a) Injunction. No effective
injunction, writ or preliminary restraining order or any order of any nature is
issued and outstanding by a Governmental Entity of competent jurisdiction to the
effect that the Transaction may not be consummated as provided herein, no
proceeding or lawsuit is commenced and ongoing by any Governmental Entity or
third party for the purpose of obtaining any such injunction, writ or
preliminary restraining order and no written notice is received and outstanding
from any Governmental Entity indicating an intent to restrain, prevent,
materially delay or restructure the transactions contemplated hereby. 

(b)
Governmental Consents. All consents, approvals, orders or authorizations
of, or registrations, declarations or filings with, all Governmental Entities
required in connection with the execution, delivery or performance hereof
are obtained or made, including the items listed on Schedule 3.6. 

11 




(c)
Personal Property Lease. On or before the Closing, FS Surgical and FS
Hospital and Newco shall have entered into a personal property lease (the
“Personal Property Lease”) on terms and conditions mutually
satisfactory to First Surgical and Northstar. Among other things, the Personal
Property Lease shall contain the following terms: 

(i) Term: 5 years (the “Initial
Term”); provided however, the term may be extended for up to an additional three
(3) years if Newco has not made distribution payments to First Surgical of at
least $18,000,000 during the Initial Term. If the distribution payments made by
Newco to First Surgical during the Initial Term are less than $18,000,000, the
Personal Property Lease payments will continue for that period of time (the
“Extended Term”) until the sum of the Personal Property Lease payments made by
Newco and one half of the distribution payments received by First Surgical equal
the difference between $18,000,000 and the distribution payments made to First
Surgical during the Initial Term; 

(ii) First Surgical agrees to pay at least
  twenty-five percent (25%) of any distribution payment received during the
  Initial Term to principal debt reduction of the loans under the First Street
  Credit Agreement. Additionally, in any month in which First Surgical receives a
  distribution payment from Newco of at least $100,000, First Surgical agrees to
  pay at least $50,000 toward principal debt reduction of such loans; 

(iii)
  Monthly payment: $189,445 per month; subject to adjustment based on changes to
  the monthly debt service due under the First Street Credit Agreement as a result
  of the interest rate charged by Iberia Bank; however, the monthly payments shall
  not be less than $150,000 and not be more than $190,000; 

(iv) Property to be
  leased: All furniture, fixtures, equipment, tenant improvements and other
  personal property owned by FS Hospital and FS Surgery as of the Closing Date;
  and 

(v) Property to be subleased: To the extent not assumed by Newco under
  Section 6.1 (d), all furniture, fixtures, equipment, tenant improvements and
  other person property leased from third parties by FS Hospital and FS Surgery as
of the Closing Date. 

(vi)
  Varon Payable: First Surgical shall cause $19,445 of the Monthly payment of the
  personal property lease shall be applied and paid to satisfy the Varon
  Receivable. After thirty-six (36) months, the monthly payment during the
  Extended Term, if any, of the Personal Property Lease shall be reduced by
  $19,445. 

(d) Lease Agreements. On or
before the Closing either Newco shall have assumed the obligations of FS
Surgical and FS Hospital from and after the Closing under the Leases. Except for
the Newco Payment described in Section 7.6, Newco shall have no obligation to pay rent owed by either
FS Surgical or FS Hospital pursuant to the Leases prior to Closing. 

12 




(e)
Management Services Agreement. Northstar and Newco shall enter into a
Management Services Agreement, on terms satisfactory to Northstar and First
Surgical, (the “Management Services Agreement”). Pursuant to the Management
Services Agreement, Newco shall pay to Northstar a management fee of three
percent (3%) of collections for corporate overhead, including the following
services: (i) recruiting, hiring and employment of all staff; (ii) accounting
and in-house legal services; and (iii) marketing. In addition, under the
Management Services Agreement, Newco shall pay Northstar third-party charges
actually incurred on behalf of or allocable to Newco. 

(f)
Transition Services Agreement. FS Surgical and/or FS Hospital shall enter
into a Transition Services Agreement with Newco, on terms satisfactory to
Northstar and First Surgical, pursuant to which FS Surgical and FS Hospital
shall, for a period of time as may be necessary (not to exceed six months), to
provide for Newco certain services which Newco may be unable to provide
immediately upon Closing (including, without limitation, operating under
existing licenses). Newco will pay FS Surgical and FS Hospital a fee under such
Transition Services Agreement equal to the cost for FS Surgical and FS Hospital
to provide such services. 

(g)
Equipment Leases. FS Surgical and FS Hospital shall either (i) assign the
Equipment Leases listed on Schedule 6.1(g) (the “Equipment Leases”) to Newco,
and Newco shall assume all of FS Surgical’s and/or FS Hospital’s liabilities and
obligations thereunder or (ii) Newco shall enter into new equipment leases in
respect of the equipment leased under the Equipment Leases. 

(h) Upon
Closing, Northstar will cause Newco to arrange to hire employees for Newco,
either directly or indirectly through ADP or other third party. Immediately upon
Closing, persons currently employed at FS Surgical and FS Hospital will continue
their employment through Newco. 

(i)
Assignment and Assumption Agreement. Upon Closing, FS Surgical, FS
Hospital and Newco shall enter into an Assignment and Assumption Agreement, on
customary terms, pursuant to which FS Surgical shall assign all of its
Receivables and Payables to Newco, and Newco shall accept title to the
Receivables and assume the obligations and liabilities for, and agree to pay and
discharge, the Payables. 

Section 6.2. Conditions to
Obligations of First Surgical. The obligations of First Surgical to
consummate the transactions contemplated hereby are subject to the fulfillment
at or before the Closing of each of the following additional conditions: 

(a) Representations and
Warranties. The representations and warranties of Northstar contained in
Article IV are true and correct in all respects (disregarding any
Material Adverse Effect or materiality qualifications set forth therein) as of
the Closing Date with the same effect as though made at and as of such date
(except those representations and warranties that address matters only as of a
specified date, which are true and correct in all respects as of
that specified date), except where failure of such representations and
warranties to be true and correct has no Material Adverse Effect.

13 




(b)
Performance of Obligations of Northstar. Northstar has performed in all
material respects all covenants and agreements required to be performed by it
hereunder at or before the Closing. 

(c)
Ancillary Documents. Northstar has delivered, or caused to be delivered,
to the Northstar Ancillary Documents. 

(d)
Required Consent. First Surgical shall have received the consents set
forth on Schedule 6.2(d).

Section 6.3. Conditions to
Obligations of Northstar. The obligations of the Northstar to consummate the
transactions contemplated hereby are subject to the fulfillment at or before the
Closing of each of the following additional conditions: 

(a) Representations and
Warranties. The representations and warranties of First Surgical contained
in Article III are true and correct in all respects (disregarding any
Material Adverse Effect or materiality qualifications set forth therein) as of
the Closing Date with the same effect as though made at and as of such date
(except those representations and warranties that address matters only as of a
specified date, which are true and correct in all respects of that specified
date), except where the failure of such representations and warranties to be
true and correct has no Material Adverse Effect. 

(b)
Performance of Obligations by First Surgical. First Surgical has
performed in all material respects all covenants and agreements required to be
performed by it hereunder on or before the Closing Date. 

(c)
Ancillary Documents. First Surgical has delivered, or caused to be
delivered, to Northstar the First Surgical Ancillary Documents. 

(d)
Financing. Northstar shall have completed the Financing and shall have
received the proceeds of the Financing. 

ARTICLE VII
CLOSING 

Section 7.1. Closing. The
Closing shall occur at 9:00 a.m., Houston, Texas time, on the third (3rd)
Business Day following the satisfaction or waiver of the conditions set forth in
Article VI that are contemplated to be satisfied before the
Closing, or on such other date as the Parties may agree. The Closing shall take
place at the offices of Strasburger & Price, LLP at 909 Fannin Street, Suite
2300, Houston, Texas 77010, or at such other place as the Parties may agree.


Section 7.2. First Surgical
Closing Deliveries and Action. At the Closing, First Surgical shall deliver,
or cause to be delivered, to Northstar the following: 

14 




(a) a
certificate of an authorized officer of First Surgical as to compliance with the
conditions set forth in Section 6.3(a), Section 6.3(b),Section 6.3(c)
and Section 6.3(d); 

(b) all other documents required to be
entered into by First Surgical, any Subsidiary pursuant hereto or reasonably
requested by Northstar to consummate the transactions contemplated hereby; and


Section 7.3. Northstar Closing Deliveries. At the
Closing, Northstar shall deliver, or cause to be delivered, to the Shareholder
the following documents. 

(a) a
certificate of an authorized officer of the Northstar as to compliance with the
conditions set forth in Section 6.2(a), Section 6.2(b) and Section
6.2(c); and 

(b) all other documents required to be
entered into by Northstar pursuant hereto or reasonably requested by the First
Surgical to otherwise consummate the transactions contemplated hereby. 

Section 7.4. Northstar Capital
Contribution. Simultaneous with the Closing, Northstar shall make the
Northstar Capital Contribution. 

Section 7.5. Assignment by FS
Surgical and FS Hospital. Simultaneous with the Closing, First Surgical
shall cause FS Surgical and FS Hospital to transfer and assign any and all of
the medical supplies owned by them to Newco, pursuant to a Bill of Sale in
customary form. 

Section 7.6. Newco
Payment. Immediately upon receiving the Northstar Capital Contribution,
Northstar shall cause Newco to pay the lessors under the leases the sum of $1
million in the aggregate (allocated as specified by such lessors) in respect of
prior obligations of FS Hospital and FS Surgical under the leases. 

Section 7.7. Allocation of
Receivables. Following the Closing, Newco shall pay to FS Surgical or FS
Hospital (as directed by First Surgical) an amount equal to 50% of the
Receivables as they are collected, up to $300,000. Such amount shall only be
paid out of collected Receivables and shall be paid weekly. 

Section 7.8. Post-Closing
Payment. No later than ten (10) days following the Closing, Newco shall
inform the parties of (i) the amount of Receivables delivered to Newco at
Closing and (ii) the amount of Payables assumed by Newco at Closing. If the
amount of such Receivables collected within 365 days following Closing exceeds
the amount of such Payables paid within 365 days following Closing, Newco shall
promptly pay First Surgical an amount equal to such difference. If the amount of
such Payables paid within 365 days following Closing exceeds the amount of such
Receivables collected within 365 days following Closing, Newco shall promptly
pay Northstar the amount of the difference. All amounts paid by Newco to FS
Surgical or FS Hospital pursuant to Section 7.7 shall be excluded from
Receivables collected in any calculation under this Section. 

15 




ARTICLE VIII
TERMINATION 

Section 8.1. Termination.
This Agreement may be terminated at any time before the Closing: 

(a) by mutual written consent of the
Parties; 

(b) by written notice from the First
Surgical to Northstar, if Northstar (i) fails to perform in any respect any of
its agreements contained herein required to be performed by it at or before the
Closing or (ii) breaches any of its representations and warranties contained
herein, which failure or breach is not cured within twenty (20) days following
First Surgical having notified the Northstar of its intent to terminate this
Agreement pursuant to this Section 8.1(b), except where such failure or
breach would not materially impair or delay the ability of the Northstar to
consummate the transactions contemplated hereby; provided,
however, that, notwithstanding the foregoing, First Surgical shall be
able to terminate this Agreement pursuant to this Section 8.1(b) in the
event that the Northstar fails to consummate the transactions required to be
performed by it on the Closing Date as set forth in Section 8.1; 

(c) by written notice from Northstar to
First Surgical, if First Surgical (i) fails to perform in any respect any of
their agreements contained herein required to be performed by it at or before
the Closing, or (ii) breaches any of its representations and warranties
contained herein, which failure or breach is not cured within twenty (20) days
following Northstar having notified First Surgical of its intent to terminate
this Agreement pursuant to this Section 8.1(c), except where such failure
or breach has no Material Adverse Effect; provided, however, that,
notwithstanding the foregoing, Northstar shall be able to terminate this
Agreement pursuant to this Section 8.1(b) in the event that First
Surgical fails to consummate the transactions required to be performed by it on
the Closing Date as set forth in Section 8.1; or 

(d) by written notice by either party
to the other Party, as the case may be, in the event the Closing has not
occurred on or before November 2, 2014 (the “Expiration Date”) for any
reason other than delay or nonperformance of the Party seeking such termination.


Section 8.2. Specific
Performance and Other Remedies. Each Party hereby acknowledges that the
rights of each Party to consummate the transactions contemplated hereby are
special, unique and of extraordinary character and that, if either Party
violates or fails or refuses to perform any covenant or agreement made by it
herein, the other Party may be without an adequate remedy at law. If either
Party violates or fails or refuses to perform any covenant or agreement made by
it herein, the other Party may, subject to the terms hereof and in addition to
any remedy at law for damages or other relief, institute and prosecute an action
in any court of competent jurisdiction to enforce specific performance of such
covenant or agreement or seek any other equitable relief. 

Section 8.3. Effect of
Termination. In the event of termination of this Agreement pursuant to this
Article VIII, this Agreement shall forthwith become void and there shall
be no liability on the part of either Party or its partners,
officers, directors or stockholders, except for obligations under Section
6.4 (Public Announcements), Section 11.1 (Notices), Section
11.6 (Controlling Law), Section 11.5 (Mediation), Section 11.6 (Consent to Jurisdiction, Etc.), Section 11.9 (Amendment)
and Section 11.14 (Transaction Costs) and this Section 8.3, all of
which shall survive the Termination Date. Notwithstanding the foregoing, nothing
contained herein shall relieve either Party from liability for any then-existing
breach hereof. 

16 




ARTICLE IX 
NORTHSTAR SUBSCRIPTION RIGHT; OPTION


Section 9.1. Northstar Subscription Right:

(a) For
purposes of this Section 9.1, capitalized terms not otherwise defined herein
shall have the meaning specified for such terms in the First Surgical
Stockholders Agreement. 

(b) In
the even any Stockholder delivers a Notice Offer to the Company, the Company
shall notify Northstar of the receipt thereof within five business days of such
receipt. Within fifteen (15) days of receiving such notice, Northstar may (but
shall not be required to) notify the Company that it elects to subscribe for a
number of Shares equal to all of the Shares referred to in the Notice Offer, at
the price specified in the Notice Offer. If Northstar makes such election, the
Company shall exercise its right under Section 4B of the Stockholders Agreement
to purchase all of the Shares specified in the Notice Offer. 

(c) The
consummation of the purchase of Shares by Northstar pursuant to the exercise of
its election set forth in the preceding paragraph shall occur at a date, time
and place designated by the Company, immediately prior to the consummation of
the Company’s repurchase of the Selling Stockholder’s Shares contemplated by
Section 9.1(b). The purchase price shall be paid by Northstar by wire transfer
to an account designated to it by the Company. 

Section 9.2. Option. 

(a)
Commencing on the fourth (4th) anniversary of the Closing and ending
on the tenth (10th) anniversary of the Closing, Northstar shall have
the right to purchase all of the equity in Newco then owned by First Surgical
(the “Option”). Northstar shall notify First Surgical of its exercise of
such right. The exercise of the Option shall be irrevocable. The consummation of
the sale of First Surgical equity shall occur five (5) Business Days after the
exercise of the Option at a place and time in Houston, Texas designated by
Northstar in its notice of exercise of the Option (the “Option Closing”).


(b) The
purchase price for units of Newco purchased pursuant to the Option shall be as
follows: An amount equal to five (5) multiplied by the last twelve months
EBITDA (based on the most recent regularly prepared quarterly financial
statements of Newco; provided that such financial statements are no more than
one month older than 30 days prior to the Option Closing) multiplied by a
fraction, the numerator of which is the First Surgical units in Newco to be
purchased pursuant to the exercise of the Option and the denomination which is
all the outstanding units of Newco. 

17 




(c) If
Northstar exercises its option to purchase all of the equity owned by First
Surgical in Newco, the minimum purchase price shall be $10 million,
notwithstanding the provisions of Section 9.2(b). 

ARTICLE X
DISSOLUTION OF RELATIONSHIP


Section 10.1. Dissolution of Relationship. 

(a) The Parties may at any time
mutually agree to terminate their relationship, terminate this Agreement and
dissolve Newco. 

(b) First
Surgical may elect, in its sole and absolute discretion, any time within 180
days following the second (2nd) anniversary Closing, to terminate the
relationship between itself and Northstar (subject to subsection 10.1(g) below),
terminate this Agreement and dissolve Newco, by giving notice thereof to
Northstar unless Newco achieves during the first two (2) years following
the Closing revenue (based on the regularly prepared monthly financial
information of Newco) for any consecutive twelve months during such two (2) year
period ending on the second anniversary of the Closing equal to or greater than
$40 million. 

(c) In
the event that Newco defaults in a payment obligation under the Personal
Property Lease or a lease payment under any of the Leases, First Surgical may at
any time, in its sole and absolute discretion, terminate its relationship with
Newco terminate this Agreement and dissolve Newco. 

(d) In
the eve
nt that the right to terminate Newco pursuant to Section 10.1(a), 10.1(b)
or 10.1(c) is exercised, then 

(i) the Personal Property Lease shall
be cancelled effective as of the Dissolution Date, and all furniture, fixtures
and equipment leased to Newco thereunder (or subsequently purchased or leased by
Newco) shall be returned to First Surgical or its designee, at the expense of
First Surgical, and Newco shall have no further obligations under the Personal
Property Lease; 

(ii) Newco shall assign its rights and
  obligations under the Real Property Lease from and after the Dissolution Date to
First Surgical or its designee; 

(iii) First Surgical’s equity in Newco
  shall be cancelled; 

(iv) First Surgical shall cause any
  person it has designated for appointment to the Board of Managers of Newco to
  resign as of the Dissolution Date. 

(e) Newco
shall continue to be liable for (i) any obligations and liabilities it incurred
prior to the Dissolution Date including but not limited to obligations under the
Personal Property Lease and the Real Property Lease and (ii) any obligations and
liabilities incurred by Newco following the Dissolution Date. 

18 




(f) The
Parties agree to take any and all action, and to execute and delivery any
necessary agreements and instruments to give effect to the provisions of this
Section 10.1, including with respect to the transfer of any and all licenses.


(g) Upon
and as a condition to the consummation of the termination of Newco pursuant to
Section 10.1(b), First Surgical shall pay Northstar the sum of $7.5 million.


ARTICLE XI
MISCELLANEOUS PROVISIONS 

Section 11.1. Notices. All
notices, communications and deliveries required or made hereunder must be made
in writing signed by or on behalf of the Party making the same and shall be
delivered personally or by a national overnight courier service, by registered
or certified mail (return receipt requested) (with postage and other fees
prepaid), or by electronic mail as follows: 

	 	To the Northstar: 	Northstar Healthcare Inc. 
	 	  	4120 Southwest Freeway, Suite 150 
	 	  	Houston, Texas 77027 
	 	  	Attn: Harry Fleming, President 
	 	  	E-mail: hfleming@northstar-healthcare.com

	 	  	  
	 	with a copy to: 	Northstar Healthcare Inc. 
	 	  	4120 Southwest Freeway, Suite 150 
	 	  	Houston, Texas 77027 
	 	  	Attn: General Counsel 
	 	  	Fax: 713-355-8615 
	 	  	  
	 	To the First Surgical: 	First Surgical Partners Holdings, Inc. 
	 	  	411 First Street 
	 	  	Bellaire, TX 77401 
	 	  	Attn: Dr. Jacob Varon and 
	 	  	Chief Executive Officer 
	 	  	Email: drvaron@varonmd.com 
	 	  	jholland@firstsurgical.com
  
	 	  	  
	 	with a copy to: 	Strasburger & Price, LLP 
	 	  	2 Houston Center 
	 	  	909 Fannin Street, Suite 2300 
	 	  	Houston, Texas 77010-1036 
	 	  	Attn: Steven D. Rubin 
	 	  	Email: steve.rubin@Strasburger.com
  


or to such other representative or at such other address of
either Party as such Party may furnish to the other Party in writing. Any such
notice, communication or delivery shall be deemed given or made (a) on the date
of delivery, if delivered in person, or (b) on the first Business Day following
timely delivery to a national overnight courier service, (c) on the fifth
Business Day following it being mailed by registered or certified mail, or (d) when
actually received, if transmitted by electronic mail. 

19 




Section 11.2. Schedules and
Exhibit. The Schedules and Exhibits are hereby incorporated into this
Agreement and are hereby made a part hereof as if set out in full herein. 

Section 11.3. Assignment;
Successors in Interest. No assignment or transfer by either Party of such
Party’s rights and obligations hereunder shall be made except with the prior
written consent of the other Party. 

Section 11.4. Captions.
The titles, captions and table of contents contained herein are inserted herein
only as a matter of convenience and for reference and in no way define, limit,
extend or describe the scope of this Agreement or the intent of any provision
hereof. 

Section 11.5. Mediation. 

(a)

Except with respect for equitable relief (including interim relief), any Legal
Dispute shall be resolved in accordance with the procedures set forth in this
Section 11.5 and Section 11.6. Until completion of such
procedures, no Party may take any action to force a resolution of a Legal
Dispute by any judicial or similar process, except to the extent necessary to
avoid expiration of a claim that is permitted by this Agreement. 

(b) Any
party seeking resolution of a Legal Dispute shall first submit the Legal Dispute
for resolution by mediation pursuant to the American Arbitration Association
Procedure for Mediation of Commercial Disputes as then in effect. Mediation will
take place in Houston, Texas and will continue for at least sixty (60) days
unless the mediator chooses to withdraw sooner. 

(c) All
offers of compromise or settlement among the Parties or their Representatives in
connection with the attempted resolution of any Legal Dispute shall be deemed to
have been delivered in furtherance of a Legal Dispute settlement and shall be
exempt from discovery and production and shall not be admissible in evidence
(whether as an admission or otherwise) in any proceeding for the resolution of
the Legal Dispute. 

Section 11.6. Governing Law; Consent to Jurisdiction; WAIVER
OF TRIAL BY JURY; Etc. 

(a) This
Agreement shall be governed by and construed and enforced in accordance with the
internal Laws of the State of Texas without reference to its choice of law
rules. 

(b) Each
Party hereby irrevocably consents and agrees that, if any Legal Dispute is not
resolved by mediation undertaken pursuant to Section 11.5, such Legal
Dispute shall be brought only to the exclusive jurisdiction of the courts of the
State of Texas or the federal courts located in the State of Texas. In that
context, and without limiting the generality of the foregoing, each Party hereby
irrevocably and unconditionally (i) consents to the jurisdiction of such courts
(and of the appropriate appellate courts therefrom) in any such suit, action or
proceeding; (ii) waives, to the fullest extent permitted by Law, any objection that it may now
or hereafter have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding that is
brought in any such court has been brought in an inconvenient forum; and (iii)
waives any objection to service of process effected in accordance with
Section 11.1 or any means allowable under Texas law or procedure. During
the period a Legal Dispute is pending before a court, all actions, suits or
proceedings with respect to such Legal Dispute or any other Legal Dispute,
including any counterclaim, cross-claim or interpleader, shall be subject to the
exclusive jurisdiction of such court. In the event a Legal Dispute is brought
pursuant to this Section 11.6(b), each Party hereby waives, and shall not
assert as a defense in any Legal Dispute, that (a) such Party is not subject
thereto, (b) such action, suit or proceeding may not be brought or is not
maintainable in such court, (c) such Party’s property is exempt or immune from
execution, (d) such action, suit or proceeding is brought in an inconvenient
forum or (e) the venue of such action, suit or proceeding is improper. A final
judgment in any action, suit or proceeding described in this Section
11.6(b) following the expiration of any period permitted for appeal and
subject to any stay during appeal shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
applicable Laws. 

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(c) EACH
PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE FIRST SURGICAL ANCILLARY
AGREEMENTS OR NORTHSTAR ANCILLARY AGREEMENTS OR ANY OTHER TRANSACTION AGREEMENTS
OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. EACH PARTY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY AND
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
EACH PARTY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II)
ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO
THIS AGREEMENT, THE FIRST SURGICAL ANCILLARY AGREEMENTS AND NORTHSTAR ANCILLARY
AGREEMENTS AND ANY OTHER TRANSACTION AGREEMENTS BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.6(C). 

Section 11.7.
Severability. Any provision hereof that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by Law, each
Party hereby waives any provision of Law that renders any such provision
prohibited or unenforceable in any respect.

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Section 11.8.
Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, and it shall not be necessary in
making proof of this Agreement or the terms hereof to produce or account for
more than one of such counterparts. 

Section 11.9. Amendment.
This Agreement may not be amended, modified or supplemented, except by written
agreement of the Parties. 

Section 11.10. Enforcement of
Certain Rights. Except as provided in Section6.1(j), nothing
expressed or implied herein is intended, or shall be construed, to confer upon
or give any Person other than the Parties, and their successors or permitted
assigns, any right, remedy, obligation or liability under or by reason of this
Agreement, or result in such Person being deemed a third-party beneficiary
hereof. 

Section 11.11. Waiver. Any
agreement on the part of either Party to any extension or waiver of any
provision hereof shall be valid only if set forth in an instrument in writing
signed on behalf of such Party. A waiver by either Party of the performance of
any covenant, agreement, obligation, condition, representation or warranty shall
not be construed as a waiver of any other covenant, agreement, obligation,
condition, representation or warranty. A waiver by either Party of the
performance of any act shall not constitute a waiver of the performance of any
other act or an identical act required to be performed at a later time. 

Section 11.12.
Integration. THIS AGREEMENT AND THE DOCUMENTS EXECUTED PURSUANT HERETO,
INCLUDING THE EXHIBITS AND SCHEDULES HERETO, SUPERSEDE ALL NEGOTIATIONS,
AGREEMENTS AND UNDERSTANDINGS BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES
WITH RESPECT THERETO. 

Section 11.13. Cooperation
Following the Closing. Following the Closing, each Party shall deliver to
the other Party such further information and documents and shall execute and
deliver to the other Party such further instruments and agreements as the other
Party shall reasonably request to consummate or confirm the transactions
provided for herein, to accomplish the purpose hereof or to assure to the other
Party the benefits hereof. 

Section 11.14. Transaction
Costs. Except as otherwise expressly provided herein, all costs and
expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the Party incurring
such costs and expenses, whether or not the Closing shall have occurred. 

(signature page follows) 

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IN WITNESS WHEREOF, the
Parties have caused this Agreement to be duly executed, as of the date first
above written. 

	 	NORTHSTAR HEALTHCARE INC. 
	 	 	  
	 	 	  
	 	By: 	
	 	Name: 	
	 	Title: 	
	 	 	  
	 	 	  
	 	 	  
	 	 	  
	 	FIRST SURGICAL PARTNERS HOLDINGS,
      INC. 
	 	 	  
	 	 	  
	 	By: 	
	 	Name: 	
	 	Title: