Document:

exv10w1

 

EXHIBIT 10.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.

PEAK ASC ACQUISITION CORP.

AND

SURGIS, INC.

Dated as of January 27, 2006

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	 	 	 	ARTICLE I
	 	 	 	 
	 
	 	 	 	 	THE MERGER
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	1.1	 	 	The Merger

	 	 	1	 
	 	1.2	 	 	Closing; Effective Time

	 	 	2	 
	 	1.3	 	 	Effects of the Merger

	 	 	2	 
	 	1.5	 	 	Directors and Officers of the Surviving Corporation

	 	 	2	 
	 	1.6	 	 	Merger Consideration

	 	 	2	 
	 	1.7	 	 	Working Capital and Other Adjustments

	 	 	5	 
	 	1.8	 	 	Purchase Price Adjustments

	 	 	8	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	ARTICLE II
	 	 	 	 
	 
	 	 	 	 	CONVERSION OF SHARES; TREATMENT OF
	 	 	 	 
	 	 	 	 	COMPANY OPTIONS AND WARRANTS
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	2.1	 	 	Conversion of Shares; Treatment of Company Options and Company Warrants

	 	 	9	 
	 	2.2	 	 	Company Options and Warrants

	 	 	10	 
	 	2.3	 	 	Exchange of Certificates

	 	 	11	 
	 	2.4	 	 	Lost, Stolen or Destroyed Certificates

	 	 	13	 
	 	2.5	 	 	Dissenter’s Rights

	 	 	13	 
	 	2.6	 	 	Required Withholdings

	 	 	14	 
	 	2.7	 	 	Escrow

	 	 	14	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	ARTICLE III
	 	 	 	 
	 
	 	 	 	 	REPRESENTATIONS AND WARRANTIES OF COMPANY AND THE COMPANY

EQUITYHOLDERS
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	3.1	 	 	Organization, Etc

	 	 	15	 
	 	3.2	 	 	Authorization of Transactions

	 	 	16	 
	 	3.3	 	 	No Violations, Etc

	 	 	16	 
	 	3.4	 	 	Capitalization

	 	 	17	 
	 	3.5	 	 	Compliance with Laws; Permits; Certification by
Medicare and Medicaid; Licenses; Certificates of
Need.

	 	 	17	 
	 	3.6	 	 	Financial Statements

	 	 	19	 
	 	3.7	 	 	Absence of Undisclosed Liabilities

	 	 	20	 
	 	3.8	 	 	Absence of Changes or Events

	 	 	20	 
	 	3.9	 	 	Ownership of Subsidiaries

	 	 	22	 
	 	3.10	 	 	Litigation

	 	 	22	 

i

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	3.11	 	 	Insurance

	 	 	22	 
	 	3.12	 	 	Contracts and Commitments

	 	 	23	 
	 	3.13	 	 	Labor Matters; Employment and Labor Contracts

	 	 	25	 
	 	3.14	 	 	Intellectual Property Rights

	 	 	26	 
	 	3.15	 	 	Taxes

	 	 	27	 
	 	3.16	 	 	Employee Benefit Plans; ERISA

	 	 	29	 
	 	3.17	 	 	Environmental Matters

	 	 	32	 
	 	3.18	 	 	Property; Equipment

	 	 	33	 
	 	3.19	 	 	Billing Practices; Accounts Receivable

	 	 	34	 
	 	3.20	 	 	Related Party Transactions

	 	 	34	 
	 	3.21	 	 	Books and Records

	 	 	35	 
	 	3.22	 	 	Medical Staff Matters

	 	 	35	 
	 	3.23	 	 	Finders or Brokers

	 	 	35	 
	 	3.24	 	 	No Knowledge of Breach

	 	 	35	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	ARTICLE IV
	 	 	 	 
	 
	 	 	 	 	REPRESENTATIONS AND WARRANTIES
	 	 	 	 
	 	 	 	 	OF PARENT AND MERGER SUB
	 	 	 	 
	

	 	 
	 	 	 	 
	 	4.1	 	 	Organization, Etc

	 	 	36	 
	 	4.2	 	 	Authority Relative to This Agreement

	 	 	36	 
	 	4.3	 	 	No Violations, Etc

	 	 	36	 
	 	4.4	 	 	Sufficient Funds

	 	 	37	 
	 	4.5	 	 	Board Approval

	 	 	37	 
	 	4.6	 	 	Litigation

	 	 	37	 
	 	4.7	 	 	Finders or Brokers

	 	 	37	 
	 	4.8	 	 	No Knowledge of Breach

	 	 	37	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	ARTICLE V
	 	 	 	 
	 
	 	 	 	 	COVENANTS
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	5.1	 	 	Conduct of Company Business During Interim Period

	 	 	37	 
	 	5.2	 	 	No Solicitation

	 	 	40	 
	 	5.3	 	 	Access to Information

	 	 	42	 
	 	5.4	 	 	Reasonable Efforts

	 	 	43	 
	 	5.5	 	 	Public Announcements

	 	 	43	 
	 	5.6	 	 	Notification of Certain Matters

	 	 	44	 
	 	5.7	 	 	Indemnification Rights

	 	 	45	 
	 	5.8	 	 	Resignation of Directors and Officers

	 	 	45	 
	 	5.9	 	 	Employee Benefit Matters

	 	 	45	 
	 	5.10	 	 	Board Recommendation

	 	 	46	 
	 	5.11	 	 	Shareholder Vote

	 	 	46	 
	 	5.12	 	 	Taxes

	 	 	46	 
	 	5.13	 	 	Audited Financial Statements

	 	 	50	 
	 	5.14	 	 	Certain Operating Agreements

	 	 	50	 

ii

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	5.15	 	 	De Novo Ambulatory Surgery Center

	 	 	51	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	ARTICLE VI
	 	 	 	 
	 
	 	 	 	 	CONDITIONS TO THE OBLIGATIONS OF EACH PARTY
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	6.1	 	 	Governmental Clearances

	 	 	51	 
	 	6.2	 	 	Statute or Decree

	 	 	51	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	ARTICLE VII
	 	 	 	 
	 
	 	 	 	 	CONDITIONS TO THE OBLIGATIONS OF COMPANY, PARENT AND MERGER SUB
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	7.1	 	 	Additional Conditions To The Obligations Of Company

	 	 	51	 
	 	7.2	 	 	Additional Conditions To The Obligations Of Parent And Merger Sub

	 	 	52	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	ARTICLE VIII
	 	 	 	 
	 
	 	 	 	 	TERMINATION
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	8.1	 	 	Termination

	 	 	53	 
	 	8.2	 	 	Notice of Termination

	 	 	55	 
	 	8.3	 	 	Expenses; Termination Fees

	 	 	55	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	ARTICLE IX
	 	 	 	 
	 
	 	 	 	 	INDEMNIFICATION
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	9.1	 	 	Grant of Indemnification

	 	 	56	 
	 	9.2	 	 	Representation, Cooperation; Settlement etc

	 	 	57	 
	 	9.3	 	 	Limitations of Liability

	 	 	59	 
	 	9.4	 	 	Remedies Exclusive

	 	 	60	 
	 	9.5	 	 	No Circular Recovery; Other Matters

	 	 	60	 
	 	9.6	 	 	Recovery Not Affected By Knowledge

	 	 	61	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	ARTICLE X
	 	 	 	 
	 
	 	 	 	 	MISCELLANEOUS
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	10.1	 	 	Amendment and Modification

	 	 	61	 
	 	10.2	 	 	Waiver of Compliance; Consents

	 	 	61	 
	 	10.3	 	 	Survival

	 	 	61	 
	 	10.4	 	 	Notices

	 	 	62	 
	 	10.5	 	 	Assignment; Third Party Beneficiaries

	 	 	63	 
	 	10.6	 	 	Governing Law

	 	 	64	 
	 	10.7	 	 	Specific Enforcement; Consent to Jurisdiction

	 	 	64	 
	 	10.8	 	 	WAIVER OF JURY TRIAL

	 	 	64	 
	 	10.9	 	 	Counterparts

	 	 	64	 

iii

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	10.10	 	 	Severability

	 	 	64	 
	 	10.11	 	 	Interpretation

	 	 	64	 
	 	10.12	 	 	Entire Agreement

	 	 	65	 
	 	10.13	 	 	Definitions of Commonly Used Terms

	 	 	65	 
	 	10.14	 	 	Rules of Construction

	 	 	66	 
	 	10.15	 	 	Shareholder Representative

	 	 	66	 

iv

 

TABLE OF DEFINED TERMS

	 	 	 	 	 
	 	 	Page
	2005 Balance Sheet

	 	 	5	 
	Acceptable Confidentiality Agreement

	 	 	40	 
	Acquisition Proposal

	 	 	41	 
	Acquisition Transaction

	 	 	41	 
	Action

	 	 	22	 
	Additional Audit Expenses

	 	 	50	 
	Adjusted Closing Current Assets

	 	 	5	 
	Adjusted Closing Current Liabilities

	 	 	6	 
	Adverse Recommendation Change

	 	 	40	 
	Agreement

	 	 	1	 
	Alternative Definitive Agreement

	 	 	40	 
	Ancillary Agreements

	 	 	16	 
	Audited Financial Statements

	 	 	50	 
	Base Current Assets

	 	 	5	 
	Base Current Liabilities

	 	 	5	 
	Base Working Capital

	 	 	5	 
	Board

	 	 	10	 
	Certificate of Merger

	 	 	2	 
	Closing

	 	 	2	 
	Closing Cash Amount

	 	 	4	 
	Closing Date

	 	 	2	 
	Closing Date Balance Sheet

	 	 	5	 
	Closing Indebtedness Amount

	 	 	4	 
	Closing Statement

	 	 	3	 
	Closing Working Capital

	 	 	5	 
	Closing Working Capital Statement

	 	 	5	 
	Code

	 	 	14	 
	Commitment Letter

	 	 	37	 
	Company

	 	 	1	 
	Company Certificate

	 	 	12	 
	Company Common Stock

	 	 	1	 
	Company Consolidated Balance Sheet

	 	 	19	 
	Company Contract

	 	 	25	 
	Company Disclosure Statement

	 	 	14	 
	Company Employee Benefit Plans

	 	 	30	 
	Company Environmental Permits

	 	 	33	 
	Company Equityholders

	 	 	1	 
	Company ERISA Affiliate

	 	 	30	 
	Company Expenses

	 	 	56	 
	Company Facility

	 	 	18	 
	Company Financial Statements

	 	 	19	 
	Company IP Rights

	 	 	26	 
	Company Material Adverse Effect

	 	 	15	 
	Company Option Agreements

	 	 	11	 
	Company Option Plans

	 	 	11	 
	Company Options

	 	 	10	 
	Company Stockholders Agreement

	 	 	17	 
	Company Subsidiaries

	 	 	15	 
	Company Subsidiary Financial Statements

	 	 	19	 
	Company Termination Fee

	 	 	56	 
	Company Warrants

	 	 	10	 
	Confidentiality Agreement

	 	 	42	 
	Consideration Adjustment Statement

	 	 	6	 
	Consolidated Company Subsidiaries

	 	 	15	 
	Continuing Employees

	 	 	45	 
	Current Policy

	 	 	45	 
	Deductible

	 	 	59	 
	Delaware Secretary

	 	 	2	 
	DGCL

	 	 	1	 
	Dispute Notice

	 	 	6	 
	Dissenting Share Notice

	 	 	13	 
	Dissenting Shares

	 	 	13	 
	EBITDA

	 	 	53	 
	Effective Time

	 	 	2	 
	Employee Transaction Payments

	 	 	5	 
	ERISA

	 	 	29	 
	Escrow Agent

	 	 	14	 
	Escrow Agreement

	 	 	14	 
	Escrow Amount

	 	 	14	 
	Estimated Working Capital

	 	 	3	 
	Final Working Capital

	 	 	8	 
	Financing

	 	 	37	 
	GAAP

	 	 	19	 
	Government Entity

	 	 	16	 
	group health plan

	 	 	31	 
	Hazardous Material

	 	 	32	 
	Hazardous Materials Activities

	 	 	33	 
	Holder

	 	 	12	 
	HSR Act

	 	 	16	 
	Indemnification Share

	 	 	59	 
	Indemnified Party

	 	 	58	 
	Indemnifying Party

	 	 	58	 
	Initial Merger Consideration

	 	 	3	 
	IRS

	 	 	31	 
	Joinder Agreement

	 	 	1	 

i

 

	 	 	 	 	 
	 	 	Page
	Leased Real Property

	 	 	34	 
	Lender

	 	 	37	 
	Lien

	 	 	14	 
	Losses

	 	 	56	 
	Matching Proposal

	 	 	41	 
	Merger

	 	 	1	 
	Merger Consideration

	 	 	3	 
	Merger Sub

	 	 	1	 
	Merger Sub Common Stock

	 	 	10	 
	New Mountain

	 	 	1	 
	New Mountain Advisory Agreement

	 	 	4	 
	Northeast Ohio

	 	 	50	 
	Option Price

	 	 	10	 
	Outside Date

	 	 	53	 
	Owned Real Property

	 	 	34	 
	Parent

	 	 	1	 
	Parent Disclosure Statement

	 	 	35	 
	Parent Expenses

	 	 	55	 
	Parent Indemnified Person

	 	 	56	 
	Parent Material Adverse Effect

	 	 	36	 
	Parent Subsidiaries

	 	 	45	 
	Parent Termination Fee

	 	 	55	 
	Paying Agent

	 	 	11	 
	Paying Agent Agreement

	 	 	11	 
	Pension Plans

	 	 	29	 
	Permits

	 	 	18	 
	Permitted Liens

	 	 	33	 
	Physician Meetings

	 	 	42	 
	Post-Closing Tax Period

	 	 	48	 
	Potential Acquiror

	 	 	40	 
	Pre-Closing Tax Claim

	 	 	48	 
	Pre-Closing Tax Period

	 	 	47	 
	Pro Rata Share

	 	 	3	 
	Real Property Leases

	 	 	34	 
	Reference Date

	 	 	20	 
	Representatives

	 	 	40	 
	Seller Indemnified Person

	 	 	57	 
	Seller Transaction Expenses

	 	 	4	 
	Share Price

	 	 	10	 
	Shareholder Representative

	 	 	1	 
	Shareholder Returns

	 	 	47	 
	Side Letter

	 	 	50	 
	St. Luke’s Center

	 	 	51	 
	Straddle Period

	 	 	47	 
	Superior Offer

	 	 	42	 
	Support Agreement

	 	 	1	 
	Surviving Corporation

	 	 	2	 
	Tax

	 	 	27	 
	Tax Benefits

	 	 	4	 
	Tax Return

	 	 	27	 
	Tax Returns

	 	 	27	 
	Taxes

	 	 	27	 
	Unconsolidated Company Subsidiaries

	 	 	20	 
	WARN Act

	 	 	32	 
	Warrant Price

	 	 	10	 
	Welfare Plans

	 	 	30	 
	West Houston

	 	 	50	 

ii

 

AGREEMENT AND PLAN OF MERGER

     This
AGREEMENT AND PLAN OF MERGER (this
“Agreement"”) is made and entered into as of January
27, 2006 by and among United Surgical Partners International, Inc., a Delaware corporation
(“Parent”), Peak ASC Acquisition Corp., a Delaware corporation and wholly-owned indirect subsidiary
of Parent (“Merger Sub”), and Surgis, Inc., a Delaware corporation (“Company”):

     A. The boards of directors of Parent, Merger Sub and Company have approved the merger of
Merger Sub with and into Company (the “Merger”), upon the terms and subject to the conditions set
forth herein, and have determined that the Merger and the other transactions contemplated by this
Agreement are fair to, and in the best interests of, their respective stockholders.

     B. In connection with the Merger, among other things, the outstanding shares of the Company’s
common stock, par value $0.01 per share (“Company Common Stock”), will be converted into the right
to receive cash from Parent at the rate set forth herein.

     C. Prior to the closing of the transactions contemplated by this Agreement, holders of Company
Common Stock, Company Options (as defined below) and/or Company Warrants (as defined below) at the
Effective Time (collectively, the “Company Equityholders”) will enter into a Joinder Agreement
substantially in the form attached hereto as Exhibit A (each, a “Joinder Agreement”)
pursuant to which each such holder will become a party to this Agreement and pursuant to which each
such holder shall appoint New Mountain Partners, L.P. as its representative (the “Shareholder
Representative”).

     D. Simultaneously with the execution and delivery of this Agreement and as a condition and
inducement to Parent’s and Merger Sub’s willingness to enter into this Agreement, New Mountain
Partners, L.P. and New Mountain Affiliated Investors, L.P. (collectively, “New Mountain”), will
enter into an agreement pursuant to which New Mountain will agree, among other things, to vote for
the approval of the Merger and the transactions contemplated hereby and against any alternative
Acquisition Proposals (as defined herein), notwithstanding any Adverse Recommendation Change (as
defined below) at a duly called meeting of the stockholders of Company or, in lieu of a meeting, by
executing an action by written consent of the stockholders of Company (the “Support Agreement”).

     The parties agree as follows:

ARTICLE I

THE MERGER

          1.1 The Merger. At the Effective Time (as defined in Section 1.2) and subject to and upon the terms and
conditions of this Agreement and the applicable provisions of the Delaware General Corporation Law
(“DGCL”), (i) Merger Sub shall be merged with and into Company, (ii) the separate corporate
existence of Merger Sub shall cease, and (iii) Company shall be the surviving corporation and a
wholly-owned indirect subsidiary of Parent. Company,

 

 

as the surviving corporation of the Merger,
is hereinafter sometimes referred to as the “Surviving Corporation.”

          1.2 Closing; Effective Time. Unless this Agreement is terminated pursuant to Article
VIII hereof, the closing of the Merger and the other transactions contemplated hereby (the
“Closing”) will take place at 10:00 a.m., local time, on a date to be specified by the parties (the
“Closing Date”), which shall be no later than the second business day after satisfaction or waiver
of the conditions set forth in Articles VI and VII (which can be satisfied prior to
Closing), unless another time or date is agreed to by the parties hereto. The Closing shall take
place at the offices of Company, Suite 450, 30 Burton Hills Boulevard, Nashville, Tennessee or at
such other location as the parties hereto shall mutually agree. At the Closing, the parties hereto
shall cause the Merger to be consummated by filing a certificate of merger reasonably acceptable to
each of Parent and Company (the “Certificate of Merger”) with the Secretary of State of the State
of Delaware (the “Delaware Secretary”), in accordance with the relevant provisions of DGCL (the
time of such filing, or such later time as may be agreed in writing by the parties and specified in
the Certificate of Merger, being the “Effective Time”). If the Delaware Secretary requires any
changes in the Certificate of Merger as a condition to filing or issuing a certificate to the
effect that the Merger is effective, Merger Sub, Parent and/or Company shall execute any necessary
document incorporating such changes, provided such changes are not inconsistent with and do not
result in any material change in the terms of this Agreement.

          1.3 Effects of the Merger. The effects of the Merger shall be as provided in this Agreement, the
Certificate of Merger and the applicable provisions of DGCL. Without limiting the foregoing, at
the Effective Time, by virtue of the Merger and in accordance with DGCL, all the property, rights,
privileges, powers and franchises of Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.

          1.4 Certificate of Incorporation; Bylaws.

               (a) Subject to Section 5.7(a), from and after the Effective Time, the certificate of
incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the Surviving Corporation.

               (b) Subject to Section 5.7(a), from and after the Effective Time, the bylaws of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation.

          1.5 Directors and Officers of the Surviving Corporation. The directors and officers of Merger Sub
immediately prior to the Effective Time shall serve as the initial directors and officers of the
Surviving Corporation, until their respective successors are duly elected or appointed and
qualified.

          1.6 Merger Consideration.

               (a) Subject to Sections 2.7, 5.14 and 5.15 and subject to the
adjustments provided for in Section 1.7 and Section 1.8, cash in the amount of
$200,000,000 minus (A) the Closing Indebtedness Amount (as defined in Section
1.6(c) below) minus (B) the

2

 

Seller Transaction Expenses (as defined in Section
1.6(d) below) plus (C) the Tax Benefits (as defined in Section 1.6(e) below)
plus (D) the Closing Cash Amount (as defined in Section 1.6(f) below) plus
(E) the Employee Transaction Payments (as defined in Section 1.6(g) below) (the “Merger
Consideration”), shall be paid for all outstanding Company Common Stock and all outstanding rights
to acquire Company Common Stock.

               (b) For purposes of determining the amounts to be initially paid to the Company Equityholders
pursuant to Section 2.1 and Sections 2.3(b) and (f) and the amount to be deposited
with the Escrow Agent (as defined below) on the Closing Date (the aggregate of such amounts, prior
to any deduction for applicable withholding taxes, the “Initial Merger Consideration”), Company
shall provide to Parent not later than three business days prior to the Closing Date a statement
(the “Closing Statement”), with reasonable detail and otherwise in form reasonably satisfactory to
Parent, certified by the Chief Financial Officer of Company and setting forth:

          (i) Company’s calculation of the Closing Indebtedness Amount, the Seller
Transaction Expenses, the Tax Benefits, the Closing Cash Amount and the Employee
Transaction Payments, in each case, together with a breakdown of such amounts, and,
where applicable, showing the amounts owed to each person who is owed any such
amounts (together with any customary payoff letters and invoices reasonably
requested by Parent);

          (ii) an equity capitalization table of Company listing all record holders of
Company Common Stock, Company Options and Company Warrants as of a date not less
than five business days prior to the Closing Date, together with (x) a table
specifying the percentages of the Initial Merger Consideration payable to each
Company Equityholder pursuant to Article II prior to any deduction for
applicable withholding (such percentage, with respect to each Company Equityholder,
its “Pro Rata Share”), (y) the proper names and addresses of all such holders and
any other information requested by Parent in connection with the determination of
any withholding
taxes associated with payment of Merger Consideration; and (z) in the case of
Company Options and Company Warrants, a schedule identifying the exercise prices
thereof; and

          (iii) Company’s estimate of the Closing Working Capital (as defined below)
calculated in accordance with Section 1.7 below (such estimate, as the same
may be adjusted in response to comments of Parent provided prior to the Closing, the
“Estimated Working Capital”).

The Closing Statement shall be prepared by Company in good faith in consultation with
Parent and its Representatives (as defined below). In connection with the preparation of
the Closing Statement, Company shall provide Parent and its Representatives reasonable
access during normal business hours to the personnel, accountants, books and records of
Company and the Company Subsidiaries (as defined below) for purposes of assisting Parent
and its Representatives in their review of the Closing Statement. Prior to Closing, the
parties shall cooperate in good faith to resolve any reasonable questions or issues raised
by Parent in connection with its review of the Closing Statement. If prior to the

3

 

Effective Time there shall be any change in the information set forth in the Closing
Statement, Company shall provide to Parent not less than one full business day prior to the
Effective Time prompt notice of such change and a revised Closing Statement.

               (c) As used herein, “Closing Indebtedness Amount” means the amount as of the Effective Time of
(A) all obligations (including all obligations in respect of principal, penalties, fees and
premiums, but excluding accrued interest) of Company and the Consolidated Company Subsidiaries (as
defined below) for borrowed money, evidenced by notes, bonds, debentures or similar instruments
(including under Company’s revolving credit facility with Bank of America, N.A.), plus (B) the
amount of all capitalized lease obligations determined in accordance with GAAP (as hereinafter
defined) of Company and the Consolidated Company Subsidiaries minus (C) the sum of (1) all
indebtedness of Company and the Consolidated Company Subsidiaries in respect of the de novo surgery
centers listed on Schedule 1.6(c) of the Company Disclosure Statement incurred from the
date hereof to the Closing Date (to the extent included in clause (A) or (B) above), (2) all
obligations under letters of credit issued by Company or any Consolidated Company Subsidiary (to
the extent included in clause (A) above), and (3) all indebtedness or amounts relating to
capitalized lease obligations, in each case, related to the Northridge Surgery Center (to the
extent included in clause (A) or (B) above).

               (d) As used herein, “Seller Transaction Expenses” means all obligations and liabilities
incurred by Company, the Company Subsidiaries and the Company Equityholders in connection with the
transactions contemplated by this Agreement and the Ancillary Agreements or incurred in
anticipation of such transactions or any alternative transactions considered by Company to the
extent such obligations and liabilities are payable or reimbursable by Company or any Company
Subsidiaries as of the Effective Time, including (A) all accrued fees, costs and expenses of
investment bankers, attorneys, accountants and other consultants and advisors as of the Effective
Time, (B) all amounts payable in connection with such transactions under the Advisory Agreement,
dated as of November 4, 2002 between Company and New Mountain Capital, LLC (as amended, modified or
supplemented from time to time, the “New Mountain Advisory Agreement”) as of the Effective Time,
(C) all other obligations and liabilities that are accrued and unpaid under the New Mountain
Advisory Agreement as of the Effective Time and (D) the costs of obtaining a “tail” directors and
officers’ insurance policy as contemplated by Section 5.7(b) that are accrued and unpaid as
of the Effective Time; provided, that Seller Transaction Expenses shall not include any
Additional Audit Expenses (as defined below), Employee Transaction Payments or severance
obligations and liabilities of Company arising out of the Merger and the related transactions.

               (e) As used herein, “Tax Benefits” shall mean 40% of the aggregate amount of the Option Price
to be paid to all holders of Company Options pursuant to Section 2.1(b) before any
withholding taxes or other required deductions.

               (f) As used herein, “Closing Cash Amount” shall mean all cash and cash equivalents of Company
and the Consolidated Company Subsidiaries (whether or not its use is restricted to certain
designated purposes) as reflected on the Closing Date Balance Sheet less any amounts used
between the time of determination of the Closing Date Balance Sheet and the Effective Time which
are used to satisfy or pay any Closing Indebtedness Amounts or Seller Transaction Expenses.

4

 

               (g) As used herein, “Employee Transaction Payments” shall mean the transaction bonus payments
described on Schedule 1.6(g) of the Company Disclosure Statement that shall be made by
Company to the employees of Company identified on such Schedule 1.6(g) in connection with
the transactions contemplated by this Agreement on the Closing Date, which amount shall equal
$620,000.

          1.7 Working Capital and Other Adjustments.

               (a) Not later than four (4) business days prior to the Closing Date, Company shall deliver to
Parent a statement of Base Working Capital. “Base Working Capital” shall be calculated by
subtracting Base Current Liabilities from Base Current Assets. “Base Current Assets” means the
current assets of the Company and its Consolidated Subsidiaries as set forth on the audited
consolidated balance sheet as of December 31, 2005 contained in the Audited Financial Statements
(as defined below) (the “2005 Balance Sheet”) less, to the extent reflected in the 2005 Balance
Sheet, (i) all cash and cash equivalents of Company and the Company Subsidiaries (whether or not
its use is restricted to certain designated purposes) as reflected on the 2005 Balance Sheet, (ii)
all current deferred tax assets and (iii) all receivables related to insurance proceeds. “Base
Current Liabilities” means the current liabilities of the Company and its Consolidated Subsidiaries
as set forth on the 2005 Balance Sheet less, to the extent reflected in the 2005 Balance Sheet, (i)
all obligations (including all obligations in respect of principal, penalties, fees and premiums,
but excluding accrued interest) of Company and the Consolidated Company Subsidiaries for borrowed
money, evidenced by notes, bonds, debentures or similar instruments (including under Company’s
revolving credit facility with Bank of America, N.A.), (ii) the amount of all capitalized
lease obligations determined in accordance with GAAP of Company and the Consolidated Company
Subsidiaries, (iii) all accruals related to Seller Transaction Expenses, and (iv) all current
deferred tax liabilities. Notwithstanding anything contained herein to the contrary, in the event
that Company takes the action with respect to West Houston described in Section 5.14(b),
appropriate adjustments shall be made in determining Base Working Capital and Closing Working
Capital to reflect the disposition of West Houston as contemplated by Section 5.14(b).

               (b) The Initial Merger Consideration shall be (i) increased on a dollar for dollar basis by
the amount, if any, by which the Estimated Working Capital is greater than Base Working Capital and
(ii) reduced on a dollar for dollar basis by the amount, if any, by which the Estimated Working
Capital is less than Base Working Capital.

               (c) As promptly as practicable, but no later than 90 days after the Closing Date, Parent will
deliver to the Shareholder Representative an unaudited consolidated balance sheet of Company as of
the close of business on the business day immediately prior to the Closing Date (the “Closing Date
Balance Sheet") together with a statement (the
“Closing Working Capital Statement”) of Closing
Working Capital. The Closing Date Balance Sheet shall be prepared using the same accounting
methods, principles, practices, procedures and estimation methodologies as those utilized in
preparing the 2005 Balance Sheet. The Closing Working Capital Statement shall set forth a
calculation of Closing Working Capital. “Closing Working Capital” shall be calculated by
subtracting Adjusted Closing Current Liabilities from Adjusted Closing Current Assets. “Adjusted
Closing Current Assets” means the current assets of the Company and its Consolidated Subsidiaries
as set forth on the Closing Date Balance Sheet

5

 

less, to the extent reflected in the Closing Date
Balance Sheet, (i) all amounts relating to the Closing Cash Amount, (ii) all current deferred tax
assets, and (iii) all amounts relating to the Tax Benefits. “Adjusted Closing Current Liabilities”
means the current liabilities of the Company and its Consolidated Subsidiaries as set forth on the
Closing Date Balance Sheet less, to the extent reflected in the Closing Date Balance Sheet, (i) all
obligations (including all obligations in respect of principal, penalties, fees and premiums, but
excluding accrued interest) of Company and the Consolidated Company Subsidiaries for borrowed
money, evidenced by notes, bonds, debentures or similar instruments (including under Company’s
revolving credit facility with Bank of America, N.A.), (ii) the amount of all capitalized lease
obligations determined in accordance with GAAP of Company and the Consolidated Company
Subsidiaries, (iii) all accruals relating to Seller Transaction Expenses, (iv) all accruals
relating to the Additional Audit Expenses, (v) all accruals relating to the Employee Transaction
Payments (vi) all current deferred tax liabilities and (vii) all accruals for severance relating to
the Merger and the related transactions. Notwithstanding anything in this Agreement to the
contrary, in no event shall amounts included in the clause (A) or (B) of the definition of Closing
Indebtedness Amount, Seller Transaction Expenses, Tax Benefits, the Closing Cash Amount and the
Employee Transaction Payments for purposes of determining the Merger Consideration also be taken
into account for purposes of determining Closing Working Capital.

               (d) At the time of delivery of the Closing Working Capital Statement, Parent shall also
provide to the Shareholder Representative a statement (the “Consideration
Adjustment Statement”) containing a calculation of the Closing Indebtedness Amount, Seller
Transaction Expenses and the Closing Cash Amount, in each case, derived from the Closing Date
Balance Sheet, the Tax Benefits derived from the actual Option Price taking into account any
adjustments to the Merger Consideration effected pursuant to Section 1.8, and the Employee
Transaction Payments derived from the actual amounts paid to employees receiving Employee
Transaction Payments at or prior to the Closing.

               (e) The Shareholder Representative may dispute the amount of Closing Working Capital specified
on the Closing Working Capital Statement, and/or any or all of the Closing Indebtedness Amount, the
Seller Transaction Expenses, the Closing Cash Amount, the Tax Benefits and the Employee
Transaction Payments specified on the Consideration Adjustment Statement by delivering to Parent,
within 45 days after delivery to the Shareholder Representative of the Closing Working Capital
Statement, a notice (a “Dispute Notice”) of such dispute setting forth in reasonable detail the
Shareholder Representative’s calculation of Closing Working Capital, the Closing Indebtedness
Amount, the Seller Transaction Expenses, the Closing Cash Amount, the Tax Benefits or the Employee
Transaction Payments, and a reasonably detailed description of the basis for the dispute. In the
case of Closing Working Capital, the only basis permitted for such a dispute is that Closing
Working Capital was not determined in accordance with Section 1.7(c) above. In the case of
a dispute relating to Closing Working Capital, except as may be specified in such Dispute Notice,
the Shareholder Representative shall be deemed to have agreed that all other requirements of the
Closing Working Capital Statement have been complied with and that all other calculations and
amounts contained in the Closing Working Capital Statement are correct. In the case of the Tax
Benefits, the only basis permitted for such a dispute is that the aggregate Option Price used to
determine Tax Benefits did not reflect the actual Share Price, taking into account the adjustments
contemplated by Section 1.8. In the case of the Employee Transaction Payments, the only
basis

6

 

permitted for such a dispute is that the aggregate amount does not reflect the amounts
actually paid. Any Dispute Notice must specify, with reasonable particularity, all facts that form
the basis of such disagreements and all statements by persons (who shall be identified by name) and
documents relied upon by the Shareholder Representative as forming the basis of such disagreement.
Any facts, statements or documents not identified with reasonable particularity in the Dispute
Notice may not be cited by the Shareholder Representative in any written submission, nor offered by
the Shareholder Representative into evidence or the record, at any proceeding conducted pursuant to
Section 1.7(f), or in any ancillary, enforcement or other proceedings brought in connection
therewith.

               (f) If a Dispute Notice shall be duly delivered pursuant to Section 1.7(e), Parent and
the Shareholder Representative shall, during the 30 days following such delivery, use their
reasonable efforts to reach agreement on the disputed matters referred to in the Dispute Notice in
order to determine, as may be required, the amount of Closing Working Capital, the Closing
Indebtedness Amount, the Seller Transaction Expenses, the Closing Cash Amount, the Tax Benefits and
the Employee Transaction Payments. Closing Working Capital and the Closing Cash Amount shall not
be less than the amount thereof shown in Parent’s calculation delivered pursuant to Section
1.7(c) or Section 1.7(d), respectively, nor more than the amount thereof shown in the
Shareholder Representative’s calculation delivered pursuant to Section 1.7(e). The Closing
Indebtedness Amount and the Seller Transaction Expenses shall not be more than the amount thereof
shown in Parent’s calculation delivered pursuant to Section 
1.7(d), nor less than the amount thereof shown in the Shareholder Representative’s
calculation delivered pursuant to Section 1.7(e). The Tax Benefits shall be determined
based on the actual Option Price as determined after taking into account all adjustments
contemplated by Section 1.8. The Employee Transaction Payments shall be determined based on the
aggregate actual Employee Transaction Payments made by the Company at or prior to the Closing,
which in no event shall exceed $620,000. If, during such period, Parent and the Shareholder
Representative are unable to reach such agreement, they shall promptly thereafter cause Ernst &
Young LLP or, if such firm is unable to serve in such capacity, PricewaterhouseCoopers LLP or, if
neither such firm is able to serve in such capacity, another firm of independent accountants of
nationally recognized standing reasonably satisfactory to Parent and the Shareholder Representative
(which shall not have or have had any material relationship with Parent or the Shareholder
Representative) promptly to review this Agreement and such disputed matters for the purpose of
determining, as may be required, the amount of Closing Working Capital, the Closing Indebtedness
Amount, the Seller Transaction Expenses, the Closing Cash Amount, the Tax Benefits and the Employee
Transaction Payments. In any such case, a single partner having special expertise with respect to
settlement of such disputes of the selected accounting firm shall act for the firm in the
determination proceeding, and such partner shall render a written decision as to each such disputed
matter, as promptly as practicable, including a statement in reasonable detail of the basis for
each such decision. In making such determination, such partner of the selected firm shall consider
only those matters properly specified in the Shareholders Representatives’ Dispute Notice in
accordance with Section 1.7(e). Such decision shall be final and binding upon Parent, the
Shareholder Representative and the Company Equityholders and will be fully enforceable. In the
event the review involves a review of Closing Working Capital, the cost of such review and decision
shall be borne (i) by the Company Equityholders if the difference between Final Working Capital and
Shareholder Representative’s calculation of Closing Working Capital delivered pursuant to
Section 1.7(e) is greater than the difference

7

 

between Final Working Capital and Parent’s
calculation of Closing Working Capital delivered pursuant to Section 1.7(c), (ii) by Parent
if the first such difference is less than the second such difference and (iii) otherwise equally by
Parent and the Company Equityholders. If the review does not involve a review of Closing Working
Capital, (i) by the Company Equityholders if the Company Equityholders are required to make a
payment pursuant to Section 1.8(a), (ii) by Parent if Parent is required to make a payment
pursuant to Section 1.8(a) and (iii) otherwise equally by Parent and the Company
Equityholders.

               (g) Parent and the Shareholder Representative agree that they will, and Parent agrees to cause
Company and the Company Subsidiaries to, until such time as Final Working Capital, the Closing
Indebtedness Amount, the Seller Transaction Expenses, the Closing Cash Amount, the Tax Benefits and
the Employee Transaction Payments have been determined in accordance with this Section 1.7,
cooperate and assist in the preparation and review of the Closing Working Capital Statement and the
determination of Closing Working Capital, the preparation and review of the Consideration
Adjustment Statement and the determination of the Closing Indebtedness Amount, the Seller
Transaction Expenses, the Closing Cash Amount, the Tax Benefits and the Employee Transaction
Payments, and in the conduct of the reviews referred to in this Section 1.7, including, and
as promptly as practicable (but in any case prior to the expiration of the 30-day period referred
to in Section 1.7(f)), subject to normal procedures associated with such preparation and
reviews, by making available books, accounting records and work papers, by delivering copies
thereof, and by using all reasonable efforts to
make available the persons identified in the Dispute Notice and other personnel, as reasonably
requested by the other party, and to make such representations as are customarily required by
independent accountants in connection with such preparation and reviews; provided,
however, that any failure of either party to comply with this Section 1.7(g) shall
not be a breach of this Agreement unless the other party shall have been actually and materially
prejudiced as a result of such failure.

          1.8 Purchase Price Adjustments.

               (a) If Final Working Capital is less than Estimated Working Capital, the Shareholder
Representative and Parent shall cause the Escrow Agent (as defined herein) to pay to Parent, as an
adjustment to the Merger Consideration, in the manner and with interest as provided in Section
1.8(b), the difference between Estimated Working Capital and Final Working Capital. If Final
Working Capital exceeds Estimated Working Capital, Parent shall pay to the Shareholder
Representative for distribution to the Company Equityholders in accordance with their respective
Pro Rata Shares, in the manner and with interest as provided in Section 1.8(b), the
difference between Final Working Capital and Estimated Working Capital. “Final Working Capital”
means the Closing Working Capital (i) as shown in Parent’s calculation delivered pursuant to
Section 1.7(c), if no Dispute Notice is duly delivered pursuant to Section 1.7(e),
or (ii) if such a Dispute Notice is delivered, (A) as agreed by Parent and the Shareholder
Representative pursuant to Section 1.7(f) or (B) in the absence of such agreement, as shown
in the independent accountant’s determination delivered pursuant to Section 1.7(f);
provided, that in no event shall Final Working Capital be less than Parent’s calculation of
Closing Working Capital delivered pursuant to Section 1.7(c) or more than the Shareholder
Representative’s calculation of Closing Working Capital delivered pursuant to Section
1.7(e). If the Closing Indebtedness Amount plus the Seller Transaction Expenses
minus the Closing Cash Amount

8

 

minus the Tax Benefits minus the Employee
Transaction Payments, as finally determined pursuant to Section 1.7, exceeds the Closing
Indebtedness Amount plus the Seller Transaction Expenses minus the Closing Cash
Amount minus the Tax Benefits minus the Employee Transaction Payments, as set forth
on the Closing Statement, then the Shareholder Representative and Parent shall cause the Escrow
Agent to pay to Parent, as an adjustment to the Merger Consideration, in the manner and with
interest as provided in Section 1.8(b), the amount of such excess. If the Closing
Indebtedness Amount plus the Seller Transaction Expenses minus the Closing Cash
Amount minus the Tax Benefits minus the Employee Transaction Payments, as finally
determined pursuant to Section 1.7, are less than the Closing Indebtedness Amount plus the
Seller Transaction Expenses minus the Closing Cash Amount minus the Tax Benefits
minus the Employee Transaction Payment, as set forth on the Closing Statement, then Parent shall
pay to the Shareholder Representative for distribution to the Company Equityholders in accordance
with their respective Pro Rata Shares, in the manner and with interest as provided in Section
1.8(b), as an adjustment to the Merger Consideration, the amount of such shortfall. For
administrative convenience, amounts payable under this Section 1.8(a) shall be netted.

               (b) Any net payment due pursuant to Section 1.8(a) shall be made within five days
after the Final Working Capital has been determined. If payment pursuant to Section 1.8(a)
is required to be made by Parent, such payment shall be made to the Shareholder
Representative for distribution to the Company Equityholders in accordance with their Pro Rata
Shares. If payment pursuant to Section 1.8(a) is required to be made by the Company
Equityholders, the Shareholder Representative and Parent shall direct the Escrow Agent to make
payment by wire transfer to an account specified by Parent. In the event that the funds in the
escrow account established pursuant to the Escrow Agreement (as defined below) are insufficient to
pay such amounts to Parent, such amounts shall be treated as Losses subject to indemnification
under Section 9.1(a) (without giving effect to any of the limitations set forth in
Section 9.3). The amount of any payment to be made pursuant to Section 1.8(a)
shall bear interest from and including the Closing Date to but excluding the date of payment at a
rate per annum equal to the Prime Rate as published in the Wall Street Journal, Eastern Edition, in
effect from time to time during the period from the Closing Date to the date of payment. Such
interest shall be payable at the same time as the payment to which it relates and shall be
calculated on the basis of a year of 365 days and the actual number of days elapsed.

ARTICLE II

CONVERSION OF SHARES; TREATMENT OF

COMPANY OPTIONS AND WARRANTS

          2.1 Conversion of Shares; Treatment of Company Options and Company Warrants. As of the Effective
Time, by virtue of the Merger, and without any action on the part of the holders of any outstanding
shares of capital stock or securities of Company or Merger Sub:

               (a) Subject to Sections 2.6 and 2.7, each share of Company Common Stock,
issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares (as
defined herein)), shall be automatically converted into the right to receive cash in an amount
equal to the Share Price (as defined below). All such shares of Company Common Stock, when so
converted, shall no longer be outstanding, shall automatically be canceled and

9

 

retired and shall
cease to exist, and each certificate previously representing any such shares shall thereafter
represent only the right to receive the Share Price.

               (b) Each option to purchase Company Common Stock that is outstanding immediately prior to the
Effective Time (the “Company Options”), shall be converted into the right to receive cash in an
amount equal to the Share Price less the exercise price of such Company Option (the “Option
Price”).

               (c) Each warrant to purchase Company Common Stock that is outstanding immediately prior to the
Effective Time (the “Company Warrants”) shall be converted into the right to receive cash in an
amount equal to the Share Price less the exercise price of such Company Warrant (the “Warrant
Price”). All such Company Warrants, when so converted, shall no longer be outstanding, shall
automatically be canceled and retired and shall cease to exist, and each certificate previously
representing any such securities shall thereafter represent only the right to receive the Warrant
Price.

               (d) Each holder of a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration payable with respect to such Company
Common Stock, without interest.

               (e) Each share of common stock of Merger Sub (the “Merger Sub Common Stock”) issued and
outstanding immediately prior to the Effective Time shall be automatically converted into one
validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.
Each certificate evidencing ownership of a number of shares of Merger Sub Common Stock shall be
deemed to evidence ownership of the same number of shares of common stock of the Surviving
Corporation.

               (f) For purposes of this Agreement, “Share Price” is the Merger Consideration plus the
total exercise price of all Company Options plus the total exercise price of all Company
Warrants less the aggregate amount of the Employee Transaction Payments, divided by the sum
of (A) the number of issued and outstanding shares of Company Common Stock immediately prior to the
Effective Time and (B) the number of shares of Company Common Stock issuable upon the exercise of
Company Options and the Company Warrants.

               (g) Without limiting any other provision of this Agreement, the Share Price, Option Price and
Warrant Price shall each be adjusted to reflect fully the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities convertible into
Company Common Stock), extraordinary dividend or distribution, reorganization, reclassification,
recapitalization or other like change with respect to Company Common Stock occurring or having a
record date or an effective date on or after the date hereof and prior to the Effective Time.

          2.2 Company Options and Warrants.

               (a) Prior to and effective as of the Effective Time, Company, the board of directors of the
Company (the “Board”) and each relevant committee of the Board shall take such actions as are
necessary to obtain (i), if necessary, the written consent of the holder of

10

 

each Company Option to
the cancellation of the Company Options and (ii) the written consent of the holder of the Company
Warrants to the cancellation of the Company Warrants in accordance with this Section 2.2.
Subject to having obtained any necessary consents from the holders of Company Options and Company
Warrants, the Company shall cause the Board or each relevant committee of the Board to adopt any
amendments to the plans of the Company Options (the “Company Option Plans”) or the agreements in
connection with the Company Options (the “Company Option Agreements”) and the Company Warrants
which may be necessary or desirable to implement such cancellations.

               (b) Company shall take all actions necessary to provide that all Company Option Agreements
related to Company Options and Company Warrants shall be
terminated as of the Effective Time and the provisions in any Company Option Plan or any other
plan providing for the issuance, transfer or grant of any capital stock of Company or any interest
in respect of any capital stock of Company shall be modified as of no later than the Effective Time
to conform to the provisions of this Agreement regarding treatment of Company Options. Further,
Company shall take all actions reasonably necessary to ensure that following the Effective Time no
holder of a Company Option Agreement or any participant in any Company Option Plan or any holder of
the Company Warrants or any other plan shall have any right thereunder to acquire any capital stock
of Company or the Surviving Corporation or any interest in respect of any capital stock of Company
or the Surviving Corporation other than the right to receive cash as set forth in this Agreement.

          2.3 Exchange of Certificates.

               (a) At or prior to the Effective Time, Parent shall enter into an agreement (the “Paying Agent
Agreement”) with a bank or trust company selected by Parent and reasonably acceptable to Company to
act as the paying agent for the payment of Merger Consideration to the holders of Company Common
Stock, Company Options and Company Warrants (the “Paying Agent”).

               (b) At or prior to the Effective Time, Parent shall supply or cause to be supplied to or for
the account of the Paying Agent in trust for the benefit of the holders of Company Common Stock,
Company Options and Company Warrants and for exchange pursuant to this Section 2.3 the
Merger Consideration (net of required tax withholdings) payable to the Company Equityholders
pursuant to Section 2.1. The Paying Agent shall invest any cash held by it under the
Paying Agent Agreement as directed by Parent and any interest and other income resulting from such
investments shall be for the benefit of Parent. Any portion of such funds which remain
undistributed for six months after the Effective Time shall be delivered to Parent, and the Holders
(as defined below) who have not theretofore complied with this Section 2.3 shall thereafter
look only to Parent and the Surviving Corporation for payment of the Merger Consideration, subject
to escheat and abandoned property and similar laws.

               (c) Promptly after the Effective Time (and in no event later than two business days after the
Effective Time), Parent shall mail or shall cause to be mailed to each Holder a letter of
transmittal in customary form (or, in the case of holders of Company Options, such other
instruments as may be reasonably required to effect payment of the Option Price to such Holder)
and, in each case reasonably acceptable to Parent and the Shareholder

11

 

Representative (which shall specify that delivery shall be effected, and risk of loss and title to the Company Certificates and
Company Warrants shall pass, only upon proper delivery of the Company Certificates and Company
Warrants to the Paying Agent) and instructions for surrender of the Company Certificates and the
Company Warrants. Upon surrender to the Paying Agent of a Company Certificate or Company Warrant,
together with such letter of transmittal duly executed (and any enclosures or other documents
required thereby), or, in the case of a Holder of Company Options, such other instrument, the
Holder shall be entitled to receive in exchange therefor the Merger Consideration payable to such
Holder in accordance with Section 2.1, and such Company Certificate or Company Warrant so
surrendered shall forthwith be canceled. No Merger Consideration will be distributed to a person in respect of
a Company Certificate or Company Warrant who is not the registered owner of a surrendered Company
Certificate or Company Warrant unless (i) the Company Certificate or Company Warrant so surrendered
has been properly endorsed or otherwise is in proper form for transfer, and (ii) such person shall
either (A) pay any transfer or other tax required by reason of such issuance or (B) establish to
the reasonable satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered in accordance with the provisions of this Section 2.3, from
and after the Effective Time, each Company Certificate and each Company Warrant shall be deemed to
represent, for all purposes, the right to receive the Share Price or the Warrant Price, as
applicable, with respect to the shares of Company Common Stock and Company Warrants formerly
represented thereby. For purposes of this Agreement, “Company Certificate” means a certificate
that immediately prior to the Effective Time represented shares of Company Common Stock and
“Holder” means a person who holds (i) one or more Company Certificates, (ii) one or more Company
Warrants or (iii) Company Options as of the Effective Time. Notwithstanding the foregoing, the
parties hereto agree that payments to holders of Company Options may be made in such other manner
as Parent and the Shareholder Representative may mutually agree.

                    (d) All cash paid upon the surrender for exchange of Certificates in accordance with the terms
of this Section 2.3 shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock and Company Warrants exchanged for cash
theretofore represented by such Certificates, and after the Effective Time, there shall be no
further registration of transfers on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock or Company Warrants which were issued and outstanding immediately
prior to the Effective Time.

                    (e) Notwithstanding anything to the contrary in this Agreement, neither the Paying Agent,
Parent, the Surviving Corporation nor any other party hereto shall be liable to any holder of
shares of Company Common Stock, Company Options or Company Warrants for any Merger Consideration
delivered to a public official pursuant to any applicable abandoned property, escheat or similar
law.

                    (f) Notwithstanding anything to the contrary in the Agreement, in the event that a Holder
requests to receive payment of the portion of the Merger Consideration payable to such Holder
pursuant to Section 2.1, directly as of the Closing Date, Company and Parent shall
cooperate with such Holder to permit such Holder to receive payment in such manner;
provided, that such Holder has executed and delivered a Joinder Agreement and executes and
delivers at least five (5) business days prior to the Closing the documents such

12

 

Holder would
otherwise have been required to deliver if such Holder were to receive payment from the Paying
Agent. Any payment in excess of $1,000,000 to be made pursuant to this Section 2.3(f)
shall, at the request of the Holder, be made by wire transfer of immediately available funds to an
account provided to Parent by such Holder at least five (5) business days prior to the Closing.
Any amounts paid directly to Holders pursuant to this Section 2.3(f) shall be deducted from
the amount of the Merger Consideration to be deposited with the Paying Agent at or prior to the
Effective Time.

          2.4 Lost, Stolen or Destroyed Certificates. In the event that any Company Certificates shall have been lost, stolen or destroyed, the Paying
Agent shall issue and pay in respect of such lost, stolen or destroyed Company Certificates, upon
the making of an affidavit of that fact by the holder thereof, the Pro Rata Share of the Merger
Consideration payable with respect to such Company Certificates; provided, however,
that Parent may, in its reasonable discretion and as a condition precedent to the payment thereof,
require the owner of such lost, stolen or destroyed Company Certificates to agree to indemnify
Parent, the Surviving Corporation and the Paying Agent against any claim that may be made against
Parent, the Surviving Corporation or the Paying Agent with respect to the Company Certificates
alleged to have been lost, stolen or destroyed.

          2.5 Dissenter’s Rights.

               (a) Notwithstanding anything in this Agreement to the contrary, Company Common Stock
outstanding immediately prior to the Effective Time and held by a stockholder who has not voted in
favor of the Merger or consented thereto in writing and who has delivered a written demand for
appraisal of such shares in accordance with Section 262 of the DGCL, if such Section 262 provides
for appraisal rights for such Company Common Stock in the Merger (“Dissenting Shares”), shall not
be converted into the right to receive the Share Price, as provided in Section 2.1 hereof,
unless and until such holder fails to perfect or effectively withdraws or otherwise loses his right
to appraisal and payment under the DGCL. If, after the Effective Time, any such stockholder fails
to perfect or effectively withdraws or loses his right to appraisal, such Dissenting Shares shall
thereupon be treated as if they had been converted as of the Effective Time into the right to
receive the Share Price to which such holder is entitled, without interest or dividends thereon.

               (b) Company shall give Parent and the Shareholder Representative prompt notice of any demands
received by Company for appraisal of Company Common Stock. Prior to the Effective Time, Parent
shall have the right to participate in all negotiations and proceedings with respect to such
demands, and Company shall not, without the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demand for payment.

               (c) Company shall promptly but not later than ten (10) business days following the date of
this Agreement mail to each stockholder of the Company that had not voted or executed a written
consent approving this Agreement a notice (the “Dissenting Share Notice”) stating that this
Agreement has been approved by stockholders of the Company holding the requisite number of shares
of Company Common Stock and that appraisal rights are available for holders of Company Common Stock
in accordance with Section 262 of the DGCL. Such notice

13

 

shall also include a copy of such Section
262. Company shall provide a draft copy of the Dissenting Share Notice to Parent at least three
business days prior to such mailing and shall incorporate all comments reasonably proposed by
Parent to such Dissenting Share Notice. Following the Effective Time, Parent shall cause the
Surviving Corporation to deliver such other notices and to take such other actions as may be
required in accordance with Section 262 of the DGCL and to keep the Shareholder Representative
reasonably apprised thereof.

          2.6 Required Withholdings. Company and the Paying Agent shall be entitled to deduct and withhold
from the Merger Consideration such amounts as may be required to be deducted or withheld therefrom
under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated
thereunder (the “Code”) or under any applicable provision of state, local or foreign tax law or
under any other applicable legal requirement. To the extent such amounts are so deducted or
withheld and paid over to the appropriate governmental authority, such amounts shall be treated for
all purposes under this Agreement as having been delivered or otherwise paid to the person to whom
such amounts would otherwise have been delivered or otherwise paid pursuant to the Merger and this
Agreement.

          2.7 Escrow. At Closing, Parent shall deposit in cash in United States dollars an amount equal to
five percent (5%) of the Initial Merger Consideration determined after taking into account the
adjustment contemplated by Section 1.7(b) (the “Escrow Amount”) with an escrow agent
reasonably satisfactory to Company and Parent (the “Escrow Agent”) for the purposes of securing the
payment of (i) the indemnification obligations of the Company Equityholders pursuant to Section
5.12 and Article IX and (ii) the obligations of the Company Equityholders pursuant the
Section 1.8(a). The Escrow Amount shall be held by the Escrow Agent pursuant to the terms
of the escrow agreement substantially in the form of Exhibit B hereto (the “Escrow
Agreement”). The Escrow Amount shall be held as a trust fund and shall not be subject to any
pledges, security interests, liens, charges, encumbrances, equities, claims and options of whatever
nature (“Lien”), attachment, trustee process or any other judicial process of any creditor of any
party, and shall be held and disbursed solely for the purposes and in accordance with the terms of
the Escrow Agreement. Upon the termination of the Escrow Agreement, any portion of the Escrow
Amount remaining shall be distributed in accordance with the terms and provisions of the Escrow
Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF COMPANY AND THE COMPANY

 EQUITYHOLDERS

Company and each Company Equityholder makes to Parent and Merger Sub the representations and
warranties contained in this Article III, in each case subject to the exceptions set forth
in the disclosure statement dated as of the date hereof (the “Company Disclosure Statement”). The
Company Disclosure Statement shall be arranged in schedules corresponding to the numbered and
lettered Sections of this Article III and items included in the Company Disclosure
Statement with respect to one section of this Agreement shall be deemed to be disclosed for any
other section of this Agreement to the extent that the relevance of the disclosure in such other
section is reasonably apparent.

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          3.1 Organization, Etc.

               (a) Each of Company and the Company Subsidiaries (as defined below) is a corporation, limited
partnership or limited liability company duly organized, validly existing and in good standing
(with respect to jurisdictions that recognize such concept) under the laws of the jurisdiction of
its organization, and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Each of Company and the Company
Subsidiaries is duly qualified to do business, and is in good standing (with respect to
jurisdictions that recognize such concept), in each jurisdiction where the character of its owned
or leased properties or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified or in good standing has not had, or could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse Effect. “Company
Subsidiaries” means each entity in which Company has an equity investment, whether or not such
investment is directly or indirectly owned, whether or not such entity is wholly owned, majority
owned or less than majority owned and whether or not such entity is a “subsidiary” of Company under
GAAP. Notwithstanding the foregoing, the term Company Subsidiary does not include Doctor’s Surgery
Center of Kingman, LLC; Four States Surgery Center, LLC; and Eastgate Building Center, LLC.
Schedule 3.1(a) of the Company Disclosure Statement lists each entity in which the Company
has an equity interest, directly or indirectly, the jurisdiction of its organization, and
specifically identifies each Company Subsidiary whose financial results are, in accordance with
GAAP, reflected in the consolidated financial statements of Company (“Consolidated Company
Subsidiaries”).

     For the purposes of this Agreement, “Company Material Adverse Effect” means any change, effect
or circumstance that either individually or in the aggregate with all other changes, effects or
circumstances (i) is, has been or is reasonably expected to be materially adverse to the business,
financial condition, results of operations, or assets and liabilities, taken as a whole, of Company
and the Company Subsidiaries, or (ii) would reasonably be expected to prevent Company from
consummating the Merger or any of the transactions contemplated by the Agreement or to perform any
of its obligations under the Agreement before the Effective Time. Notwithstanding the foregoing,
with respect to item (i) above, none of the following shall be deemed (either alone or in
combination) to constitute, and none of the following shall be taken into account in determining
whether there has been or will be, a Company Material Adverse Effect: (A) any adverse change,
event or effect arising from or relating to general business or economic conditions which does not
disproportionately affect Company and the Company Subsidiaries, taken as a whole, as compared to
other industry participants impacted thereby; (B) any adverse change, event or effect relating to
or affecting the healthcare industry generally, which does not disproportionately affect Company
and the Company Subsidiaries, taken as a whole, as compared to other industry participants impacted
thereby; and (C) any adverse change, event or effect arising from or relating to the announcement
or pendency of the Merger.

               (b) Neither Company nor any of the Company Subsidiaries is in material violation of any
provision of its certificate or articles of incorporation or bylaws or, in the case of any Company
Subsidiary that is not a corporation, any equivalent organizational document. Schedule
3.1(b) of the Company Disclosure Statement sets forth
(i) the full name of each entity in which Company has an equity interest, directly or indirectly, the ownership
interest of Company in such entity and (ii) each jurisdiction in which Company and each of the
Company

15

 

Subsidiaries is qualified to do business. Company has made available to Parent accurate
and complete copies of the certificate or articles of incorporation and bylaws and, in the case of
any Company Subsidiary that is not a corporation, any other equivalent organizational documents, as
currently in effect, of Company and each of the Company Subsidiaries.

          3.2 Authorization of Transactions. Company has full corporate power and authority to execute and
deliver this Agreement and, to the extent a party thereto, each of the Escrow Agreement, the Paying
Agent Agreement, the Support Agreement, each Joinder Agreement and each of the other agreements,
certificates and instruments being or to be executed and delivered in connection with this
Agreement and the Closing (collectively, the “Ancillary Agreements”), and to consummate the Merger
and the other transactions contemplated hereby and thereby and to perform its obligations hereunder
and thereunder. The execution and delivery of this Agreement and each of the Ancillary Agreements,
and the consummation of the Merger and the other transactions contemplated hereby and thereby, have
been duly and validly authorized by the vote of the Board and will be submitted to the stockholders
of Company for approval, at a duly called meeting of the stockholders of Company or, in lieu of a
meeting, by an action by written consent of the stockholders of Company, owning at least a majority
of the shares of Company Common Stock and no other corporate proceedings on the part of Company, or
actions on the part of any Company Equityholder, are or will be necessary to authorize this
Agreement and each of the Ancillary Agreements or to consummate the Merger and the other
transactions contemplated hereby and thereby. The Agreement has been duly and validly executed and
delivered by Company and, assuming due authorization, execution and delivery by Parent and Merger
Sub, constitutes a valid and binding agreement of Company, enforceable against Company in
accordance with its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors’ rights generally or by general equitable principles.

          3.3 No Violations, Etc.

               (a) No filing with or notification to, and no permit, authorization, consent or approval of,
any court, administrative agency, commission, or other governmental or regulatory body, authority
or instrumentality (“Government Entity”) is necessary on the part of Company or any Company
Subsidiary for the consummation by Company of the Merger and the other transactions contemplated
hereby except (i) for the filing of the Certificate of Merger as required by DGCL, (ii) compliance
with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and (iii)
as set forth on Schedule 3.3 of the Company Disclosure Statement.

               (b) Except as set forth in Schedule 3.3 of the Company Disclosure Statement, neither
the execution and delivery of the Agreement or any of the Ancillary Agreements, nor the
consummation of the Merger or the other transactions contemplated hereby
or thereby, nor compliance by Company with all of the provisions hereof and thereof, will (i)
conflict with or result in any breach of any provision of the certificate or articles of
incorporation or bylaws of Company or any Company Subsidiary (or, in the case of any Company
Subsidiary that is not a corporation, the equivalent organizational documents of such Company
Subsidiary), (ii) violate any material order, writ, injunction, decree, law, statute, rule or
regulation applicable to Company or any Company Subsidiary, or by which any of their properties or
assets may be

16

 

bound, or (iii) result in a material violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default under, or result in any material change in,
or give rise to any right of payment, termination, cancellation, acceleration, redemption or
repurchase under, any of the terms, conditions or provisions of any material Company Contract (as
defined in Section 3.12). Schedule 3.3 of the Company Disclosure Statement lists
all consents, notices, waivers and approvals required to be obtained in connection with the
consummation of the transactions contemplated hereby under (i) any Company Contracts, or (ii)
except for those whose failure to obtain will not have a Company Material Adverse Effect, any of
Company’s or any Company Subsidiaries’ other notes, bonds, mortgages, indentures, deeds of trust,
licenses or leases, contracts, agreements or other instruments or obligations.

          3.4 Capitalization.

               (a) The authorized capital stock of Company consists of 2,000,000 shares of Company Common
Stock. As of the date hereof, all of the outstanding shares of Company Common Stock are held of
record and beneficially owned by the persons and in the respective amounts set forth in
Schedule 3.4(a) of the Company Disclosure Statement and there are no shares of Company
Common Stock held in treasury. All outstanding shares of Company Common Stock are duly authorized
and have been validly issued, are fully paid and nonassessable and none of the outstanding shares
of Company Common Stock were issued in violation of the Securities Act of 1933, as amended, or laws
of any state or jurisdiction.

               (b) Except for the Company Options identified on Schedule 3.4(b) of the Company
Disclosure Statement, and the Company Warrants identified on Schedule 3.4(b) of the Company
Disclosure Statement, there are no warrants, options, convertible securities, calls, rights, stock
appreciation rights, preemptive rights, rights of first refusal, or agreements or commitments of
any nature obligating Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other equity interests of Company, or obligating Company to
grant, issue, extend, accelerate the vesting of, or enter into, any such warrant, option,
convertible security, call, right, stock appreciation right, preemptive right, right of first
refusal, agreement or commitment.

               (c) Schedule 3.4(b) of the Company Disclosure Statement sets forth the following
information with respect to each Company Option and each Company Warrant: the holder thereof, the
aggregate number of shares issuable thereunder, the grant date, the expiration date, the exercise
price and the vesting schedule including a description of any acceleration provisions. Each of the
Company Options is either currently exercisable or will become exercisable at or prior to the
Effective Time.

               (d) Except for the Stockholders’ Agreement among Company, New Mountain and certain of the
Company’s Equityholders (the “Company Stockholders Agreement”) and the Support Agreement, to the
knowledge of Company, there are no stockholder agreements, voting trusts, proxies or other
agreements or understandings with respect to the voting of the Company Common Stock.

          3.5 Compliance with Laws; Permits; Certification by Medicare and Medicaid; Licenses;
Certificates of Need.

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               (a) Except as provided for on Schedule 3.5(a) of the Company Disclosure Statement,
neither Company nor any Company Subsidiary is in violation in any material respect of any law that
is material to the Company or any Company Subsidiary, including all federal and state healthcare
laws. Notwithstanding the foregoing, the Company makes no representation with respect to the
matters covered in Sections 3.5 (b) though (h) except to the extent set forth in such
sections.

               (b) Company and the Company Subsidiaries have all material permits, licenses and franchises
from Governmental Entities (“Permits”) that are required to conduct their businesses as now being
conducted and as proposed to be conducted, except for those which are the subject of the
disclosures in Sections 3.5(d), (e) and (f) below. Such Permits are not subject to any
conditions or requirements that are not generally imposed on the holders thereof, and all such
Permits are valid and in full force and effect; and no proceeding is pending or, to the knowledge
of Company, threatened, to revoke, suspend, cancel, terminate or otherwise adversely modify any
such Permit. Company and the Company’s Subsidiaries are in compliance in all material respects
with the terms of the Permits.

               (c) Company and the Company’s Subsidiaries have adopted a voluntary compliance program to
promote compliance with laws and regulations, a copy of which has been delivered to Parent. To the
knowledge of Company, no individual employed by or contracting independently with the Company or
any Company Subsidiary is excluded from participation in the Medicare or Medicaid programs or is
listed on the excluded individuals list published by the United States Department of Health and
Human Services Office of the Inspector General.

               (d) All surgery centers owned or operated as continuing operations by Company or a Company
Subsidiary (each a “Company Facility”) are certified for participation or enrollment in the
Medicare and Medicaid programs, have a current and valid provider contract with the Medicare or
Medicaid programs and are in substantial compliance with the conditions of participation of such
programs and have received all approvals or qualifications necessary for reimbursement. Neither
Company, nor to Company’s knowledge, any Company Subsidiary has received a notice from the
regulatory authorities which enforce the statutory or regulatory provisions in respect to either
the Medicare or Medicaid program of any pending or threatened investigations.

               (e) Each Company Facility is licensed by the proper State Department of Health (or similar
agency) to conduct its business in substantially the manner conducted by such Company Facility.
Schedule 3.5(e) of the Company Disclosure Statement contains a
true and correct listing of all such licenses. The Company Facilities are presently in substantial
compliance with all the terms, conditions and provisions of such licenses. Company has heretofore
made available to Parent correct and complete copies of all such licenses. The facilities,
equipment, staffing and operations of the Company Facilities satisfy the applicable state licensing
requirements in all material respects. Each Company Facility is certified by the Accreditation
Association for Ambulatory Health Care or the Joint Commission on Accreditation of Healthcare
Organizations.

18

 

               (f) Any Certificates of Need required for the construction or operation of Company or any
Company Subsidiary’s business locations were duly obtained and such Certificates of Need, if any,
will remain in full force and effect immediately after the consummation of the transactions
provided for herein; provided that required regulatory filings are timely submitted.

               (g) Company has provided all material notices to, and received all material approvals from,
the appropriate state and federal governmental agencies or entities when it acquired its interest,
whether held as of the date hereof or previously divested, in the Company Subsidiaries.

               (h) Neither the U.S. Department of Health and Human Services nor any state agency has
conducted or given Company or any Company Subsidiary any notice that it intends to conduct any
audit or other review of any Company Subsidiary’s participation in the Medicare or Medicaid
programs.

          3.6 Financial Statements. The audited consolidated balance sheet (the “Company Consolidated Balance
Sheet”), income statement and statement of cash flow (including, in each case, any related notes
thereto) of Company as of and for the year ended December 31, 2004 and the unaudited consolidated
balance sheet, income statement and statement of cash flow of Company as of and for the nine month
period ended September 30, 2005 (collectively, the “Company Financial Statements”), (x) were
prepared in accordance with generally accepted accounting principles in the United States of
America as in effect from time to time applied on a consistent basis throughout the periods
involved (“GAAP”) (except as may be indicated in the notes thereto or, in the case of unaudited
interim financial statements, except for the absence of footnote disclosures) and (y) fairly
present the consolidated financial position of Company as at the respective dates thereof and its
consolidated results of operations and cash flows for the periods indicated, consistent with the
books and records of Company and the Company Subsidiaries, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end adjustments which were
not, or are not expected to be, material in amount. Company has made available to Parent the
unaudited balance sheets, income statements and statements of cash flows of each Company Subsidiary
for the year ended December 31, 2004 and for the nine months ended September 30, 2005 (the “Company
Subsidiary Financial Statements”). Each of the Company Subsidiary Financial Statements (x) was
prepared in accordance with GAAP (except (i) as may be indicated in the notes to the Company
Financial Statements, (ii) for the absence of footnote disclosures, and (iii)
for any adjustments that are reflected in the books and records of Company that relate to financial
records of Company and would otherwise be allocated to the applicable Company Subsidiary) and (y)
fairly presents the financial position of the applicable Company Subsidiary as at the respective
date thereof and the results of operations and cash flows of the applicable Company Subsidiary for
the periods indicated, consistent with the books and records of such Company Subsidiary, except
that the unaudited interim financial statements were or are subject to normal and recurring
year-end adjustments which were not, or are not expected to be material in amount. The audited
consolidated balance sheet, income statement and statement of cash flows (including, in each case,
any related notes thereto) of Company as of and for the year ended December 31, 2005 to be
contained in the Audited Financial Statements, (x) will be prepared in accordance with GAAP (except
as may be indicated in the notes thereto) and (y) will fairly present the

19

 

consolidated financial
position of Company as at the date thereof and its consolidated results of operations and cash
flows for the period indicated, consistent with the books and records of Company and the Company
Subsidiaries.

          3.7 Absence of Undisclosed Liabilities. Neither Company, nor any of the Company Subsidiaries has
any liabilities (absolute, accrued, contingent or otherwise) other than (i) liabilities included in
the unaudited consolidated balance sheet of the Company as of September 30, 2005 and the related
notes thereto included in the Company Financial Statements, (ii) liabilities reflected in the
balance sheets of the Company Subsidiaries other than the Consolidated Company Subsidiaries (the
“Unconsolidated Company Subsidiaries”) included in the Company Subsidiary Financial Statements,
(iii) liabilities of a nature not required to be disclosed on a balance sheet or in the notes to
financial statements prepared in accordance with GAAP, (iv) normal or recurring liabilities
incurred since September 30, 2005 (the “Reference Date”) in the ordinary course of business
consistent with past practice none of which, individually or in the aggregate, would be reasonably
likely to have a Company Material Adverse Effect (and not relating to any violation of law or
breach of contract) and (iv) liabilities under this Agreement.

          3.8 Absence of Changes or Events. Since the Reference Date, no state of facts, change, event or
effect that has had or could reasonably be expected to have Company Material Adverse Effect has
occurred and, in addition, except as has occurred after the date hereof as contemplated by this
Agreement, Company has not, and no Company Subsidiary has, directly or indirectly:

               (a) other than as set forth on Schedule 3.8 of the Company Disclosure Statement
purchased, otherwise acquired, or agreed to purchase or otherwise acquire, any shares of capital
stock or other ownership interests of Company or any Company Subsidiary, or declared, set aside or
paid any dividend or otherwise made a distribution (whether in cash, stock or property or any
combination thereof) in respect of the capital stock or other equity interests of Company or a
Company Subsidiary (other than dividends or other distributions payable by a Company Subsidiary to
its owners in accordance with its organizational documents);

               (b) other than as set forth on Schedule 3.8 of the Company Disclosure Statement
authorized for issuance, issued, sold, delivered, granted or issued any capital stock or other
equity securities (other than upon exercise of the Company Options and Company Warrants), options,
warrants, calls, subscriptions or other rights for, or issued or otherwise agreed or committed to
issue, sell or deliver any shares of any class of capital stock or other ownership interest of
Company or any Company Subsidiary or any securities convertible into or exchangeable or exercisable
for shares of any class of capital stock or ownership interests of Company or any Company
Subsidiary;

               (c) (i) created or incurred any indebtedness for borrowed money exceeding $250,000, (ii)
assumed, guaranteed, endorsed or otherwise as an accommodation become responsible for the
obligations of any other individual, firm or corporation, made any loans or advances to any other
individual, firm or corporation exceeding $250,000, (iii) entered into any oral or written material
agreement or any material commitment or transaction or

20

 

incurred any liabilities material to Company
and the Company Subsidiaries taken as a whole, or involving in excess of $250,000;

               (d) instituted any material change in accounting methods, principles or practices other than
as required by GAAP;

               (e) revalued any of its assets (other than accounts receivable) in excess of $250,000 in the
aggregate;

               (f) suffered any damage, destruction or loss, whether covered by insurance or not, except for
such as would not, individually and in the aggregate exceed $250,000;

               (g) (i) increased in any manner the compensation of any of its directors or employees, other
than in the ordinary course of business and consistent with past practice, (ii) granted any
severance or termination pay to any person other than in the ordinary course of business and
consistent with past practice; (iii) other than in the ordinary course of business consistent with
past practice entered into any oral or written employment, consulting, indemnification or severance
agreement with any person; (iv) other than as required by law or consistent with past practice,
adopted, become obligated under, or amended any employee benefit plan, program or arrangement; or
(v) repriced any Company Options;

               (h) sold, transferred, leased, licensed, pledged, mortgaged, encumbered, or otherwise disposed
of, or agreed to sell, transfer, lease, license, pledge, mortgage, encumber, or otherwise dispose
of, any material properties or assets (including intangible, real, personal or mixed);

               (i) amended its or any Company Subsidiary’s articles of incorporation, bylaws, or any other
organizational document, or effected or been a party to any merger, consolidation, share exchange,
business combination, recapitalization, reclassification of shares, stock split, reverse stock
split or similar transaction;

               (j) made any capital expenditures in any calendar month which exceeded $250,000;

               (k) paid, discharged or satisfied any material claims, liabilities or obligations (absolute,
accrued, contingent or otherwise), other than the payment, discharge or satisfaction of liabilities
(including accounts payable) in the ordinary course of business and consistent with past practice,
or collected, or accelerated the collection of, any amounts owed (including accounts receivable)
other than their collection in the ordinary course of business;

               (l) waived, released, assigned, settled or compromised any material claim or litigation, or
commenced a lawsuit other than for the routine collection of bills;

               (m) incurred any Lien or encumbrance on any material properties owned, leased or operated by
Company or any Company Subsidiary other than Permitted Liens (as hereinafter defined);

21

 

               (n) closed any operating facility, operation or business previously operated by Company or any
Company Subsidiary; or

               (o) agreed or proposed to do any of the things described in the preceding clauses (a) through
(n) other than as expressly contemplated or provided for in this Agreement.

          3.9 Ownership of Subsidiaries. Company is directly or indirectly the record and beneficial owner
of, and has good and valid title to, the outstanding shares of capital stock or other equity
interests of each of the Company Subsidiaries as set forth on Schedule 3.1(b) of the
Company Disclosure Statement. All of such shares or ownership interests have been duly authorized
and are validly issued, fully paid, nonassessable and free of preemptive rights with respect
thereto and are owned by Company free and clear of any claim, Lien or encumbrance of any kind with
respect thereto. There are no proxies or voting agreements with respect to such shares or
ownership interests, and there are no existing options, warrants, calls, subscriptions, or other
rights or other agreements or commitments obligating Company or any of the Company Subsidiaries to
issue, transfer or sell any shares of capital stock (or other equity interests) of any Company
Subsidiary or any other securities convertible into, exercisable for, or evidencing the right to
subscribe for any such shares (or other equity interests). Schedule 3.9 lists all
purchases and sales of units (or other equity interests) effected since January 1, 2004 to the date
hereof relating to any Company Subsidiary which owns or is expected to own an ambulatory surgery
center.

          3.10 Litigation.

               (a) Except as set forth on Schedule 3.10 of the Company Disclosure Statement, there is
no private or governmental claim, action, suit (whether in law or in equity) or proceeding of any
nature (“Action”) pending and, to the knowledge of Company, there is not any private or
governmental investigation threatened against Company, any of the Company Subsidiaries, or
involving any of their assets or capital stock, before any court, governmental or regulatory
authority or body, arbitration tribunal or other Governmental Entity. There is no Action pending
or, to the knowledge of Company, threatened which in any manner challenges, seeks to, or is reasonably likely to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement.

               (b) There is no outstanding judgment, order, writ, injunction or decree of any court,
governmental or regulatory authority, body or agency or arbitration tribunal or other Governmental
Entity to which Company, any Company Subsidiary, or any of their assets is or was a party or by
which Company, any Company Subsidiary, or any of their assets is bound.

          3.11 Insurance. Schedule 3.11 of the Company Disclosure Statement lists all insurance
policies (including property, casualty, liability and workers’ compensation insurance policies)
covering the business, properties or assets of Company and the Company Subsidiaries, the premiums
and coverages of such policies, and all claims in excess of $100,000 made against any such policies
since January 1, 2004. All such policies are in effect, and true and complete copies of all such
policies have been made available to Parent. Company has not received notice of the cancellation
or threat of cancellation of any of such policy. To the knowledge of

22

 

Company, all physicians with
staff privileges conducting business or other activities at any facility operated by Company or any
Company Subsidiary meets the minimum eligibility requirements set forth in Company’s (or the
applicable Company Subsidiaries’), professional liability insurance policy. Neither Company nor
any of the Company Subsidiaries, nor, to the knowledge of Company, any other party to a policy
appearing on Schedule 3.11 of the Company Disclosure Statement is in breach or default
(including with respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy.

          3.12 Contracts and Commitments.

               (a) Except as contemplated by this Agreement or entered into subsequent to the date hereof in
accordance with Section 5.1, neither Company, nor any of the Company Subsidiaries, is a
party to or bound by any oral or written contract, obligation or commitment of any type in any of
the following categories:

                    (i) agreements or arrangements that contain severance pay, understandings with
respect to tax arrangements, understandings with respect to expatriate benefits, or
post-employment liabilities or obligations, sales-based bonus or other bonus
arrangements, profit sharing, loss sharing, stock option, stock purchase, stock
appreciation, deferred compensation or other plan or arrangement for the benefit of
its current or former directors, officers, employees or independent contractors;

                    (ii) agreements or plans under which benefits will be increased or accelerated
by the occurrence of any of the transactions contemplated by this Agreement, or
under which the value of the benefits will be calculated on the basis of any of the
transactions contemplated by this Agreement or any Ancillary Agreement;

                    (iii) agreements, contracts or commitments currently in force relating to the
disposition or acquisition of assets, equity interests or a business other than in
the ordinary course of business, or relating to an ownership interest in any
corporation, partnership, joint venture or other business enterprise;

                    (iv) agreements, contracts or commitments for the purchase of materials,
supplies or equipment, under which the aggregate payments for the past 12 months
exceeded $500,000 (or $100,000 with respect to any operating facility, operation or
business operated by any Company Subsidiary), which are with sole or single source
suppliers;

                    (v) guarantees or other agreements, contracts or commitments under which
Company or any of the Company Subsidiaries is absolutely or contingently liable for
(A) the performance of any other person, firm or corporation, (B) the whole or any
part of the indebtedness or liabilities of any other person, firm or corporation, or
(C) indemnification obligations to employees,

23

 

officers and directors or any such
agreement as described in items (A) through (C) where such obligation has been
guaranteed by any affiliate of Company;

                    (vi) any management agreements, any partnership agreements and operating
agreements of Company and Company Subsidiaries;

                    (vii) any acquisition agreements of Company and any Company Subsidiaries
relating to the direct or indirect purchase of more than a ten percent interest in
an entity that operates an ambulatory surgery center (and all material ancillary
agreements relating thereto);

                    (viii) agreements providing for (A) indemnification obligations owed by Company
or any Company Subsidiary, (B) purchase price adjustment or (C) other post-closing,
post-execution or other contingent liabilities in connection with any (X)
acquisition, disposition or issuance of assets or securities, (Y) merger,
consolidation or other business combination or (Z) series or group of related
transactions or events of the type specified in clauses (X) and (Y);

                    (ix) any loan agreements by Company and Company Subsidiaries with any employees
of Company or any employees of Company Subsidiaries;

                    (x) powers of attorney authorizing the incurrence of a material obligation on
the part of Company or the Company Subsidiaries;

                    (xi) agreements, contracts or commitments which limit or restrict (A) where
Company or any of the Company Subsidiaries may conduct business, (B) the type or
lines of business (current or future) in which they may engage, or (C) any
acquisition of assets or stock (tangible or intangible) by Company or any of the
Company Subsidiaries;

                    (xii) agreements, contracts or commitments with respect to a change of control
of Company or any of the Company Subsidiaries (other than Company Employee Benefit
Plans);

                    (xiii) agreements, contracts or commitments for the borrowing or lending of
money, or the availability of credit, or notes, bonds or similar instruments (except
credit extended by Company or any of the Company Subsidiaries to customers in the
ordinary course of business and consistent with past practice);

                    (xiv) any hedging, option, derivative or other similar transaction and any
foreign exchange position or contract for the exchange of currency;

                    (xv) any capital lease entered into by Company or any Company Subsidiary;

24

 

                    (xvi) agreements with a physician who owns an equity interest in, or refers
patients to, one of the Company Subsidiaries that operates an ambulatory surgery
center;

                    (xvii) any management or similar agreement with any health care facility
whether or not owned or operated by Company or any Company Subsidiary; and

                    (xviii) any consulting contract with any person or entity involving annual
payments in excess of $50,000.

     Each contract, agreement or commitment of the type described in this Section 3.12
together with Real Property Leases (as defined below) is referred to herein as a “Company
Contract.”

               (b) Neither Company nor any of the Company Subsidiaries, nor to the knowledge of Company any
other party to a Company Contract, has materially breached, violated or defaulted under, or
received notice that it has breached, violated or defaulted under (nor does there exist any
condition under which, with the passage of time or the giving of notice or both, could reasonably
be expected to cause such a breach, violation or default under), any Company Contract.

               (c) Each Company Contract is a valid, binding and enforceable obligation of Company or a
Company Subsidiary, as applicable, and to the knowledge of Company, of the other party or parties
thereto, in accordance with its terms, and in full force and effect, except where the failure to be
valid, binding, enforceable and in full force and effect has not had, or could not reasonably be
expected to have, a Company Material Adverse Effect and to the extent enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or other laws affecting the enforcement of creditors’
rights governing or by general principles of equity.

               (d) Company has made available a true, accurate and complete copy of each Company Contract to
Parent and a summary of any oral contract listed on Schedule 3.12 to the Company Disclosure
Statement.

          3.13 Labor Matters; Employment and Labor Contracts.

               (a) None of Company or any of the Company Subsidiaries is a party to any union contract or
other collective bargaining agreement, nor to the knowledge of Company or any of the Company
Subsidiaries are there any activities or proceedings of any labor union to organize any of its
employees. Each of Company and the Company Subsidiaries is in compliance in all material respects
with all applicable (i) laws, regulations and agreements respecting employment and employment
practices and (ii) occupational health and safety requirements.

               (b) There is no labor strike, slowdown or stoppage pending (or any labor strike or stoppage
threatened) against Company or any of the Company Subsidiaries. No petition for certification has
been filed and is pending before the National Labor Relations Board

25

 

with respect to any employees
of Company or any of the Company Subsidiaries who are not currently organized. Except as set forth
on Schedule 3.13(b) of the Company Disclosure Statement, there are no material
controversies pending or, to the knowledge of Company or any of the Company Subsidiaries,
threatened, between Company or any of the Company Subsidiaries and any of their respective
employees or former employees. The employment of each of the employees of Company and each Company
Subsidiary is “at will” (except for non-U.S. employees) and Company and each Company Subsidiary
does not have any obligation to provide any particular form or period of notice (except as
otherwise required by applicable law) prior to terminating the employment of any of their
respective employees.

          3.14 Intellectual Property Rights. Except as set forth on Schedule 3.14 of the Company
Disclosure Statement:

               (a) Schedule 3.14(a) of the Company Disclosure Statement sets forth a list of all U.S.
and foreign (i) issued patents and patent applications, (ii) trademark registrations and
applications (including Internet domain name registrations), and (iii) copyright registrations and
applications, which are owned by the Company or the Company Subsidiaries;

               (b) to the knowledge of Company, Company and the Company Subsidiaries own or have the right to
use all material intellectual property (including all trade names), used to conduct their
respective businesses (such intellectual property and the rights thereto are collectively referred
to herein as the “Company IP Rights”);

               (c) to the knowledge of Company, (i) the businesses of Company and the Company Subsidiaries,
do not infringe or otherwise violate any person’s intellectual property rights, and there is no
such claim pending or threatened against Company or any Company Subsidiary, and (ii) no person is
infringing or otherwise violating any of the Company IP Rights, and there is no such claim pending or threatened against any person by Company or the Company
Subsidiaries;

               (d) the execution, delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not (i) constitute a material breach of any instrument or
agreement governing any Company IP Rights, (ii) cause the material modification of any term of any
material agreements whereby the Company or one of the Company Subsidiaries (x) grants or obtains a
license to use intellectual property, or (y) pays material royalties with respect to intellectual
property (other than agreements granting licenses with respect to available commercial software
having an acquisition price of less than $50,000), including the material modification of the
effective rate of any royalties or other payments provided for in any such agreement, (iii) cause
the forfeiture or termination of any Company IP Rights, (iv) give rise to a right of forfeiture or
termination of any Company IP Rights or (v) impair in any material respect the right of Company or
the Surviving Corporation to use, sell or license any Company IP Rights or portion thereof;

               (e) to the knowledge of Company, none of the employees of Company or any of the Company
Subsidiaries is obligated under any contract, covenant or other agreement or commitment of any
nature, or subject to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such employee’s best efforts to

26

 

promote the interests of Company
and the Company Subsidiaries or that would conflict with the business of Company as presently
conducted or proposed to be conducted. Neither Company nor any of the Company Subsidiaries has
entered into any agreement to indemnify any other person, including but not limited to any employee
or consultant of Company or any of the Company Subsidiaries, against any charge of infringement,
misappropriation or misuse of any intellectual property, other than indemnification provisions
contained in purchase orders, customer agreements, reseller agreements or distribution agreements,
arising in the ordinary course of business;

               (f) the Company and the Company Subsidiaries take commercially reasonable measures to protect
the confidentiality of its trade secrets; and

               (g) to the knowledge of Company, Company and the Company Subsidiaries comply in all material
respects with its privacy policies and terms of use, as well as applicable laws concerning use,
dissemination and transfer of data and information used by the applicable Company or Company
Subsidiary in the conduct of the business of the applicable Company or Company Subsidiary.

          3.15 Taxes.

               (a) For the purposes of this Agreement, “Tax” or “Taxes” refers to (i) any and all federal,
state, local and foreign taxes, assessments and other governmental charges, duties, impositions and
liabilities relating to taxes, including taxes based upon or measured by gross receipts, income
(gross or net), profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property taxes, together with
all interest, penalties and additions imposed with respect to such amounts, (ii) any obligations
imposed by law to pay amounts described in clause (a)(i) with respect to the obligations of another
person, including under Treasury Regulations Section 1.1502-6 and analogous provisions of foreign,
state and local law, and (iii) any obligations or liabilities arising from any tax sharing or tax
allocation agreement, arrangement or understanding or as a result of any liability of a predecessor
entity or by virtue of being a transferee of any other person, by contract or otherwise. For
purposes of this Agreement, “Tax Return” or “Tax Returns” refers to all federal, state and local
and foreign returns, schedules, attachments, estimates, information statements and reports relating
to Taxes, and any amendments thereto.

               (b) Company and each of the Company Subsidiaries have filed all material Tax Returns required
to be filed by them, and all such Tax Returns are true, correct, and complete except with respect
to immaterial items. All Taxes owed by Company and each of the Company Subsidiaries (whether or
not shown on any Tax Return) have been timely paid in full. Company’s interim financial statements
reflect an adequate reserve (excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) for the payment of all Taxes of Company and the
Consolidated Company Subsidiaries, accrued through the date of such financial statements. No
deficiencies for any Taxes have been proposed, asserted or assessed against Company or any of the
Company Subsidiaries, other than deficiencies that are reflected by reserves maintained in
accordance with GAAP and are being contested in good faith and by appropriate procedures. Company
has made available to Parent true, correct and complete copies of all Tax Returns, examination
reports, and statements of

27

 

deficiencies filed, assessed against or agreed to by Company or any
Company Subsidiary since September 15, 2002.

               (c) None of Company and the Company Subsidiaries, (i) has received any notice that it is being
audited by any taxing authority or is the subject of a dispute, audit, proceeding or claim
concerning any Tax liability (and, to Company’s knowledge, no such audit, dispute, investigation,
proceeding, or claim is pending); (ii) has waived of any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or deficiency; (iii) has
granted to any person a power of attorney with respect to Taxes, which power of attorney will be in
effect as of or following the Closing; (iv) has received an inquiry regarding the filing of Tax
Returns or paying Taxes (and, to Company’s knowledge, there is no reasonable basis for any such
inquiry to be made); or (v) has availed itself of any Tax amnesty or similar relief in any taxing
jurisdiction. Schedule 3.15 of the Company Disclosure Statement lists all closing
agreements, private letter rulings, technical advice memoranda or similar agreements or rulings related to Taxes that have been entered into or issued by any
Governmental Entity with or in respect of Company or any Company Subsidiary.

               (d) None of Company and the Company Subsidiaries are, or will be after the Effective Time,
bound by any tax sharing agreement (including any indemnity arrangements) or similar arrangements.

               (e) There is no Lien for Taxes on any of the assets of Company or any of the Company
Subsidiaries, except for inchoate Liens for Taxes not yet due and payable.

               (f) No payment or other benefit, and no acceleration of the vesting of any options, payments
or other benefits, will be, as a direct or indirect result of the transactions contemplated by this
Agreement, an “excess parachute payment” to a “disqualified individual” as those terms are defined
in Section 280G of the Code and the regulations thereunder (and any comparable provisions of state,
local or foreign tax law).

               (g) Company and each of the Company Subsidiaries have properly withheld on all amounts paid to
any consultant, employee, creditor, stockholder or other third party, whether located inside or
outside the United States and have paid over all such withheld amounts to the appropriate taxing
authorities and complied with all reporting and recordkeeping requirements.

               (h) Except as disclosed in Schedule 3.12(a) of the Company Disclosure Statement,
neither Company nor any Company Subsidiary (i) is a partner for Tax purposes with respect to any
joint venture, partnership, or other arrangement or contract which is treated as a partnership for
Tax purposes, (ii) owns a single member limited liability company or other entity which is treated
as a disregarded entity, (iii) is a stockholder of a “controlled foreign corporation” as defined in
Section 957 of the Code or a “passive foreign investment company” as defined in Section 1297 of the
Code (or any similar provision of state, local or foreign Tax law), or (iv) is a “personal holding
company” as defined in Section 542 of the Code (or any similar provision of state, local or foreign
Tax law).

28

 

               (i) Neither Company nor any Company Subsidiary is or has been a member of an affiliated group
of corporations filing a consolidated federal income tax return (or a group of corporations filing
a consolidated, combined or unitary income tax return under comparable provisions of state, local
or foreign tax law) other than a group the common parent of which is or was Company. Neither
Company nor any Company Subsidiary is a party to any contractual obligation relating to Tax sharing
or Tax allocation. Neither Company nor any Company Subsidiary has liability for Taxes of any
person under Treasury Regulations section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or otherwise.

               (j) Neither Company nor any Company Subsidiary is required to make any adjustments under
Section 481(a) or any similar provision of foreign, state, or local law by reason of any change in
accounting methods, and will not be required to make such an adjustment as a result of the
transactions contemplated by this Agreement, and there is no
application pending with any governmental authority requesting permission for any changes in
Company’s or any Company Subsidiary’s accounting methods for Tax purposes.

               (k) Neither Company nor any Company Subsidiary will be required to include any amount in
taxable income or exclude any item of deduction or loss from taxable income for any taxable period
(or portion thereof) ending after the Closing Date as a result of (a) any “closing agreement” as
described in Section 7121 (or any corresponding or similar provision of state, local, or foreign
income tax law) executed on or prior to the Closing Date, (b) any deferred intercompany gain or
excess loss account described in Treas. Reg. section 1.1502 (or any corresponding or similar
provision or administrative rule of federal, state, local, or foreign law), (c) any installment
sale or open transaction disposition made on or prior to the Closing Date or (d) any prepaid amount
received on or prior to the Closing Date;

               (l) Neither Company nor any Company Subsidiary is a United States real property holding
corporation within the meaning of Section 897(c) (2), or a United States real property holding
corporation during the period specified in Section 897(c)(1)(A)(ii);

               (m) Company and each Company Subsidiary has disclosed on its Federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of income tax within
the meaning of Section 6662;

               (n) Neither Company nor any Company Subsidiary has participated in a Section 355 transaction
as either the “distributing corporation” or the “controlled corporation” within the meaning of Code
Section 355(a)(1);

               (o) Within the last three years, neither Company nor any Company Subsidiary has had any
outstanding debt on which interest is not deductible under Sections 163(i) (AHYDO), 163(j)
(earnings stripping) or 279 (corporate acquisition indebtedness).

          3.16 Employee Benefit Plans; ERISA.

               (a) Schedule 3.16(a) of the Company Disclosure Statement lists all (i) “employee
pension benefit plans” as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”) (“Pension Plans”); (ii) “welfare benefit plans” as

29

 

defined in Section
3(1) of ERISA (“Welfare Plans”); (iii) stock bonus, stock option, restricted stock, phantom stock,
stock appreciation right, stock purchase or other equity compensation plan; bonus, profit-sharing
plan or other incentive plan; deferred compensation arrangement; severance plan; holiday or
vacation plan; retirement or supplemental retirement plan; sabbatical program; medical,
heath-related, life or other insurance plan; relocation arrangement; cafeteria (Code Section 125)
or dependent care (Code Section 129) benefit; or any other fringe benefit program; and (iv) other
employee benefit or compensation plan, agreement (including individual agreement), program, policy
or arrangement covering employees, directors and consultants of Company, and any Company Subsidiary
that either is maintained or contributed to by Company or any of the Company Subsidiaries or any of
their Company ERISA Affiliates or to which Company or any of the Company Subsidiaries or any of
their Company ERISA Affiliates is obligated to make payments
or otherwise may have any liability (collectively, the “Company Employee Benefit Plans”) with
respect to employees or other service-providers or former employees or other service-providers of
Company and the Company Subsidiaries. For purposes of this Agreement, “Company ERISA Affiliate”
shall mean any person (as defined in Section 3(9) of ERISA) that is or has been a member of any
group of persons described in Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the
Code, including Company or any of the Company Subsidiaries.

          (b) Company and each of the Company Subsidiaries, and each of the Company Employee Benefit
Plans is materially in compliance with, has performed all material obligations required under, and
is not subject to material liability under, the applicable provisions of ERISA, the Code and other
applicable laws, and with the terms of each Company Employee Benefit Plan. Each Company Employee
Benefit Plan can be amended, terminated or otherwise discontinued at or after the Effective Time in
accordance with its terms, without liability to Parent or the Surviving Corporation, and no Company
Employee Benefit Plan will be subject to any surrender fees or service fees upon termination other
than the normal and reasonable administrative fees associated with the termination of benefit
plans.

          (c) All contributions to, and payments from, the Company Employee Benefit Plans which are
required to have been made in accordance with the Company Employee Benefit Plans have been timely
made, and timely deposits of employee contributions have been made, except where the failure to
make such contributions or payments on a timely basis has not had, or could not reasonably be
expected to give rise to any material liability.

          (d) Each of the Company’s Pension Plans and Company Subsidiaries’ Pension Plans intended to
qualify under Section 401 of the Code, if individually designed, has received a favorable
determination letter from the IRS on which the plan is entitled to rely, or, if such plan is a
word-for-word adopter of a volume submitter or a master and prototype plan, may rely on the
advisory or opinion letter issued by the IRS with respect to the lead or specimen plan. To the
knowledge of the Company no event has occurred and no condition exists with respect to the form or
operation of such Pension Plans which would cause the loss of such qualification or the imposition
of any liability, penalty or tax under ERISA or the Code.

          (e) There are no (i) to the knowledge of Company, investigations pending by any governmental
entity involving the Company Employee Benefit Plans, nor (ii) pending or to the knowledge of
Company, threatened claims (other than routine claims for

30

 

benefits in the ordinary course of
business), suits or proceedings against any Company Employee Benefit Plans, against the assets of
any of the trusts under any Company Employee Benefit Plans or, against any fiduciary of any Company
Employee Benefit Plans or against Company, any Company Subsidiary or any of its or their Company
ERISA Affiliates with respect to the operation of such plan or asserting any rights or claims to
benefits under any Company Employee Benefit Plans or against the assets of any trust under such
plan, except for those which would not, individually or in the aggregate, give rise to any material
liability. To the knowledge of Company, there are no facts which would reasonably be expected to
give rise to any material liability under this Section 3.16(e).

               (f) None of Company, any of the Company Subsidiaries nor any employee of the foregoing, nor
any trustee, administrator, other fiduciary or any other “party in interest” or “disqualified
person” with respect to the Pension Plans or Welfare Plans, has engaged in a “prohibited
transaction” (as such term is defined in Section 4975 of the Code or Section 406 of ERISA) other
than such transactions that would not reasonably be expected to result in material liability to
Company or any Company Subsidiary.

               (g) Neither Company, any of the Company Subsidiaries nor any of their Company ERISA Affiliates
has maintained, contributed to, or been required to contribute to, or has any material liability
(including any contingent liability under Section 4204 of ERISA) with respect to any Pension Plan
subject to Title IV of ERISA, any multiemployer plan, within the meaning of Section 3(37) of ERISA,
or any multiple employer plan, within the meaning of Code Section 413(c).

               (h) With respect to each of the Company Employee Benefit Plans, true, correct and complete
copies of the following documents have been made available to Parent: (i) the plan document and
any related trust agreement, including amendments thereto, (ii) any current summary plan
descriptions and other material communications to participants relating to the Company Employee
Benefit Plans, (iii) the three most recent Forms 5500, if applicable, and (iv) the most recent
United States Internal Revenue Service (“IRS”) determination or opinion letter, if applicable.
Company or any Company Subsidiary has timely filed and delivered or made available to Parent the
three most recent annual reports (Form 5500) and all schedules attached thereto for each Company
Employee Benefit Plan that is subject to ERISA and Code reporting requirements, and all material
communications with participants, the IRS, the U.S. Department of Labor, or any other governmental
authority, administrators, trustees, beneficiaries and alternate payees relating to any Company
Employee Benefit Plan.

               (i) None of the Company Employee Benefit Plans which is a Welfare Plan provides for continuing
benefits or coverage for any participant or any beneficiary of a participant following termination
of employment, except as may be required under COBRA “the Uniformed Services Employment and
Reemployment Rights Act,” or except at the expense of the participant or the participant’s
beneficiary. Company and each of the Company Subsidiaries which maintain a “group health plan”
within the meaning of Section 5000(b)(1) of the Code have complied in all material respects with
the notice and continuation requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B
of Title I of ERISA and the regulations thereunder except where the failure to comply would not,
individually or in the aggregate, reasonably be expected to give rise to a material liability.

31

 

               (j) No liability under any Pension Benefit Plan or Welfare Plan has been funded or
self-insured nor has any such obligation been satisfied with the purchase of a contract from an
insurance company as to which Company or any of the Company Subsidiaries has received notice that
such insurance company is in rehabilitation or a comparable proceeding.

               (k) Neither the consummation of the transactions contemplated by this Agreement, nor any
termination of employment or any other service relationship, will result in an increase in the
amount of compensation or benefits or accelerate the vesting or timing of payment of any benefits
or compensation payable to or in respect of any current or former
employee, director or consultant of Company or any of the Company Subsidiaries. There has
been no amendment to, written interpretation or announcement (whether or not written) by Company,
any Company Subsidiary or other Company ERISA Affiliate relating to, or change in participation or
coverage under, any Company Employee Benefit Plan which would materially increase the expense of
maintaining such Company Employee Benefit Plan above the level of expense incurred with respect to
such Company Employee Benefit Plan for the most recent fiscal year included in the Company
Financial Statements.

               (l) Company and each Company Subsidiary is in compliance in all material respects with the
Worker Adjustment Retraining Notification Act of 1988, as amended (“WARN Act”), or any similar
state or local law. In the past two years, (i) neither Company nor any Company Subsidiary has
effectuated a “plant closing” (as defined in the WARN Act) affecting any site of employment or one
or more facilities or operating units within any site of employment or facility of its business;
(ii) there has not occurred a “mass layoff” (as defined in the WARN Act) affecting any site of
employment or facility of Company and Company Subsidiaries; and (iii) neither Company nor any
Company Subsidiary has been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state, local or foreign law
or regulation. Neither Company nor any Company Subsidiary has caused any of its employees to
suffer an “employment loss” (as defined in the WARN Act) during the 90-day period prior to the
effective date of this Agreement.

          3.17 Environmental Matters.

               (a) Except as otherwise disclosed in Schedule 3.17 of the Company Disclosure Statement, no
underground storage tanks and no amount of any substance that has been designated by any Government
Entity or by applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the United States Resource Conservation and Recovery Act of 1976, as
amended, and the regulations promulgated pursuant to said laws which term shall not include office
and janitorial supplies (insofar as they are stored or used in the ordinary course of business) (a
“Hazardous Material”) are present in quantity or manner that could rise to liability, as a result
of the actions of Company or any of the Company Subsidiaries or, to the knowledge of Company, as a
result of any actions of any third party or otherwise, in, on or under any property, including the
land and the improvements, ground water and surface water thereof, that Company or any of the
Company Subsidiaries own, operate, occupy or lease or have owned, operated, occupied or leased at
any time.

32

 

               (b) Neither Company nor any of the Company Subsidiaries has transported, stored, used,
manufactured, disposed of, released or exposed its employees or others to Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor has Company or any of the Company
Subsidiaries disposed of, transported, sold, used, released,
exposed its employees or others to or manufactured any product containing a Hazardous Material
(collectively “Hazardous Materials Activities”) in violation in any material respect of any rule,
regulation, treaty or statute promulgated by any Government Entity in effect prior to or as of the
date hereof to prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.

               (c) Company and the Company Subsidiaries currently hold all material environmental approvals,
permits, licenses, clearances and consents (the “Company Environmental Permits”) necessary for the
conduct of Company’s and the Company Subsidiaries’ Hazardous Material Activities and other
businesses of Company and the Company Subsidiaries as such activities and businesses are currently
being conducted. To the knowledge of Company, there are no facts or circumstances indicating that
any Company Environmental Permit will or may be revoked, suspended, canceled or not renewed. All
appropriate action in connection with the renewal or extension of any Company Environmental Permit
has been taken.

               (d) No material action, proceeding, revocation proceeding, amendment procedure, writ,
injunction or claim is pending, or to the knowledge of Company, threatened concerning any Company
Environmental Permit, Hazardous Material or any Hazardous Materials Activity of Company or any of
the Company Subsidiaries. Company does not have knowledge of any fact or circumstance which could
involve Company or any of the Company Subsidiaries in any such environmental litigation. Company
and the Company Subsidiaries have not received notice, nor to the knowledge of Company is there a
threatened notice, that Company or the Company Subsidiaries are responsible, or potentially
responsible, for the investigation, remediation, clean-up, or similar action at property presently
or formerly used by Company or any of the Company Subsidiaries for recycling, disposal, or handling
of waste. Company has made available to Parent true and correct copies of all environmental
reports and notifications, in its or, to the knowledge of the Company, any Company Subsidiary’s
possession.

          3.18 Property; Equipment.

               (a) Company and the Company Subsidiaries have good, valid title to all of their respective
properties, interests in properties and assets, real and personal, reflected in the balance sheets
included in the Company Financial Statements and Company Subsidiary Financial Statements or
acquired after the dates thereof, or otherwise used by the Company and the Company Subsidiaries in
their respective operations, and have valid leasehold interests in all leased properties and
assets, in each case free and clear of all mortgages, Liens, pledges, charges or encumbrances of
any kind or character, except (i) Liens for current taxes not yet due and payable, (ii) such
imperfections of title, Liens and easements as do not and will not materially detract from or
interfere with the use or value of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties or (iii) Liens securing debt
reflected on such balance sheets; or (iv) mechanics, materialmen’s or landlord’s Liens or other
similar Liens incurred in the ordinary course of business (collectively, “Permitted Liens”). The
Company and the Company Subsidiaries own or have adequate rights to use all of

33

 

the assets,
properties and rights of every type and description,
whether real or personal, tangible or intangible, used or necessary to the conduct of the
business of Company and the Company Subsidiaries.

               (b) The property constituting equipment used by Company or any Company Subsidiary performs the
functions required of it in connection with the ordinary course of such user’s operations, and is
adequate in all material respects to fully equip and operate, on an ongoing basis as of the date
hereof and following the Closing Date, the business of each such entity at its present level of
operations, ordinary wear and tear excepted.

               (c) Schedule 3.18(c) of the Company Disclosure Statement contains a complete and
correct list of all the real property and interests in real property owned by Company and the
Company Subsidiaries (“Owned Real Property”) setting forth information sufficient to specifically
identify such Owned Real Property and the legal owner thereof. Company and the Company
Subsidiaries have good and valid fee simple title to the Owned Real Property, free and clear of any
Liens other than Permitted Liens. There is not pending, or to Company’s knowledge, threatened, any
eminent domain proceeding affecting any of the Owned Real Property. Section 3.18(c) of the
Company Disclosure Statement contains a complete and correct list of all interests in real property
pursuant to real property leases, subleases, licenses and use or occupancy agreements (“Real
Property Leases”) pursuant to which Company or any of the Company Subsidiaries is the lessee, sub
lessee, licensee, user, operator or occupant of real property, or interests therein material to the
operation of the Company or any of the Company Subsidiaries (“Leased Real Property”). Each of
Company and the Company Subsidiaries has good and valid title to the leasehold estate or other
interest created under its respective Real Property Leases free and clear of any Liens other than
Permitted Liens.

          3.19
Billing Practices; Accounts Receivable. Except as described in Schedule 3.19
of the Company Disclosure Statement, Company’s and each Company Subsidiary’s billing practices are
in compliance in all material respects with all federal and state laws (including all workers’
compensation and insurance laws and regulations), and, where applicable, all contracts with
insurance companies, health maintenance organizations and other third party payors. All accounts
receivable of the Company and the Company Subsidiaries are valid claims and, to Company’s
knowledge, are not subject to any defenses, offsets, claims or counterclaims, except for
contractual allowances, discounts and refunds in accordance with the ordinary course of Company’s
business conducted on and prior to the Closing Date. Although Company has no knowledge of any
reason why such accounts receivable will not be collected on a timely basis, Company is not
guaranteeing the collectibility of such accounts receivable.

          3.20 Related Party Transactions. Except for transactions and agreements disclosed on Schedule
3.20 of the Company Disclosure Statement or entered into in the ordinary course of business and
under commercially reasonable terms, neither Company nor any of the Company Subsidiaries has
entered into (A) any agreement, commitment or transaction with or for the benefit of any of its
executive officers (or an affiliate of such executive officer or family member thereof), that
requires payments in excess
of $60,000 or (B) any agreement, commitment or transaction with or for the benefit of New Mountain
or any of its affiliates.

34

 

          3.21 Books and Records. The books and records (including books of account and minute books) of
Company and each of the Company Subsidiaries are, in all material respects, complete and accurate,
are maintained in accordance with all applicable laws and reflect all material transactions that
Company and the Company Subsidiaries have engaged and contain copies of all resolutions passed by
the shareholders and directors (or equivalent) of each of such entities since the date of their
incorporation. True, correct and complete copies of all such books and records have been made
available to Parent and its Representatives.

          3.22 Medical Staff Matters. Except as described in Schedule 3.22 of the Company Disclosure
Statement, there are no pending, or to Company’s knowledge, threatened disputes with applicants,
medical staff members, or allied health professionals, which (1) assert or are based upon a
violation of the applicable Company Facility’s medical staff by-laws, including any “fair hearing”
procedures conducted thereunder or (2) are in the process of being adjudicated or resolved pursuant
to the applicable Company Facility’s medical staff by-laws. Except as set forth in Schedule
3.22 of the Company Disclosure Statement, all appeal periods in respect of any medical staff
member or applicant against whom an adverse action has been taken have expired. Company has made
available to Parent a written description of all adverse actions taken against medical staff
members or applicants since January 1, 2005, a list of which is set forth on Schedule 3.22
of the Company Disclosure Statement.

          3.23 Finders or Brokers. Except as set forth on Schedule 3.23 of Company Disclosure
Statement, neither Company nor any of the Company Subsidiaries has employed any investment banker,
broker, finder or intermediary in connection with the transactions contemplated hereby who might be
entitled to a fee or any commission the receipt of which is conditioned upon consummation of the
Merger. A true, correct and complete copy of the agreements identified in Schedule 3.23 of
the Company Disclosure Statement has been provided to Parent.

          3.24 No Knowledge of Breach. As of the date of this Agreement, Company is unaware of any
circumstances or conditions that as of the date hereof have caused or would be reasonably expected
to cause, any breach of, or inaccuracy in, any representation or warranty made by Parent or Merger
Sub in this Agreement or any Ancillary Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

OF PARENT AND MERGER SUB

     Parent and Merger Sub make to Company the representations and warranties contained in this
Article IV, in each case subject to the exceptions set forth in the disclosure statement
dated as of the date hereof (the “Parent Disclosure Statement”). The Parent Disclosure Statement
shall be arranged in schedules corresponding to the numbered and lettered Sections of this
Article IV, and items included in the Parent Disclosure Statement with respect to one
section of this Agreement shall be deemed to be disclosed for any other section of this Agreement
to the extent that the relevance of the disclosure in such other section is reasonably apparent.

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          4.1 Organization, Etc. Each of Parent and Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation 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. For the purposes of this Agreement, “Parent Material Adverse
Effect” means any change, effect or circumstance that, individually or when taken together with all
other such similar or related changes, effects or circumstances that have occurred prior to the
date of determination of the occurrence of the Parent Material Adverse Effect would reasonably be
expected to prevent Parent from consummating the Merger or any of the transactions contemplated by
the Agreement or to perform any of its obligations under the Agreement before the Effective Time.
Neither Parent nor Merger Sub is in violation of any provision of its certificate of incorporation,
bylaws or other charter documents.

          4.2 Authority Relative to This Agreement. Each of Parent and Merger Sub has full corporate power
and authority to execute and deliver this Agreement and each Ancillary Agreement to which it is a
party and to consummate the Merger and the other transactions contemplated hereby and thereby and
to perform its obligations hereunder and thereunder. The execution and delivery of the Agreement
and each of the Ancillary Documents, and the consummation of the Merger and the other transactions
contemplated hereby and thereby have been duly and validly authorized by a vote of the board of
directors of each of Parent and Merger Sub and approval by the sole shareholder of Merger Sub and
no other corporate proceedings on the part of either Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the Merger and the other transactions contemplated
hereby. The Agreement has been duly and validly executed and delivered by each of Parent and
Merger Sub and, assuming due authorization, execution and delivery by Company, constitutes a valid
and binding agreement of each of Parent and Merger Sub, enforceable against each of them in
accordance with its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors’ rights generally or by general equitable principles.

          4.3 No Violations, Etc. No filing with or notification to, and no permit, authorization, consent or approval of, any
Government Entity is necessary on the part of either Parent or Merger Sub for the consummation by
Parent or Merger Sub of the Merger or the other transactions contemplated hereby, except (i) for
the filing of the Certificate of Merger as required by DGCL, (ii) compliance with the HSR Act and
(iii) as set forth in Schedule 4.3 of the Parent Disclosure Statement. Neither the
execution and delivery of the Agreement, nor the consummation of the Merger or the other
transactions contemplated hereby, nor compliance by Parent and Merger Sub with all of the
provisions hereof and thereof will (i) conflict with or result in any breach of any provision of
the certificate of incorporation, bylaws or other charter documents of Parent or Merger Sub, or
(ii) violate any order, writ, injunction, decree, law, statute, rule or regulation applicable to
Parent or Merger Sub, or by which any of their properties or assets may be bound, or (iii) result
in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a
default under, or result in any material change in, or give rise to any right of termination,
cancellation, acceleration, redemption or repurchase under, any of the terms, conditions or
provisions of any contract that is material to Parent.

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          4.4 Sufficient Funds. Parent has received, executed and delivered a commitment letter, dated
December 13, 2005 (the “Commitment Letter”) from Sun Trust Bank (the “Lender”), pursuant to which
the Lender has committed, subject to the terms and conditions set forth therein, to provide up to
$50,000,000 out of a total of $125,000,000 in senior debt financing required to complete the
transactions contemplated hereby (such financing described in the Commitment Letter, including both
the portion thereof that the Lender has committed to provide and the uncommitted portion, the
"Financing”). A true and complete copy of the Commitment Letter as in effect on the date of this
Agreement has been furnished to Company. As of the date of this Agreement, the Commitment Letter
is valid and in full force and effect. Subject to its receipt of the Financing, on the Closing
Date, Parent will have sufficient funds available to pay the Merger Consideration.

          4.5 Board Approval. The board of directors of Parent has (i) approved and adopted the Agreement
and (ii) determined that this Agreement is fair to and in the best interests of the stockholders of
Parent. The board of directors of Merger Sub has approved and adopted this Agreement and
determined that this Agreement is fair to and in the best interests of its stockholders.

          4.6 Litigation. There is no Action pending or, to the knowledge of Parent, threatened which in any
manner challenges, seeks to, or is reasonably likely to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement.

          4.7 Finders or Brokers. Parent has not employed any investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who might be entitled to a fee
or any commission the receipt of which is conditioned upon consummation of the Merger.

          4.8 No Knowledge of Breach. As of the date of this Agreement, Parent is unaware of any
circumstances or conditions not otherwise communicated to Company in writing that as of the date
hereof have caused or would be reasonably expected to cause, any breach of, or inaccuracy in, any
representation or warranty made by Company in this Agreement or any Ancillary Agreement.

ARTICLE V

COVENANTS

          5.1 Conduct of Company Business During Interim Period. During the period from the date of this
Agreement to the earlier of the termination of this Agreement or the Effective Time, Company,
except as contemplated or required by this Agreement or as expressly consented to in writing by
Parent, will, and will cause each of the Consolidated Company Subsidiaries to, and will use
reasonable efforts to cause each of the Unconsolidated Company Subsidiaries to (i) conduct its
operations according to its ordinary and usual course of business and consistent with past
practices, (ii) use reasonable efforts to preserve intact its business, to keep available the
services of its officers and employees in each business function and to maintain satisfactory
relationships with suppliers, distributors, customers and others having business relationships with
it, and (iii) not take any action which would adversely affect its

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ability to consummate the Merger
or the other transactions contemplated hereby. Without limiting the generality of the foregoing,
and except as otherwise expressly provided in this Agreement and except as set forth on
Schedule 5.1 of the Company Disclosure Statement, prior to the earlier of the termination
of this Agreement or Effective Time Company will not, and will not permit any of the Consolidated
Company Subsidiaries to, and will use reasonable efforts to prevent any of the Unconsolidated
Company Subsidiaries to, without the prior written consent of Parent, directly or indirectly, do
any of the following:

               (a) except in the ordinary course of business, enter into, violate, extend, amend, terminate
or otherwise modify or waive any of the material terms of any Company Contracts.

               (b) waive any stock repurchase rights, accelerate, amend or change the period of
exercisability of options or restricted stock, or reprice options granted under any employee,
consultant or director stock plans or authorize cash payments in exchange for any options granted
under any of such plans, except for the acceleration of vesting of Company Options;

               (c) make or grant any right to receive severance or termination payments to any employee
except payments in amounts consistent with existing policies and past practices or pursuant to
written agreements or plans existing on the date hereof and disclosed in the Company Disclosure
Statement, or adopt any new severance plan or enter into any new severance agreement;

               (d) declare or pay any dividends on or make any other distributions (whether in cash, stock or
property) in respect of any capital stock (or other equity interests) or
split, combine or reclassify any capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for any capital stock (or other equity
interests) other than, in the case of the Company Subsidiaries only, in the ordinary course of
business, consistent with past practice;

               (e) repurchase or otherwise acquire, directly or indirectly, any shares of capital stock (or
other equity interests) except pursuant to rights of repurchase of any such shares under any
employee, consultant or director stock plan existing on the date hereof other than in the ordinary
course of business, consistent with past practice;

               (f) cause, permit or propose any amendments to the certificate of incorporation or bylaws of
Company;

               (g) sell, lease, license, encumber or otherwise dispose of any properties or assets which are
material, individually or in the aggregate, to the business of Company or any Company Subsidiary,
except in the ordinary course of business consistent with past practice;

               (h) incur any indebtedness for borrowed money (other than ordinary course trade payables or
pursuant to existing credit facilities in the ordinary course of business) or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to

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acquire debt securities
of Company, as the case may be, or guarantee any debt securities of others;

               (i) adopt or amend any employee benefit or employee stock purchase or employee option plan, or
enter into any employment contract, pay any special bonus or special remuneration to any director
or employee, or increase the salaries or wage rates of its officers or employees other than in the
ordinary course of business, consistent with past practice, or change in any material respect any
management policies or procedures;

               (j) pay, discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction of
claims, liabilities or obligations in the ordinary course of business;

               (k) split, combine or reclassify any shares of its capital stock;

               (l) except as permitted by Section 5.2 of this Agreement authorize, solicit, propose
or announce an intention to authorize, recommend or propose, or enter into any agreement in
principle or an agreement with any other person with respect to, any plan of liquidation or
dissolution, any acquisition of a material amount of assets or securities, any disposition of a
material amount of assets or securities, any material change in capitalization, or any partnership,
association or joint venture;

               (m) fail to renew any insurance policy naming it as a beneficiary or a loss payee, or take any
steps or fail to take any steps that would permit any insurance policy naming it as a beneficiary
or a loss payee to be canceled, terminated or materially altered, except in the ordinary course of
business and consistent with past practice and following written notice to Parent;

               (n) maintain its books and records in a manner other than in the ordinary course of business
and consistent with past practice;

               (o) enter into any hedging, option, derivative or other similar transaction or any foreign
exchange position or contract for the exchange of currency other than in the ordinary course of
business and consistent with past practice;

               (p) institute any change in its accounting methods, principles or practices other than as
required by GAAP, or revalue any assets, including writing down the value of inventory or writing
off notes or accounts receivables except as required by GAAP;

               (q) in respect of any Taxes, (i) except as required by applicable law make or change any
material election, change any accounting method, enter into any closing agreement, settle any
material claim or assessment, or consent to any extension or waiver of the limitation period
applicable to any material claim or assessment, or (ii) enter into any Tax sharing agreement
(including any indemnity arrangement) or similar arrangement;

               (r) issue any capital stock or other options, warrants or other rights to purchase or acquire
capital stock of Company or any Company Subsidiary, except for the issuance of Company Common Stock
upon exercise of stock options or warrants granted prior to

39

 

the date hereof and the issuance of
capital stock or other options, warrants or other rights to purchase or acquire equity interests by
Subsidiaries in the ordinary course and consistent with past practice; or

               (s) take or agree to take any action (i) which, if taken or omitted to be taken between the
Reference Date and the date of this Agreement would have been required to be disclosed on
Schedule 3.8 of the Company Disclosure Statement or (ii) which could reasonably be expected
to result in any condition contained in Section 7.2 of this Agreement not being satisfied
immediately prior to the Effective Time.

          5.2 No Solicitation.

               (a) From and after the date of this Agreement until the Effective Time or termination of this
Agreement pursuant to Article VIII, Company will not, nor will it authorize or permit any
of its officers, directors, affiliates, employees, investment bankers, attorneys, accountants or
other advisors or representatives (“Representatives”) to, directly or indirectly, (i) solicit,
initiate or induce the making, submission or announcement, directly or indirectly, of any proposal
that constitutes or is reasonably likely to lead to any Acquisition Proposal (as hereinafter
defined), (ii) participate in any discussions or negotiations regarding, or furnish to any person
any information or data with respect to, or take any other action to facilitate any inquiries or
the making of any proposal that constitutes or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) engage in discussions with any person with respect to any Acquisition
Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v) enter into any letter
of intent or similar document or any contract, agreement or commitment contemplating or otherwise
relating to any Acquisition Transaction (as hereinafter defined).

               (b) Notwithstanding anything to the contrary contained in Section 5.2(a), Company, the
Board (or any committee thereof) and their Representatives shall not be prohibited from (A)
contacting any person that has made an unsolicited Acquisition Proposal after the date hereof that
has not been withdrawn (a “Potential Acquiror”) for the sole purpose of clarifying such proposal
and any material contingencies and the capability of consummation; (B) from furnishing information
to, or entering into discussions or negotiations with any such Potential Acquiror; (C) withdrawing
(or amending or modifying in a manner adverse to Parent or Merger Sub) the approval or
recommendation by the Board or any committee thereof of this Agreement, the Merger or the
transactions contemplated by this Agreement; (D) recommending, adopting or approving any such
unsolicited Acquisition Proposal (any action described in this clause (C) or (D) being referred to
as an “Adverse Recommendation Change”); or (E) subject to Section 5.2(d) below, entering
into any definitive agreement with respect to any Acquisition Proposal (a “Alternative Definitive
Agreement”) if, and only if, (1) in each case referred to in clauses (A) through (E) above, Company
has otherwise complied with its obligations under this Section 5.2, New Mountain has
otherwise complied with its obligations under Section 3.2 of the Support Agreement and the
Board, after consultation with its outside counsel, has determined in good faith that the failure
to cause Company to take such action would be inconsistent with its fiduciary duties under
applicable law; (2) in the case of clause (B) above, (x) Company first enters into a
confidentiality agreement with a Potential Acquiror on terms no less favorable to Company than the
Confidentiality Agreement (as defined herein) (an “Acceptable Confidentiality Agreement”) and
provides a copy thereof to Parent and (y) the Board has

40

 

reasonably determined in good faith that
such Acquisition Proposal is reasonably likely to lead to a Superior Offer (as hereinafter
defined); (3) in the case of each of clause (D) or (E) above, the Board has reasonably determined
in good faith (after consultation with its legal and financial advisors) that such Acquisition
Proposal constitutes a Superior Offer; and (4) in the case of clause (E) above, the effectiveness
of such Alternative Definitive Agreement is conditioned upon the termination of this Agreement
pursuant to this Section 8.1(f) and Company complying with its obligations under
Section 8.3 of this Agreement.

               (c) In addition to the obligations of Company set forth in Section 5.2(a), Company
shall promptly (and in no event later than twenty-four (24) hours after receipt of any Acquisition
Proposal, any inquiry or indication of interest that Company reasonably believes could lead to an
Acquisition Proposal) advise Parent orally and in writing of any Acquisition Proposal or any
request for nonpublic information or inquiry which Company reasonably believes would lead to an
Acquisition Proposal or to any Acquisition Transaction, the material terms and conditions of such
Acquisition Proposal, request or inquiry, and the identity of the person or group making any such
Acquisition Proposal, request or inquiry. Company will keep Parent informed as promptly as
practicable in all material respects of the status and details (including material amendments or
proposed material amendments) of any such Acquisition Proposal, request or inquiry made after the
date hereof.

               (d) Notwithstanding anything contained in this Agreement to the contrary, immediately
following any determination of the Board to authorize Company to enter into any Alternative
Definitive Agreement, and in all cases not less than five (5) business days prior to Company’s
entering into such Alternative Definitive Agreement or terminating this
Agreement pursuant to Section 8.1(f), Company shall give Parent written notice of its
intent to take such action. Any such notice shall include the identity of the person or group
making the Alternative Proposal and the final terms and conditions thereof (including a copy of the
proposed Alternative Definitive Agreement and all related agreements, exhibits and schedules). For
a period of five (5) business days following the receipt of such notice, Company shall in good
faith afford Parent the opportunity to offer to revise the terms and conditions of this Agreement
and the Ancillary Agreements such that the Alternative Proposal no longer constitutes a Superior
Offer (any such offer made by Parent, a “Matching Proposal”). Company shall not be permitted to
enter into any such Alternative Definitive Agreement or terminate this Agreement pursuant to
Section 8.1(f) if a Matching Proposal is made during such five (5) business day period (it
being understood that any amendment or modification to the terms of an Alternative Proposal in
response to a Matching Proposal shall require the delivery of a new notice to Parent and a new five
(5) business day matching period). In the event that Company shall terminate this Agreement
pursuant to Section 8.1(f) and enter into a Definitive Alternative Agreement, Company shall
deliver a copy of such Definitive Alternative Agreement and all related agreements, exhibits and
schedules to Parent immediately after its execution by Company.

               (e) For purposes of this Agreement, “Acquisition Proposal” with respect to Company shall mean
any offer or proposal (other than the transactions contemplated by this Agreement) relating to any
Acquisition Transaction. For purposes of this Agreement, “Acquisition Transaction” shall mean any
transaction or series of related transactions involving: (A) any purchase from Company or
acquisition by any person or “group” (as defined under Section 13(d) of the Exchange Act and the
rules and regulations thereunder) of more than a 15% interest in the total outstanding voting
securities of Company or of any Company Subsidiary (other than an the sale of equity interests in
Company Subsidiaries effected in the ordinary course of business) or any tender offer or exchange
offer that if consummated would result in any person or “group” (as defined under Section 13(d) of
the Exchange Act and the rules and regulations thereunder) beneficially owning 15% or more of the
total outstanding voting securities of Company or of any Company Subsidiary or any merger,
consolidation, business combination or similar transaction involving Company; (B) any sale, lease
(other than in the ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition or disposition of more than 15%

41

 

of the consolidated
assets of Company; or (C) any liquidation or dissolution of Company. For purposes of this
Agreement, “Superior Offer” shall mean an Acquisition Proposal relating to all or substantially all
of the assets or at least 100% equity securities of Company which the board of directors of Company
determines in good faith, taking into account all legal, financial and regulatory aspects of the
Acquisition Proposal, the likelihood of obtaining financing and the identity of the Potential
Acquiror, is more favorable from a financial point of view to Company’s stockholders than the
transactions contemplated by this Agreement.

          5.3 Access to Information.

               (a) From the date of this Agreement until the Effective Time, Company will afford to Parent,
its prospective financing sources and its and their respective authorized Representatives
reasonable access during normal business hours and upon reasonable notice to all of its facilities,
personnel and operations and to all of its and the Company Subsidiaries’ books and records, will
permit Parent and its authorized Representatives to conduct inspections as they may reasonably
request and will instruct its officers and those of the Company Subsidiaries to furnish Parent with
such financial and operating data and other information with respect to its business and properties
as Parent may from time to time reasonably request, subject to the restrictions set forth in the
Confidentiality Agreement, dated as of October 4, 2005 between Parent and Company (the
“Confidentiality Agreement”). Parent agrees that it will treat any such information in accordance
with the Confidentiality Agreement, which shall remain in full force and effect in accordance with
its terms.

               (b) During the sixteen (16) day following the date of this Agreement, Company shall use its
reasonable efforts (i) to schedule meetings between Parent, its Representatives and such Company
Representatives as are reasonably requested by Parent, with the members of the board of directors
(or other similar governing board) of such Company Subsidiaries as Parent may request and with the
physicians who own equity interests in the Company Subsidiaries (“Physician Meetings”) and (ii) to
cause such Company Representatives, member of the boards of directors and physicians to attend such
Physician Meetings. Parent shall use its reasonable efforts to cause its Representatives to be
available for and to attend the Physician Meetings when scheduled. Parent and Company will
cooperate to arrange such Physician Meetings to occur at mutually convenient times and at locations
of the physicians’ choosing.

               (c) Prior to the Closing, Company shall and shall use its reasonable efforts to cause the
Company Subsidiaries and their respective officers and employees to provide, all cooperation
reasonably requested by Parent in connection with the arrangement of any bank

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financing to be
consummated contemporaneously with or at or after the Closing in respect of the transactions
contemplated by this Agreement, including participation in meetings and due diligence sessions.
Notwithstanding the foregoing, Parent acknowledges and agrees that (i) none of the Company, the
Company Subsidiaries or their respective officers or employees will give, or be deemed to have
given, any representation or warranty, or provided any other assurance, to any person, nor owe or
accept any duty or responsibility to any person, whether in contract or in tort or otherwise, nor
shall any of them be liable in respect of any Loss (as defined below) arising out of or in
connection with such bank financing, including, in connection with person’s reliance upon any
information delivered in connection with such bank financing and (ii) the only representations or
warranties made by Company in relation to Company and the Company Subsidiaries are those expressly
set forth in this Agreement and the Ancillary Agreements and solely on the terms and conditions
thereof and such representations and warranties are made exclusively to Parent and no one else.

          5.4 Reasonable Efforts.

               (a) Subject to the terms and conditions herein provided, Parent, Merger Sub and Company shall
use reasonable efforts to take, or cause to be taken, all actions and do, or cause to be done, all
things necessary, proper or appropriate under this Agreement, applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement, including (i) using
reasonable efforts to obtain all necessary governmental and private party consents, approvals or
waivers, (ii) using reasonable efforts to lift any legal bar to the Merger, and (iii) furnishing
all information required under the HSR Act. Parent shall cause Merger Sub to perform all of its
obligations under this Agreement. Notwithstanding anything to the contrary in this Agreement
(other than Section 5.14), neither Parent, the Surviving Corporation, nor Company nor any
of their Subsidiaries shall be required to (i) divest, hold separate or license (through a trust or
otherwise) any business(es), product line(s) or asset(s), (ii) take any action or accept any
limitation that would reasonably be expected to have a Parent Material Adverse Effect or a Company
Material Adverse Effect, or (iii) agree to any of the foregoing. Parent shall use its reasonable
efforts to make all filings required to be made under the HSR Act within ten (10) days following
the date of this Agreement.

               (b) Company agrees to provide, and will cause the Company Subsidiaries and its and their
respective officers and employees to provide all necessary cooperation reasonably requested by
Parent in connection with the Financing.

          5.5 Public Announcements. Before issuing any press release or otherwise making any public
statement with respect to the Merger or any of the other transactions contemplated hereby, Parent,
Merger Sub and Company agree to consult with each other as to its form and substance, and agree not
to issue any such press release or general communication to employees or make any public statement
prior to obtaining the consent of the other (which shall not be unreasonably withheld or delayed),
except to the extent that Parent, Merger Sub or Company, as the case may be, is advised by outside
counsel that such public statement may be required by applicable law (in which case the disclosing
party will provide the other parties with the opportunity to review in advance the disclosure) or
by the rules and regulations of or listing agreement with Nasdaq Stock Market, or as may otherwise
be required by the Nasdaq Stock Market or the SEC; provided, however, that the
provisions of this Section 5.5 will not prohibit

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any disclosure made in connection with the
enforcement of any right or remedy relating to this Agreement or the transactions contemplated
hereby.

          5.6 Notification of Certain Matters.

               (a) From the date hereof until the Effective Time, Company shall give prompt notice to Parent
and Merger Sub of (i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which would be likely to cause any representation or warranty of Company (or, to the knowledge
of Company, any Company Equityholder contained in this Agreement, the Support Agreement or any
Joinder Agreement) to be untrue or inaccurate in any material respect at or prior to the Effective
Time (together with amendments or supplements to the Company Disclosure Statement that are
necessary to correct such inaccuracy), (ii) any
material failure of Company or, to the knowledge of Company, any Company Equityholder, to
comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it
hereunder or thereunder, (iii) any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with the transactions
contemplated by this Agreement, or (iv) any facts or circumstances arise that could reasonably be
expected to result in a Company Material Adverse Effect.

               (b) From the date hereof until the Effective Time, Parent and Merger Sub shall give prompt
notice to Company of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty of Parent or Merger
Sub contained in this Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time (together with amendments or supplements to the Parent Disclosure Statement that
are necessary to correct such inaccuracy), (ii) any material failure of Parent or Merger Sub to
comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it
hereunder, (iii) any notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions contemplated by this
Agreement, or (iv) any facts or circumstances arise that could reasonably be expected to result in
a Parent Material Adverse Effect.

               (c) For purposes of determining the accuracy of the representations and warranties in this
Agreement and the Ancillary Agreement and for purposes of determining whether the conditions set
forth in Sections 7.2(a) and 7.1(a), respectively, have been fulfilled the Company
Disclosure Statement and the Parent Disclosure Statement shall be deemed to exclude any information
contained in any subsequent amendment or supplement thereto delivered pursuant to Section
5.6(a) or 5.6(b) above.

               (d) From and after the date of this Agreement until the Effective Time, (i) Parent agrees to
notify promptly Company if Parent becomes aware of any circumstances or conditions that have
caused, or would be reasonably expected to cause, any breach of, or inaccuracy in, any
representation or warranty made by Company in this Agreement or any Ancillary Agreement and (ii)
Company agrees to notify promptly Parent if Company becomes aware of any circumstances or
conditions that have caused, or would be reasonably expected to cause, any breach of, or inaccuracy
in, any representation or warranty made by Parent in this Agreement or any Ancillary Agreement.

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          5.7 Indemnification Rights.

               (a) The Certificate of Incorporation and Bylaws of the Surviving Corporation will contain
provisions with respect to exculpation and indemnification that are, to the extent permitted by the
DGCL, at least as favorable as those contained in the Articles of Incorporation and Bylaws of
Company immediately prior to the Effective Time, which provisions will not be amended, repealed or
otherwise modified for a period of six (6) years after the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who at the Effective Time were directors,
officers, employees or agents of Company unless such modification is required by law.

               (b) Prior to the Closing, Company shall purchase a “tail” directors’ and officers’ liability
insurance policy covering those persons who are currently covered by Company’s directors’ and
officers’ liability insurance policy (the “Current Policy”) (a copy of which has been made
available to Parent). Such “tail” policy shall provide for coverage on terms and conditions which
are no less advantageous, in the aggregate, to former officers and directors of Company than
contained in the Current Policy..

          5.8 Resignation of Directors and Officers. Prior to the Effective Time, Company shall use its
reasonable efforts to deliver to Parent the resignations of such directors and officers of Company
and Company Subsidiaries (which directors and officers are also employees of Company or Surgis
Management, Inc.) as Parent shall specify at least ten business days prior to the Closing,
effective at the Effective Time. For avoidance of doubt, no resignation tendered pursuant to this
Section 5.8 shall be considered a resignation or termination of employment by such person.

          5.9 Employee Benefit Matters.

               (a) For a period of one year immediately following the Closing Date, Parent, the Surviving
Corporation or another Parent Subsidiary (as defined below) shall provide each employee of Company
and each employee of Surgis Management, Inc. as of immediately prior to the Closing Date who is
employed by Parent, the Surviving Corporation or another subsidiary of Parent following the Closing
Date (the “Continuing Employees”) with employee benefits (including retirement programs and health
and welfare benefits but excluding incentive programs and equity compensation arrangements) that
are, in the aggregate, at least substantially equivalent to those provided to such Continuing
Employees as of the date hereof; provided, that the foregoing shall not prohibit
modifications to any employee benefit plans or arrangements in the ordinary course of business or
to the extent required by applicable law. “Parent Subsidiaries” means each entity in which Parent
has an equity investment, whether or not such investment is directly or indirectly owned, whether
or not such entity is wholly owned, majority owned or less than majority owned and whether or not
such entity is a “subsidiary” of Parent under GAAP (including, following the Closing, Company and
the Company Subsidiaries).

               (b) Subject to Section 5.9(a), Parent agrees to cause all Continuing Employees to be
eligible to participate in Parent’s 2001 Equity-Based Compensation Plan, Parent’s Employee Stock
Purchase Plan and Parent’s health and life insurance plans, in each case, consistent with the
eligibility criteria applied by Parent to other employees of Parent and the

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Parent Subsidiaries.
The Continuing Employees shall receive full credit for prior years of service with Company and the
Company Subsidiaries on parity with Parent employees with respect to eligibility to participate in
all Parent employee benefit plans, programs and policies made available to employees of Parent
generally, in each case, to the extent permitted by law and the terms of such plans.

               (c) From and after the Closing Date, the Surviving Corporation and its Subsidiaries will honor
in accordance with their terms all existing severance, employment or other similar agreements
between Company or any of the Company Subsidiaries and any current or former officer, director,
employee or consultant of Company or any of the Company Subsidiaries that have been disclosed on
the Company Disclosure Statement.

               (d) Notwithstanding the preceding, nothing in this Section 5.9 or this Agreement shall
confer upon any Continuing Employee any right or claim to continue in the employ of the Parent, the
Surviving Corporation, or any Parent Subsidiary or other affiliate of Parent or shall interfere
with or restrict in any way the right of Parent, the Surviving Corporation, or any Parent
Subsidiary or other affiliate of Parent, which rights are hereby expressly reserved, to remove,
terminate or discharge any Continuing Employee at any time for any reason or no reason.

               (e) Nothing contained in this Section 5.9 shall create any third party beneficiary
rights in any employee or former employee (including any dependent thereof) of Company, any of the
Company Subsidiaries or the Surviving Corporation of any nature or kind whatsoever.
Notwithstanding anything to the contrary contained herein, compensation provided to Continuing
Employees shall be determined by Parent in its sole discretion.

          5.10 Board Recommendation. Subject to its fiduciary duties under applicable Law, the Board shall
recommend that the stockholders of Company adopt this Agreement and approve the Merger and the
transactions contemplated herein.

          5.11 Shareholder Vote. Notwithstanding any Adverse Recommendation Change, Company shall, as soon
as practicable after the date hereof (and in any event within ten (10) calendar days of the date
hereof), either (i) take all action necessary in accordance with applicable Law and its Certificate
of Incorporation and Bylaws to duly call a meeting of the stockholders of Company for the purpose
of having all of the stockholders of Company approve this Agreement or (ii) take all action
necessary to obtain the written consent of all Company Equityholders in accordance with applicable
Law and the Certificate of Incorporation and Bylaws of Company for the purpose of having all of the
stockholders of Company approve this Agreement.

          5.12 Taxes.

               (a) The Company Equityholders, Company, the Shareholders Representatives and Parent will
cooperate fully, as and to the extent reasonably requested by the other parties, in connection with
any Tax matters relating to Company (including by the provision of reasonably relevant records or
information). The party requesting such cooperation will pay the reasonable out-of-pocket expenses
of the other parties.

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               (b) All Tax sharing agreements or similar agreements and all powers of attorney with respect
to or involving Company shall be terminated prior to the Closing.

               (c) The Company Equityholders and Parent shall bear equally all transfer Taxes incurred in
connection with the transactions contemplated by this Agreement. Parent, or the Company
Equityholders as the case may be, shall execute and deliver to the other at the Closing any
certificates or other documents as may reasonably be requested to perfect any exemption from any
such transfer Tax or otherwise comply with applicable reporting requirements with respect to such
transfer Taxes.

               (d) The Company Equityholders shall pay (i) all Taxes of Company for all Taxable periods
ending on or before the Closing Date and the portion through the end of the Closing Date for any
Taxable period that includes (but does not end on) the Closing Date (“Pre-Closing Tax Period”),
(ii) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which
Company is or was a member on or prior to the Closing Date, including pursuant to Treas. Reg. §
1.1502-6 or any analogous or similar state, local, or foreign tax law or regulation and (iii) any
and all Taxes of any person imposed on Company for any period as a transferee or successor in
respect of a transaction occurring on or before the Closing Date, by law, contract, or otherwise;
provided, however, that (A) the Company Equityholders shall be liable for Taxes
pursuant to clauses (i), (ii) and (iii) above only to the extent that such Taxes exceed the amount,
if any, reserved for such Taxes in computing Closing Working Capital and (B) the Company
Equityholders shall not be held liable for any Taxes attributable to actions not in the ordinary
course of business and not contemplated by this Agreement taken by Parent or Company after the
Closing.

               (e) In the case of any Taxable period that includes (but does not end on) the Closing Date (a
“Straddle Period”), the amount of any Taxes of Company based upon or measured by net income or gain
which relate to the Pre-Closing Tax Period will be determined based on an interim closing of the
books as of the close of business on the Closing Date and for such purpose, the Taxable period of
any partnership or other pass-through entity in which Company holds a beneficial interest will be
deemed to terminate at such time. The amount of Taxes of Company other than transfer Taxes and
Taxes that are based upon or measured by net income or gain for a Straddle Period which relate to
the Pre-Closing Tax Period will be deemed to be the amount of such Tax for the entire Taxable
period multiplied by a fraction, the numerator of which is the number of days in the portion of the
Taxable period ending on the Closing Date and the denominator of which is the number of days in
such Straddle Period.

               (f) The Shareholders Representatives shall prepare and duly and timely file (i) all Tax
Returns of Company that are required to be filed on or before the Closing Date, (ii) all Tax
Returns of Company that are required to be filed after the Closing Date for any taxable period
ending on or before the Closing Date, and (iii) all Tax Returns required to be filed with respect
to Transfer Taxes (collectively, “Shareholder Returns”). All Shareholder Returns shall be prepared
on a basis consistent with the most recent Tax Returns of Company except to the extent that either
the Shareholder Representative determines that there is no reasonable basis for a position taken on
any such recent Tax Return or Parent consents to the Company’s taking a different position, such
consent not to be unreasonably
withheld, conditioned, or delayed. Not later than thirty (30) days prior to the due date for
filing of a Shareholder Return, the

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Shareholders Representatives shall provide Parent with a copy
of such Shareholder Return. The Shareholders Representatives shall make such changes to the
Shareholder Return as Parent may reasonably request, and shall not file such Shareholder Return
without Parent’s consent, which shall not be unreasonably withheld, conditioned, or delayed.
Parent shall prepare and file all Tax Returns other than Shareholder Returns; provided,
however, that not later than thirty (30) days prior to the due date for filing of a Straddle
Period Tax Return, and not later than thirty (30) days prior to filing any amended Tax Return
related to the Pre-Closing Tax Period, Parent shall provide the Shareholders Representatives with a
copy of such Tax Return, shall make such changes to the portions of the Tax Return that relate to
the Pre-Closing Tax Period as the Shareholders Representatives may reasonably request, and shall
not file such Tax Return without the Shareholders Representatives’ consent, which shall not be
unreasonably withheld, conditioned, or delayed. In the case of a Straddle Period Tax Return, the
Company Equityholders shall pay to Parent the Company Equityholders’ share of any Taxes due with
respect to such Tax Return (determined pursuant to clauses (d) and (e) above) not later than seven
(7) days prior to the date for filing such Tax Return.

               (g) Company shall promptly remit to the Shareholders Representatives for distribution to the
Company Equityholders any refund of Taxes of Company with respect to a Pre-Closing Tax Period,
except to the extent that (i) such refund was reflected as an asset on the Closing Working Capital
Statement, (ii) such refund is attributable to actions not in the ordinary course of business taken
by Parent or Company on the Closing Date and after the Closing, or (iii) such refund is
attributable to the carryback of a Tax attribute (including a net operating loss, net capital loss,
foreign tax credit, or research and development credit) arising in a period other than a
Pre-Closing Tax Period (a “Post-Closing Tax Period”), and the carryback of such Tax attribute does
not reduce the amount of any refund that would otherwise be received by the Company Equityholders.
Any refund of Taxes with respect to a Straddle Period shall be apportioned between the Pre-Closing
and Post-Closing Tax Periods in accordance with clause (e) of this Section 5.12 (Straddle
Periods). All other refunds of Taxes of Company shall be for the account of Company.

               (h) If the Company Equityholders pay a Tax for a Pre-Closing Tax Period as a result of an
adjustment by a Governmental Entity of a Tax Return for such periods, and Company actually realizes
a Tax benefit (including a refund, credit, or reduction in Tax) in a period other than a
Pre-Closing Tax Period as a result of such adjustment, Company shall pay the amount of such Tax
benefit to the Shareholders Representatives for distribution to the Company Equityholders within
thirty (30) days after the filing of a Tax Return reflecting such Tax benefit (subject to the
Company Equityholders entering into an indemnity arrangement reasonably satisfactory to Parent and
providing for the return of such payment if such Tax benefit is ultimately disallowed).

               (i) Resolution of Tax Disputes.

                    (i) If Parent receives notice of a claim by a Governmental Entity in respect of
Taxes of Company for a Pre-Closing Period which may give rise to a liability of
Company Equityholders under this Agreement (a “Pre-Closing Tax Claim”), then
Parent will promptly give written notice to the Shareholders Representatives;
provided, however, that no delay on

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the part of Parent in notifying
the Shareholders Representatives will relieve the Company Equityholders from any
obligation under this Section 5.12, except to the extent such delay actually and
materially prejudices the Company Equityholders.

                    (ii) The Shareholders Representatives will be entitled to participate at their
own cost and expense in the defense of any Pre-Closing Tax Claim that is the subject
of a notice given by Parent pursuant to clause (i) above. In addition, the
Shareholders Representatives will have the right to defend Company against the
Pre-Closing Tax Claim with counsel of its choice reasonably satisfactory to Parent
so long as (A) the Shareholders Representatives give written notice to Parent within
fifteen days after Parent has given notice of the Pre-Closing Tax Claim that the
Company Equityholders will indemnify Parent from and against the entirety of any and
all Losses Parent may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Pre-Closing Tax Claim (including any Taxes arising in a
Post-Closing Tax Period as the result of the resolution of such Pre-Closing Tax
Claim), (B) the Shareholders Representatives provide Parent with evidence reasonably
acceptable to Parent that the Company Equityholders will have adequate financial
resources to defend against the Pre-Closing Tax Claim and fulfill its
indemnification obligations hereunder, and (C) the Shareholders Representatives
conduct the defense of the Pre-Closing Tax Claim actively and diligently;
provided, however, that the Company Equityholders will pay the fees
and expenses of separate co-counsel retained by Parent that are incurred prior to
the Shareholder Representative’s assumption of control of the defense of the
Pre-Closing Tax Claim.

                    (iii) The Shareholders Representatives will not consent to the entry of any
judgment or enter into any compromise or settlement with respect to a Pre-Closing
Tax Claim without the prior written consent of Parent, which shall not be
unreasonably conditioned, withheld, or delayed.

                    (iv) If the Shareholders Representatives do not deliver the notice contemplated
by clause (i)(i) of this Section 5.12, or the evidence contemplated by
clause (i)(ii), within fifteen (15) days after Parent has given notice of the
Pre-Closing Tax Claim, or otherwise at any time fails to conduct the defense of the
Pre-Closing Tax Claim actively and diligently, Parent may defend, and may consent to
the entry of any judgment or enter into any compromise or settlement with respect
to, the Pre-Closing Tax Claim in any manner it may deem appropriate (and Parent need
not consult with, or obtain any consent from, the Shareholders Representatives in
connection therewith). If such notice and evidence is given on a timely basis and
the Shareholders Representatives conduct the defense of the Pre-Closing Tax Claim
actively and diligently but any of the other conditions in clause (ii) of this
Section 5.12 is or becomes unsatisfied, Parent may defend, and may consent
to the entry of any judgment or enter into any compromise or settlement with respect
to, the Pre-Closing Tax Claim; provided, however, that the Company
Equityholders will not be bound by the entry of any such judgment not consented to,
or any such compromise or

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settlement effected, without its prior written consent (which consent will not be
unreasonably conditioned, withheld, or delayed). If that Parent conducts the
defense of the Pre-Closing Tax Claim pursuant to this Section 5.12(i)(iv),
the Company Equityholders shall (x) advance Parent promptly and periodically the
costs of defending against the Pre-Closing Tax Claim (including reasonable
attorneys’ fees and expenses) and (y) remain responsible for any and all other
Losses that Parent may incur or suffer resulting from, arising out of, relating to,
in the nature of or caused by the Pre-Closing Tax Claim.

          5.13 Audited Financial Statements. Promptly, after execution of this Agreement, Company shall use
its reasonable efforts to cause to be prepared an audited consolidated balance sheet, income
statement and statement of cash flow (including, in each case, any related notes thereto) of
Company as of and for the year ended December 31, 2005 (the “Audited Financial Statements”).
Company shall use reasonable efforts to cause the Audited Financial Statements to be prepared as
promptly as practicable. To the extent paid prior on or prior to the Closing Date, Parent shall
reimburse Company for all amounts in excess of $200,000 (the “Additional Audit Expenses”) paid in
respect of the preparation of the Audited Financial Statements.

          5.14 Certain Operating Agreements.

               (a) Company will use its reasonable efforts to have waived the restrictions in:

                    (i) Section 5.11.2 of the limited partnership agreement, and Section 1.6 of the
management agreement of West Houston Ambulatory Surgical Associates, L.P. and
Section 5.11.2 of the Second Amended and Restated Agreement of Limited Partnership
of Houston Ambulatory Surgical Associates, L.P. (West Houston Ambulatory Surgical
Associates, L.P. and Houston Ambulatory Surgical Associates, L.P. collectively,
“West Houston ”) to the extent the foregoing provisions would restrict the Parent’s
ownership of Memorial Hermann Northwest Surgery Center; and

                    (ii) Section 12.2.3 of the operating agreement of Northeast Ohio Surgery
Center, L.L.C. (“Northeast Ohio ”) to the extent the foregoing provisions would
restrict the Parent’s ownership of Zeeba Surgery Center.

               (b) In the event Company does not obtain the waiver from West Houston referred to in
Section 5.14(a)(i), the Merger Consideration will be reduced as set forth in Schedule
5.14(b) of the Company Disclosure Statement and Company will cause its ownership interest in
West Houston to be transferred prior to the Closing in accordance with the terms set forth in the
letter dated the date hereof between Company and Parent (the “Side Letter”).

               (c) In the event Company does not obtain the waiver from Northeast Ohio referred to in
Section 5.14(a)(ii), Parent and Company will cause Parent’s ownership

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interest in Zeeba
Surgery Center to be transferred prior to the Closing in accordance with the terms set forth in the
Side Letter.

          5.15 De Novo Ambulatory Surgery Center.

               (a) Company will use its reasonable efforts to, at or prior to Closing, execute and consummate
the funding of Company’s capital commitment under, the partnership, operating or other similar
agreements with respect to St. Luke’s Surgery Center, LLP (the “St. Luke’s Center”).

               (b) In the event Company does not, at or prior to the Closing, execute and consummate the
funding of Company’s capital commitment under, a partnership agreement with respect to the St.
Luke’s Center, the Merger Consideration will be reduced as set forth in Schedule 5.15(b) of
the Company Disclosure Statement and the parties will comply with the related provisions of the
Side Letter.

ARTICLE VI

CONDITIONS TO THE OBLIGATIONS OF EACH PARTY

     The respective obligations of each party to this Agreement to effect the Merger shall be
subject to the fulfillment on or before the Effective Time of each of the following conditions, any
one or more of which may be waived in writing by all the parties hereto:

          6.1 Governmental Clearances. All applicable waiting periods under the HSR Act shall have expired
or terminated. In addition, other than the filing of the Certificate of Merger which shall be
accomplished as provided in Section 1.2, all authorizations, consents, orders or approvals
of, or declarations or filings with, or expirations of waiting periods imposed by, any Government
Entity that are required to be obtained or made prior to Closing shall have been obtained or filed.

          6.2 Statute or Decree. No statute, rule, regulation, writ, order, temporary restraining order or
preliminary or permanent injunction shall have been enacted, entered, promulgated or enforced by
any court or other tribunal or governmental body or authority, which remains in effect, and
prohibits the consummation of the Merger or otherwise makes it illegal, nor shall any governmental
agency have instituted any action, suit or proceeding which remains pending and which seeks, and
which is reasonably likely, to enjoin, restrain or prohibit the consummation of the Merger in
accordance with the terms of this Agreement.

ARTICLE VII

CONDITIONS TO THE OBLIGATIONS OF COMPANY, PARENT AND MERGER SUB

          7.1 Additional Conditions To The Obligations Of Company. The obligations of Company to effect the
Merger shall be subject to the fulfillment of each of the following additional conditions, any one
or more of which may be waived in writing by Company:

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               (a) The representations and warranties of Parent and Merger Sub set forth in this Agreement
that are qualified by materiality or Parent Material Adverse Effect shall be true and correct, and
the representations and warranties of Parent and Merger Sub set forth in this Agreement that are
not so qualified shall be true and correct in all material respects, in each case, as of the
Closing Date (except to the extent such representations and warranties speak as of a specific date
or as of the date hereof, in which case such representations and warranties shall be so true and
correct or true and correct in all material respects, as the case may be, as of such specific date
or as of the date hereof, respectively).

               (b) Parent and Merger Sub shall have performed and complied in all material respects with all
agreements and obligations required by this Agreement to be performed or complied with by them on
or prior to the Closing Date.

               (c) Parent and Merger Sub shall have furnished a certificate or certificates of Parent and
Merger Sub executed on behalf of one or more of their respective officers to evidence compliance
with the conditions set forth in Section 7.1(a) and (b) of this Agreement.

          7.2 Additional Conditions To The Obligations Of Parent And Merger Sub. The obligations of Parent
and Merger Sub to effect the Merger shall be subject to the fulfillment of each of the following
additional conditions, any one or more of which may be waived in writing by Parent:

               (a) The representations and warranties of Company and the Company Equityholders set forth in
this Agreement and in the Ancillary Agreements that are qualified by materiality or Company
Material Adverse Effect shall be true and correct, and the representations and warranties of
Company and the Company Equityholders set forth in this Agreement and the Ancillary Agreements that
are not so qualified shall be true and correct in all material respects, in each case, as of the
Closing Date (except to the extent such representations and warranties speak as of a specific date
or as of the date hereof, in which case such representations and warranties shall be so true and
correct or true and correct in all material respects, as the case may be, as of such specific date
or as of the date hereof, respectively).

               (b) Company and the Company Equityholders shall have performed and complied in all material
respects with all agreements and obligations required by this Agreement and the Ancillary
Agreements to be performed or complied with by any of them on or prior to the Closing Date.

               (c) Company and New Mountain shall have furnished a certificate of Company executed by one of
its officers to evidence its compliance with the conditions set forth in Section 7.2(a) and
(b) of this Agreement.

               (d) The approvals, consents, notifications, waivers and releases from and to third parties set
forth in Schedule 7.2(d) of the Company Disclosure Statement shall have been made or
obtained, in a manner reasonably satisfactory in form and substance to Parent and its counsel, and
no such approval, consent, notification, waiver or release shall have been revoked or rescinded.

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               (e) Parent shall have received (i) a certificate of good standing from the jurisdiction of
organization of Company dated no more than five (5) business days prior the Closing Date and (ii) a
certificate from the Secretary of Company certifying as to (x) the incumbency and signatures of the
officers of Company executing and delivering this Agreement and the Ancillary Agreements and (y)
the resolutions, consents and other approvals of the Board and the stockholders of the Company with
respect to this Agreement, the Ancillary Agreements and the transactions contemplated hereby and
thereby;

               (f) The New Mountain Advisory Agreement shall have been terminated.

               (g) Company will have delivered to Parent a certification (in such form as may be reasonably
requested by counsel to Parent) conforming to the requirements of Treasury Regulations
1.1445-2(c)(3) and 1.897-2(h), in the form attached as Exhibit C.

               (h) Each of the Ancillary Agreements to be executed and delivered by Company and/or the
Shareholder Representative on or prior to the Closing Date shall have been executed and delivered
by Company and/or the Shareholder Representative.

               (i) Company Equityholders holding shares of Company Common Stock, Company Warrants and Company
Options representing at least eighty percent (80%) of the Company Common Stock outstanding as of
the Closing Dates on a fully-diluted basis hall have executed and delivered a Joinder Agreement.

               (j) Parent and Merger Sub shall have obtained the proceeds of the Financing contemplated by
the Commitment Letter.

               (k) Company shall have delivered to Parent the Audited Financial Statements which shall be
accompanied by an unqualified audit opinion from Company’s independent public accountants. Based
upon the information contained in such Audited Financial Statements a calculation shall be derived
to calculate consolidated earnings before, interest, taxes, depreciation and amortization for 2005,
as determined in accordance with Schedule 7.2(k) of the Company Disclosure Statement
(“EBITDA”) and EBITDA shall be at least $11,700,000.

ARTICLE VIII

TERMINATION

          8.1 Termination. This Agreement may be terminated at any time prior to the Effective Time:

               (a) by mutual written consent duly authorized by the boards of directors of Parent and
Company;

               (b) by either Company or Parent if the Merger shall not have been consummated by April 15,
2006 (the “Outside Date”), which date may be extended by mutual consent of the parties hereto, for
any reason; provided, however, that the right to terminate this

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Agreement under
this Section 8.1(b) shall not be available to any party whose action or failure to act has
been a principal cause of or resulted in the failure of the Merger to occur on or before such date
and such action or failure to act constitutes a material breach of this Agreement. Notwithstanding
the foregoing, if the failure to consummate the Merger by the Outside Date is due to a delay in
obtaining approval for the transactions contemplated by this Agreement pursuant to the HSR Act, if
required, the Outside Date shall be the earlier of (a) June 1, 2006 or (b) five (5) business days
after approval of the transactions contemplated by this Agreement pursuant to the HSR Act;

               (c) by either Company or Parent if (i) a statute, rule, regulation or executive order shall
have been enacted, entered or promulgated prohibiting the consummation of the Merger substantially
on the terms contemplated hereby or (ii) a court of competent jurisdiction or other Government
Entity shall have issued an order, decree or ruling or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the Merger;

               (d) by Company, upon a breach of any representation, warranty, covenant or agreement on the
part of Parent set forth in this Agreement, or if any representation or warranty of Parent shall
have become untrue, in either case such that the conditions set forth in Section 7.1(a) or
Section 7.1(b) would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that such inaccuracy in
Parent’s representations and warranties or breach by Parent remains uncured on the date which is
twenty (20) business days following written notice of such breach or inaccuracy from Company to
Parent (it being understood that Company may not terminate this Agreement pursuant to this
Section 8.1(d) if it shall have materially breached this Agreement and remains in breach of
this Agreement as of the date of such termination);

               (e) by Parent, upon a breach of any representation, warranty, covenant or agreement on the
part of Company or any Company Equityholder set forth in this Agreement or any Ancillary Agreement,
or if any representation or warranty of Company or any Company Equityholder herein or therein shall
have become untrue, in either case such that the conditions set forth in Section 7.2(a) or
Section 7.2(b) would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that such
inaccuracy in Company’s or any Company Equityholders’ (as the case may be) representations and
warranties or breach by Company or any Company Equityholder (as the case may be) remains uncured on
the date which is twenty (20) business days following written notice of such breach or inaccuracy
from Parent to Company (it being understood that Parent may not terminate this Agreement pursuant
to this Section 8.1(e) if it shall have materially breached this Agreement and remains in
breach of this Agreement as of the date of such termination and such breach shall have given rise
to the breach by Company or the applicable Company Equityholder);

               (f) by Company, upon written notice to Parent, if the Board shall have resolved to enter into,
subject to the terms of this Agreement, including Sections 5.2 and 8.3 hereof, an
Alternative Definitive Agreement; provided, that Company shall not be permitted to
terminate this Agreement pursuant to this Section 8.1(f) unless Company shall have complied
with its obligations under Section 5.2 and Section 8.3 and the entering into such
other definitive agreement is otherwise permitted by Section 5.2; or

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               (g) by Parent upon written notice to Company, at any time after 5:00 p.m. Central Time on
February 12, 2006 and prior to 5:00 p.m. Central Time on February 13, 2006, if Parent determines in
good faith that, as a result of (i) the Physician Meetings or (ii) the failure (other than as a
result of Parent’s actions) to complete Physician Meetings with respect to ambulatory surgery
centers representing at least eighty percent (80%) of the consolidated earnings before interest,
taxes, depreciation and amortization of Company requested by Parent by such date, it is inadvisable
for Parent to proceed with the Merger. In the event of any such termination Parent shall deliver
to Company a notice setting forth in reasonable detail the reasons for Parent’s decision to
terminate this Agreement.

          8.2 Notice of Termination. Except as otherwise provided in this Agreement, any termination of this
Agreement pursuant to Section 8.1 will be effective immediately upon the delivery of a
valid written notice of the terminating party to the other parties hereto. No termination of this
Agreement shall affect the obligations of the parties contained in the Confidentiality Agreement,
all of which obligations shall survive termination of this Agreement in accordance with their
terms. In the event of the termination of this Agreement pursuant to Section 8.1, this
Agreement, other than the provisions of Sections 3.23 (Finders or Brokers), 4.7
(Finders or Brokers), 5.3(a) (Confidentiality), 5.5 (Public Announcements),
8.2 (Notice of Termination), 8.3 (Expenses; Termination Fees), 10.6
(Governing Law), 10.7(b) (Jurisdiction) 10.8 (Waiver of Jury Trial), will then be
null and void and have no further force and effect and all other rights and liabilities of the
parties hereunder will terminate without any liability of any party to any other party, except for
liabilities arising in respect of breaches under this Agreement by any party on or prior to the
termination date.

          8.3 Expenses; Termination Fees.

               (a) Subject to the application of Section 1.6 relating to the Seller Transaction
Expenses, Section 5.13 relating to Additional Audit Expenses and Sections 8.3(b) and
(c) below, whether or not the Merger is consummated, all fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses.

               (b) If this Agreement is terminated pursuant to Section 8.1(f), then Company shall pay
to Parent on the date of such termination by wire transfer of immediately available funds to an
account designated by Parent a termination fee in an amount equal to
$6,000,000 (the “Parent
Termination Fee”) and shall reimburse Parent for the documented out-of-pocket fees and expenses
reasonably incurred by Parent and Merger Sub in connection with this Agreement and the transactions
contemplated hereby (including fees and other amounts payable to banks, investment banking firms
and other financial institutions, and their respective agents and counsel, and all fees of counsel,
accountants and consultants to Parent and its affiliates (whether or not such fees and other
payments are measured by or based on a percentage of the Parent Termination Fee or the proposed
aggregate Merger Consideration) up to an aggregate of $500,000 (the “Parent Expenses”). Company
shall reimburse such Parent Expenses, promptly after receiving an invoice therefor from Parent.
Parent may deliver such invoice on or after the date on which Company is obligated to pay the
Parent Termination Fee to Parent.

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               (c) If this Agreement is terminated pursuant to Section 8.1(b) and at the time of such
termination all of the conditions to Parent’s obligations under this Agreement (other than the
condition set forth in Section 7.2(j)) shall have been satisfied, then Parent shall pay to Company
on the date of such termination by wire transfer of immediately available funds to an account
designated by Company a termination fee in an amount equal to $6,000,000 (the “Company Termination
Fee” ) and shall reimburse Company for the documented out-of-pocket fees and expenses reasonably
incurred by Company in connection with this Agreement and the transactions contemplated hereby
(including fees and other amounts payable to banks, investment banking firms and other financial
institutions, and their respective agents and counsel, and all fees of counsel, accountants and
consultants to Company and its affiliates (whether or not such fees and other payments are measured
by or based on a percentage of the Company Termination Fee or the proposed aggregate Merger
Consideration) up to an aggregate of $500,000 (the “Company Expenses”). Parent shall reimburse
such Company Expenses, promptly after receiving an invoice therefor from Company. Company may
deliver such invoice on or after the date on which Parent is obligated to pay the Company
Termination Fee to Company.

ARTICLE IX

INDEMNIFICATION

          9.1 Grant of Indemnification.

               (a) The Company Equityholders, subject to the limitations set forth in Section 9.3,
shall jointly and severally indemnify, defend and hold harmless Parent and each of its affiliates
(including, following the Closing, Company and each of the Company Subsidiaries), and the
Representatives of each of the foregoing persons (each, a “Parent Indemnified Person”) from and
against any and all claims, losses, liabilities, obligations, lawsuits, Actions, investigations,
governmental orders, deficiencies, liens, encumbrances, damages, costs and expenses of whatever
nature, accrued, absolute, contingent or otherwise, including interest, penalties, fines, reasonable
attorney’s fees and other costs
of investigation, defense and enforcement and all amounts paid in settlement whether or not
involving a third party claim (“Losses”) that are suffered or incurred by such Parent Indemnified
Persons as a result of, arising out of or directly or indirectly relating to:

                    (i) any breach of, or inaccuracy in, any representation or warranty
made by Company in this Agreement, any Ancillary Agreement or in any
document, schedule, instrument or certificate delivered pursuant to this
Agreement or any Ancillary Agreement (in each case, as such representation
or warranty would read if all qualifications as to materiality, substantial
compliance and “Company Material Adverse Effect” were deleted therefrom,
except for the reference to “Company Material Adverse Effect in the first
clause of Section 3.8 and for Section 3.19) ;

                    (ii) any breach or violation of any covenant or agreement of Company to
the extent required to be performed or complied with by

56

 

Company prior to the
Closing in or pursuant to this Agreement or any Ancillary Agreement;

                    (iii) amounts payable by the Company in respect of Dissenting Shares in
excess of the Share Price; and

                    (iv) any claim, action, suit or proceeding (including any appraisal
proceeding brought under Section 262 of the DGCL) brought by any actual or
alleged current or former stockholder, optionholder or warrantholder of
Company in connection with the transactions contemplated by this Agreement.

               (b) Each Company Equityholder shall severally (and solely with respect to itself) indemnify,
defend and hold harmless the Parent Indemnified Persons from and against any and all Losses that
are suffered or incurred by such Parent Indemnified Persons as a result of, arising out of or
directly or indirectly relating to:

                    (i) any breach of, or inaccuracy in, any representation or warranty
made by such Company Equityholder in this Agreement, the Joinder Agreement,
the Support Agreement or any other Ancillary Agreement or in any document,
schedule, instrument or certificate delivered pursuant to this Agreement,
the Joinder Agreement, the Support Agreement or any other Ancillary
Agreement; and

                    (ii) any breach or violation of any covenant or agreement of such
Company Equityholder in or pursuant to this Agreement, the Joinder
Agreement, the Support Agreement or any other Ancillary Agreement.

               (c) Parent shall indemnify, defend and hold Company and, following the Closing, the Company
Equityholders, and their respective affiliates and the Representatives of each of the foregoing
persons (each, a “Seller Indemnified Person”) from and against any Losses suffered or incurred by
any such Seller Indemnified Person as a result of, arising out of or directly or indirectly
relating to:

                    (i) any breach of, or inaccuracy in, any representation or warranty made by
Parent or Merger Sub in this Agreement or any other Ancillary Agreement or in any
document, schedule, instrument or certificate delivered pursuant to this Agreement
or any other Ancillary Agreement; and

                    (ii) any breach or
violation of any convenant or agreement of Parent or Merger Sub to the extent required to be performed or complied with by Company Merger Sub
prior to the Closing in or pursuant to this Agreement or any Ancillary Agreement.

          9.2 Representation, Cooperation; Settlement etc..

               (a) Each party agrees to give prompt notice to the other(s) of any claim which might give rise
to a claim based on the indemnity contained in this Article, stating

57

 

the nature and basis
of the claim and the amount thereof; provided, however, that no delay on the part
of the Indemnified Party in notifying the Indemnifying Party will relieve the Indemnifying Party
from any obligation under this Article IX, except to the extent such delay actually and
materially prejudices the Indemnifying Party.

               (b) In the event any claim, action, suit or proceeding is brought against a party (the
“Indemnified Party”) with respect to which another party (the “Indemnifying Party”) may have
liability under this Article, the Indemnified Party shall permit the Indemnifying Party (or
the Shareholder Representative in the case of the Company Equityholders) to assume the defense of
any such claim or any litigation resulting from such claim, provided, that (x) Parent shall
not be required to permit the Shareholder Representative to assume the defense of any third party
claim which if not paid, discharged or otherwise complies with would result in interruption or
cessation of the conduct of Company’s or the Company Subsidiaries’ business and (y) the
Indemnifying Party (or the Shareholder Representative in the case of the Company Equityholders)
will have the right to defend the Indemnified Party against the claim only so long as (i) the claim
involves only money damages and does not seek an injunction or other equitable relief against the
Indemnified Party, (ii) the Indemnified Party has not been advised by counsel that an actual or
potential conflict exists between the Indemnified Party and the Indemnifying Party (or the
Shareholder Representative in the case of the Company Equityholders) in connection with the defense
of the claim, (iii) the claim does not relate to or otherwise arise in connection with Taxes or any
criminal or regulatory enforcement matter, and (iv) the Indemnifying Party (or the Shareholder
Representative in the case of the Company Equityholders) conducts the defense of the claim actively
and diligently. Failure of the Indemnifying Party (or the Shareholder Representative in the case
of the Company Equityholders) to notify the Indemnified Party of its election to defend any such
claim or action by a third party within 20 days after notice thereof shall have been given by the
Indemnified Party, shall be deemed a waiver of any such election. If the Indemnifying Party (or
the Shareholder Representative in the case of the Company Equityholders) assumes the defense of
such claim or litigation resulting therefrom, the obligations of the Indemnifying Party (or the
Shareholder Representative in the case of the Company Equityholders)
hereunder as to such claim shall include taking all steps reasonably necessary in the defense
or settlement of such claim or litigation resulting therefrom, including the retention of counsel
reasonably satisfactory to the Indemnified Party, and holding the Indemnified Party harmless from
and against any and all damage resulting from, arising out of, or incurred with respect to any
settlement approved by the Indemnifying Party or any judgment in connection with such claim or
litigation resulting therefrom. The Indemnifying Party (or the Shareholder Representative in the
case of the Company Equityholders) shall not, in the defense of such claim or litigation, consent
to the entry of any judgment (other than a judgment of dismissal on the merits with costs) except
with the written consent of the Indemnified Party nor enter into any settlement (except with the
written consent of the Indemnified Party) which does not include as an unconditional terms thereof
the giving by the claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect to such claim or litigation.

               (c) If the Indemnifying Party (or the Shareholder Representative in the case of the Company
Equityholders) shall not assume the defense of any such claim by a third party or litigation
resulting therefrom, and until the defense thereof is assumed the Indemnified Party may defend
against such claim or litigation in such manner as it deems appropriate. The Indemnifying Party
shall, in accordance with the provisions hereof, promptly reimburse the

58

 

Indemnified Party for the
amount of any settlement reasonably entered into by the Indemnified Party and for all damage
incurred, costs and expenses by the Indemnified Party in connection with the defense against or
settlement of such claim or litigation. Prior to any Indemnifying Party (or the Shareholder
Representative in the case of the Company Equityholders) assuming the defense of any claim pursuant
to this Section 9.2, such Indemnifying Party (or the Shareholder Representative in the case
of the Company Equityholders) must first have agreed in writing to the satisfaction of the
Indemnified Party, that the claim to be defended against is subject to Indemnification under this
Agreement. Notwithstanding anything contained in this Agreement to the contrary, in the event that
the Indemnifying Party (or the Shareholder Representative in the case of the Company Equityholders)
may not assume the defense of any third party claim due to any of the factors set forth in the
proviso of the first sentence of Section 9.2(a), the Indemnifying Party shall not be bound
by any determination of any proceeding relating to such claim or any compromise of settlement
effected with respect to such claim without the written consent of the Indemnifying Party (or the
Shareholder Representative in the case of the Company Equityholders) which consent shall not be
unreasonably withheld or delayed.

          9.3 Limitations of Liability.

               (a) The maximum liability of each Company Equityholder executing the Joinder Agreement’s for
any claim for indemnification pursuant to Section 9.1(a)(i) shall not exceed the amount of
such Company Equityholder’s Indemnification Share (as defined below) of ten percent (10%) of the
Initial Merger Consideration; provided, however, that the limitation set forth in
this Section 9.3(a) shall not apply to any claim for indemnification based on a breach of
or inaccuracy in any representation or warranty contained in any of Sections 3.1(a), 3.2,
3.3(a), 3.3(b)(i) and (ii), 3.4, 3.10(a) (last sentence), 3.15 or 3.23. For purposes of this
Agreement the “Indemnification Share” of a Company Equityholder executing a
Joinder Agreement means a fraction the numerator of which is such Company Equityholder’s Pro
Rata Share of the Merger Consideration and the denominator of which is the aggregate Pro Rata
Shares of the Merger Consideration attributable to all Company Equityholders executing Joinder
Agreements. For the avoidance of doubt, the parties hereto agree and acknowledge that any claims
for indemnification by Parent Indemnified Persons under this Agreement shall, to the extent
possible, first be made against the Escrow Fund, and that any payments therefrom to the Parent
Indemnified Persons would be effective a payment by each Company Equityholder in accordance with
their respective Pro Rata Shares.

               (b) No Company Equityholder shall have any obligation to indemnify any Parent Indemnified
Person pursuant to the provisions of Section 9.1(a)(i) unless and until the aggregate of
all Losses suffered or incurred by Parent which would otherwise be subject to indemnification
hereunder exceeds $2,000,000 (the “Deductible”); provided, however, that all Losses
suffered or incurred by Parent for Pre-Closing Tax Claims and the breach of or inaccuracy in any
representation or warranty contained in any of Sections 3.1(a), 3.2, 3.3(a), 3.3(b)(i) and
(ii), 3.4, 3.10(a) (last sentence), 3.15, 3.19 or 3.23 shall not be subject to the Deductible.
Notwithstanding the foregoing, no Company Equityholder shall have any obligation to indemnify any
Parent Indemnified Person pursuant to the provisions of Section 9.1(a)(i) with respect to
any claim or series of related claims unless and until the aggregate of all Losses suffered or
incurred in connection with such claim or series of related claims exceeds $50,000

59

 

(it being
understood that all such Losses shall be subject to indemnification if such $50,000 threshold is
exceeded).

               (c) In no event shall an individual Company Equityholder be jointly and severally liable for
the fraud or breach of another Company Equityholder under the Support Agreement or Joinder
Agreements.

          9.4 Remedies Exclusive. Except with respect to claims of fraud and except as provided in
Article VIII and Section 10.7, from and after the Closing, the remedies provided in
this Article IX shall be the exclusive remedies available the Indemnified Parties hereunder
for the Losses suffered or incurred by an Indemnified Party pursuant to the this Agreement or the
transactions contemplated hereby. The parties hereto acknowledge and agree that the remedies
provided for in this Article IX (and Article VIII and Section 10.7) are
fair and equitable and hereby waive any other remedies that might otherwise be available to them
whether under law or at equity.

          9.5 No Circular Recovery; Other Matters.

               (a) Each Company Equityholder hereby agrees that it will not make any claim for
indemnification against Parent, Company or any Company Subsidiary by reason of the fact that such
Company Equityholder was a controlling person, director, employee or other Representative of
Company or any Company Subsidiary or was serving as such for another person at the request of
Company or any Company Subsidiary (whether such claim is for Losses of any kind or otherwise and
whether such claim is pursuant to any statute, charter, bylaw or
other organizational document, contractual obligation or otherwise) with respect to any claim
brought by a Parent Indemnified Person against such Company Equityholder under this Article
IX or otherwise relating to this Agreement, any Ancillary Agreement or the transactions
contemplated hereby and thereby. With respect to any claim brought by a Parent Indemnified Person
against any Company Equityholder relating to the Agreement, any Ancillary Agreement or the
transactions contemplated hereby and thereby, each Company Equityholder expressly waives any right
of subrogation, contribution, advancement, indemnification or other claim against Company or any
Company Subsidiary with respect to any amounts owed by such Company Equityholder pursuant to this
Article IX.

               (b) Upon making any payment to an Indemnified Party for any indemnification claim pursuant to
this Article IX, the Indemnifying Party shall be subrogated, to the extent of such payment,
to any rights which the Indemnified Party or its affiliates may have against any other persons not
a party to this Agreement with respect to the subject matter underlying such claim and the
Indemnified Party shall use reasonable efforts to take, at the expense of the Indemnifying Party,
such actions as the Indemnifying Party may reasonably request to perfect such subrogation.

               (c) Notwithstanding anything contained in this Agreement to the contrary, in the event that
any fact, event or circumstance which results in an adjustment to the Merger Consideration pursuant
to Sections 1.6, 1.7, 1.8, 5.14 or 5.15 would also constitute a breach or inaccuracy of any
of Company’s representations, warranties, covenants or agreements under this Agreement, the Company
Equityholders shall have no obligation to indemnify any

60

 

Parent
Indemnified Persons with respect to
such breach of inaccuracy to the extent that recovery for any such Loss would constitute a
duplicative payment of amounts recovered as a purchase price adjustment pursuant to pursuant to
Sections 1.6, 1.7, 1.8, 5.14 or 5.15.

               (d) All indemnification payments paid pursuant to this Agreement shall be treated as
adjustments to the Merger Consideration for tax purposes.

          9.6 Recovery Not Affected By Knowledge. The right of any Indemnified Party to indemnification
pursuant to this Article IX will not be affected by any investigation conducted or
knowledge acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to the accuracy of any
representation or warranty, or performance of or compliance with any covenant or agreement.

ARTICLE X

MISCELLANEOUS

          10.1 Amendment and Modification. Subject to applicable law, this Agreement may be amended,
modified or supplemented only by written agreement of Parent, Merger Sub and Company at any time
prior to the Effective Time; provided, however, that no such amendment or
modification shall, without obtaining approval of the holders of Company Common Stock as required
by law, (a) change the amount or form of the
consideration to be received by Company’s stockholders in the Merger in exchange for the Company
Common Stock, or (b) change any other term or condition of the Merger if such change would
materially and adversely affect Company or the holders of any Company Common Stock.

          10.2 Waiver of Compliance; Consents. Any failure of Parent or Merger Sub, on the one hand, or
Company, on the other hand, to comply with any obligation, covenant, agreement or condition herein
may be waived by Company (with respect to any failure by Parent or Merger Sub) or Parent or Merger
Sub (with respect to any failure by Company), respectively, only by a written instrument signed by
the party granting such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement requires or permits
consent by or on behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in this Section
10.2.

          10.3 Survival. All representations and warranties of Parent, Merger Sub and Company contained in
this Agreement shall survive the Closing and terminate on June 30, 2007; provided,
however, that (i) representations and warranties set forth in this Section 3.15
shall survive until thirty (30) days after the expiration of the statutory period of limitations
including extensions thereof under the applicable law, (ii) the representations and warranties set
forth in Section 3.5 shall survive until thirty six (36) months following the Closing Date
and (iii) the representations and warranties set forth in Sections 3.1(a), 3.2, 3.3(a),
3.3(b)(i) and (ii), 3.4, 3.10(a) (last sentence), 3.23, 4.1, 4.2 and
4.7 shall survive in perpetuity. All covenants and agreements contained herein which by
their terms are to be performed in whole or in part, or

61

 

which prohibit actions, subsequent to the
Closing Date, shall survive the Closing in accordance with their terms. All covenants and
agreements contained herein which by their terms are to be performed in whole on or prior to the
Closing Date shall not survive the Closing and shall thereupon terminate, except that claims for
indemnification by Parent Indemnified Persons and claims for indemnification by the Company
Equityholders in respect of any breach thereof may be made at any time prior to June 30, 2007. Any
claims based on fraud shall survive in perpetuity.

          10.4 Notices. All notices and other communications hereunder shall be in writing and shall be
delivered personally by overnight courier or similar means or sent by facsimile with written
confirmation of receipt, to the parties at the addresses specified below or at such other address
for a party as shall be specified by like notice. Any such notice shall be effective upon receipt,
if personally delivered or on the next business day following transmittal if sent by confirmed
facsimile. Notices, including oral notices, shall be delivered as follows:

          if to Company, to:

	 	 	 	 	 	 	 
	 

	 	 	 	Surgis, Inc.
	 	 
	 

	 	 	 	30 Burton Hills Boulevard	 	 
	 

	 	 	 	Suite 450	 	 
	 

	 	 	 	Nashville, TN 37215	 	 
	 

	 	 	 	Telephone: 615-312-5570	 	 
	 

	 	 	 	Facsimile: 615-665-3013	 	 
	 

	 	 	 	Attention: George McGinn	 	 
	 
	 	 	 	 	 	 
	 

	 	With a copy to:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	New Mountain Capital LLC
	 	 
	 

	 	 	 	787 Seventh Avenue	 	 
	 

	 	 	 	49th Floor	 	 
	 

	 	 	 	New York, NY 10019	 	 
	 

	 	 	 	Telephone: 212-720-0300	 	 
	 

	 	 	 	Facsimile: 212-582-2277	 	 
	 

	 	 	 	Attention: Steven B. Klinsky	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Skadden, Arps, Slate, Meagher & Flom LLP	 	 
	 

	 	 	 	Four Times Square	 	 
	 

	 	 	 	New York, NY 10036	 	 
	 

	 	 	 	Telephone: 212-735-3000	 	 
	 

	 	 	 	Facsimile: 212-735-2000	 	 
	 

	 	 	 	Attention: Sean C. Doyle, Esq.	 	 
	 
	 	 	 	 	 	 
	 	 	if to Parent, or Merger Sub, to:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	United Surgical Partners International, Inc.
	 	 
	 

	 	 	 	15305 Dallas Parkway, Suite 1600	 	 
	 

	 	 	 	Addison, TX 75001	 	 

62

 

	 	 	 	 	 	 	 
	 

	 	 	 	Telephone: 972-713-3500
	 	 
	 

	 	 	 	Facsimile: 972-267-0084	 	 
	 

	 	 	 	Attention: Chief Executive Officer and General Counsel	 	 

	 	 	 	 	 	 	 
	 

	 	 	 	With a copy to:
	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Ropes & Gray LLP	 	 
	 

	 	 	 	45 Rockefeller Plaza	 	 
	 

	 	 	 	New York, NY 10111	 	 
	 

	 	 	 	Telephone: 212-841-5700	 	 
	 

	 	 	 	Facsimile: 212-841-5725	 	 
	 

	 	 	 	Attention: Othon A. Prounis, Esq.	 	 
	 
	 	 	 	 	 	 
	 	 	if to the Shareholder Representative, to:	 	 

	 	 	 	 	 	 	 
	 

	 	 	 	New Mountain Capital LLC
	 	 
	 

	 	 	 	787 Seventh Avenue	 	 
	 

	 	 	 	49th Floor	 	 
	 

	 	 	 	New York, NY 10019	 	 
	 

	 	 	 	Telephone: 212-720-0300	 	 
	 

	 	 	 	Facsimile: 212-582-2277	 	 
	 

	 	 	 	Attention: Steven B. Klinsky	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	With a copy to:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Skadden, Arps, Slate, Meagher & Flom LLP	 	 
	 

	 	 	 	Four Times Square	 	 
	 

	 	 	 	New York, NY 10036	 	 
	 

	 	 	 	Telephone: 212-735-3000	 	 
	 

	 	 	 	Facsimile: 212-735-2000 Attention: Sean C. Doyle, Esq.	 	 

          10.5 Assignment; Third Party Beneficiaries. Neither this Agreement nor any right, interest or
obligation hereunder shall be assigned by any of the parties hereto without the prior written
consent of the other parties; provided, however, that Parent may (a) assign any or
all of its rights and interests hereunder to one or more of its affiliates or as collateral
security to any provider of the Financing and (b) designate one or more of its affiliates to
perform its obligations hereunder, in each case, so long as Parent is not relieved of any liability
hereunder. This Agreement shall be binding upon and inure solely to the benefit of the parties
hereto and their respective successors and permitted assigns; provided, however,
that individuals who were directors of Company at the Effective Time shall be third party
beneficiaries of this Agreement with respect to Section 5.7 and the Parent Indemnified
Persons and Seller Indemnified Persons not party hereto shall be third party beneficiaries of this
Agreement with respect to Article IX.

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          10.6 Governing Law. This Agreement shall be governed by the laws of the State of Delaware without
reference to principles of conflicts of laws.

          10.7 Specific Enforcement; Consent to Jurisdiction.

               (a) The parties hereto agree that irreparable damage would occur and that the parties would
not have any adequate remedy at law in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement
in any Federal court located in the State of Delaware or in any state court in the State of
Delaware, this being in addition to any other remedy to which they are entitled at law or in
equity.

               (b) Except as otherwise provided in Section 1.7, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court located in the State of
Delaware or of any state court located in the State of Delaware in the event any dispute arises out
of this Agreement or the transactions contemplated by this Agreement, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any
such court and (c) agrees that it will not bring any action relating to this Agreement or the
transactions contemplated by this Agreement in any court other than a Federal court located in the
State of Delaware or a state court located in the State of Delaware. Within ten (10) business days
of the date hereof, Company shall duly appoint an agent to accept service of process in the State
of Delaware and shall provide Parent with the name and contact information for such agent.

          10.8 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

          10.9 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the same instrument.

          10.10 Severability. In case any one or more of the provisions contained in this Agreement should
be finally determined to be invalid, illegal or unenforceable in any respect against a party
hereto, it shall be adjusted if possible to effect the intent of the parties. In any event, the
validity, legality and enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby, and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such final determination shall have been
made.

          10.11 Interpretation. The Article and Section headings contained in this Agreement are solely for
the purpose of reference and shall not in any way affect the meaning or interpretation of this
Agreement. The word “including” shall be deemed to mean “including without limitation.” For
purposes of this Agreement, (i) the phrase “to the knowledge of

64

 

Company,” or words of similar
import, shall mean the actual knowledge of the following executive officers of Company (after
reasonable investigation by each of them): J. Michael Gould, Jot N. Hollenbeck, Joseph C. Hutts,
George P. McGinn, Jr., Patrick A. Murphy, Derril W. Reeves and Eric L. Sutley and (ii) the phrase
“to the knowledge of Parent,” or words of similar import, shall mean the actual knowledge of the
following executive officers of Parent: William Wilcox, Mark Kopser, Jason Cagle and John Wellik.

          10.12 Entire Agreement. This Agreement including the exhibits hereto and the documents and instruments referred to
herein (including the Company Disclosure Statement and the Parent Disclosure Statement, the Support
Agreement, the Paying Agent Agreement, the Joinder Agreements, the Escrow Agreement and the other
Ancillary Agreements), embody the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no representations, promises, warranties,
covenants, or undertakings, other than those expressly set forth or referred to herein and therein.

          10.13 Definitions of Commonly Used Terms. When used in this Agreement:

               (a) “affiliate” means, with respect to any specified person at any time, each person directly
or indirectly controlling, controlled by or under direct or indirect common control with such
specified person at such time.

               (b) “business day” means any day other than a Saturday, Sunday or other day on which banks in
New York, New York are required or authorized to be closed.

               (c) “law” means any applicable law or regulation (whether civil, criminal or administrative)
including, common law, statute, statutory instrument, treaty, regulation, directive, decision,
code, order, decree, injunction, resolution or judgment of any government, quasi-government,
supranational, federal, state or local government, statutory or regulatory body, court, or agency
or other Governmental Entity.

               (d) “liability” means, with respect to any person, any liability or obligation of such person
whether known or unknown, whether asserted or unasserted, whether determined, determinable or
otherwise, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, whether incurred or consequential, whether due or to become due and whether or not
required to be accrued on the financial statements of such person.

               (e) “ordinary course of business” means an action taken by any person in the ordinary course
of the normal day-to-day operations of such person’s business which is consistent with the past
customs and practices of such person (including past practice with respect to quantity, amount,
magnitude and frequency, standard employment and payroll policies and past practice with respect to
management of working capital).

               (f) “person” means any individual or corporation, association, partnership, limited liability
company, joint venture, joint stock or other company, business trust, trust, organization,
Governmental Entity or other entity of any kind.

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               10.14 Rules of Construction(a) . Each party to this Agreement has been represented by counsel
during the preparation and execution of this Agreement, and therefore waives any rule of
construction that would construe ambiguities against the party drafting the agreement.

               10.15 Shareholder Representative. Pursuant to the Joinder Agreements, Company Equityholders shall
appoint the Shareholder Representative as the agent, proxy and attorney-in-fact for such Company
Equityholders for all purposes under this Agreement and the Escrow Agreement and the Shareholder
Representative shall accept such appointment. No Joinder Agreement shall be amended or modified
and no substitute Shareholder Representative shall be appointed without the prior written consent
of Parent. Without limiting the generality of the foregoing, from and after the Effective Time,
the Shareholders Representatives shall be authorized to: (i) execute and receive all documents,
instruments, certificates, statements and agreements on behalf of and in the name of the Company
Equityholders necessary to effectuate the Closing and consummate the transactions contemplated
hereby and by the Ancillary Agreements; (ii) take any and all actions on behalf of the Company
Equityholders in connection with any claims made under or otherwise in connection with this
Agreement (including to defend, settle and make payments in respect of such claims); (iii) take all
actions on behalf of the Company Equityholders in connection with the escrow account established
pursuant to the Escrow Agreement (including giving any instructions to the Escrow Agent, on behalf
of the Company Equityholders), any amendment or waiver of any provisions of this Agreement or the
Escrow Agreement and (iv) take all other actions to be taken by or on behalf of the Company
Equityholders and exercise any and all rights which the Company Equityholders are permitted or
required to do or exercise under this Agreement or the Escrow Agreement.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their
respective duly authorized officers as of the date first above written.

	 	 	 	 	 	 	 
	 	 	UNITED SURGICAL PARTNERS
 INTERNATIONAL, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ William H. Wilcox	 	 
	 

	 	 	 	 	 	 
	 	 	Its: President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	PEAK ASC ACQUISITION CORP.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ William H. Wilcox	 	 
	 

	 	 	 	 	 	 
	 	 	Its: President	 	 
	 
	 	 	 	 	 	 
	 	 	SURGIS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Joseph C. Hutts	 	 
	 

	 	 	 	 	 	 
	 	 	Its: President and CEO	 	 

[Signature Page to Agreement and Plan of Merger]<PAGE>
                                                                     Exhibit 4.1

================================================================================

                                 LSB CORPORATION

                                       and

                        COMPUTERSHARE TRUST COMPANY, N.A.

                            Renewed Rights Agreement

                          Dated as of November 17, 2005

================================================================================

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Section 1. Certain Definitions ..........................................     2
Section 2. Appointment of Rights Agent ..................................     9
Section 3. Issuance of Rights Certificates ..............................    10
Section 4. Form of Rights Certificates ..................................    12
Section 5. Countersignature and Registration ............................    13
Section 6. Transfer, Split-Up, Combination and Exchange of Rights
              Certificates; Mutilated, Destroyed, Lost or Stolen
              Rights Certificates .......................................    14
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
              Rights ....................................................    15
Section 8. Cancellation and Destruction of Rights Certificates ..........    17
Section 9. Reservation and Availability of Capital Stock ................    17
Section 10. Preferred Stock Record Date .................................    19
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
               Number of Rights .........................................    20
Section 12. Certificate of Adjusted Purchase Price or Number of Shares       30
Section 13. Consolidation, Merger or Sale or Transfer of Assets, Cash
               Flow or Earning Power ....................................    30
Section 14. Fractional Rights and Fractional Shares .....................    33
Section 15. Rights of Action ............................................    34
Section 16. Agreement of Rights Holders .................................    35
Section 17. Rights Certificate Holder Not Deemed a Stockholder ..........    36
Section 18. Concerning the Rights Agent .................................    36
</TABLE>

<PAGE>

<TABLE>
<S>                                                                         <C>
Section 19. Merger or Consolidation or Change of Name of Rights
               Agent ....................................................    36
Section 20. Duties of Rights Agent ......................................    37
Section 21. Change of Rights Agent. .....................................    40
Section 22. Issuance of New Rights Certificates .........................    41
Section 23. Redemption and Termination ..................................    41
Section 24. Exchange ....................................................    42
Section 25. Notice of Certain Events ....................................    43
Section 26. Notices. ....................................................    44
Section 27. Supplements and Amendments ..................................    45
Section 28. Successors ..................................................    45
Section 29. Determinations and Actions by the Board, etc. ...............    45
Section 30. Benefits of this Agreement ..................................    46
Section 31. Severability ................................................    46
Section 32. Governing Law ...............................................    46
Section 33. Counterparts ................................................    47
Section 34. Descriptive Headings ........................................    47
</TABLE>

<PAGE>

                                    EXHIBITS

Exhibit A -- Form of Rights Certificates

Exhibit B -- Form of Summary of Rights

<PAGE>

                            RENEWED RIGHTS AGREEMENT

          RENEWED RIGHTS AGREEMENT, dated as of November 17, 2005 (the
"Agreement"), between LSB Corporation, a Massachusetts corporation (the
"Company"), and Computershare Trust Company, N.A. (the "Rights Agent").

                                   WITNESSETH

          WHEREAS, on December 19, 1996 (the "1996 Rights Dividend Declaration
Date"), the Board of Directors of Lawrence Savings Bank (the "Bank") authorized
the Rights Agreement, dated as of December 19, 1996, between the Company and
State Street Bank and Trust Company ("State Street") as Rights Agent thereunder
(the "1996 Agreement") and declared a dividend distribution of one right (a
"1996 Right") for each share of Common Stock (as hereinafter defined) of the
Company outstanding at the close of business on December 29, 1996 (the "1996
Record Date"), each 1996 Right initially representing the right to purchase one
one-hundredth of a share of Series A Junior Participating Preferred Stock of the
Company; and

          WHEREAS, the Company and the Rights Agent are successors in interest
to the Bank and State Street, respectively, under the 1996 Agreement; and

          WHEREAS, on November 17, 2005, the Board determined it desirable and
in the best interests of the Company and its shareholders for the Company to
extend the benefits afforded by the 1996 Agreement and to implement such
extension by executing this Agreement; and

          WHEREAS, on November 17, 2005 (the "Rights Dividend Declaration
Date"), the Board authorized and declared a dividend distribution of one Right
(as hereinafter defined) for each share of Common Stock outstanding at the close
of business upon the "Expiration Date" under the 1996 Agreement (the "Record
Date"), and authorized the issuance of one Right (as such number may hereinafter
be adjusted pursuant to the provisions of Section 11(p) hereof) for each share
of Common Stock issued between the Record Date (whether originally issued or
delivered from the Company's treasury) and the Distribution Date (as hereinafter
defined), each Right initially representing the right to purchase one
one-hundredth of a share of Series A Junior Participating Preferred Stock of the
Company (the "Preferred Stock") having the rights, powers and preferences set
forth in the

                                        1

<PAGE>

Certificate of Vote of Directors Establishing a Series of a Class of Stock dated
December 19, 1996 filed with the Commonwealth of Massachusetts on December 20,
1996, upon the terms and subject to the conditions hereinafter set forth (the
"Rights");

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:

          Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:

               (a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of ten percent (10%) or more of the shares of Common Stock then
outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the
Company, (iii) any employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan, or (iv) any Person who
becomes the Beneficial Owner of ten percent (10%) or more of the shares of
Common Stock then outstanding as a result of a reduction in the number of shares
of Common Stock outstanding due to the repurchase of shares of Common Stock by
the Company (or any Subsidiary of the Company or any employee benefit plan of
the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) unless and until such Person, after becoming aware that such
Person has become the Beneficial Owner of ten percent (10%) or more of the then
outstanding shares of Common Stock, acquires beneficial ownership of additional
shares of Common Stock representing one percent (1%) or more of the shares of
Common Stock then outstanding, or (v) any such Person who has reported or is
required to report such ownership (provided such ownership is less than 15% of
the then outstanding shares of Common Stock) on Schedule 13G under the Exchange
Act (or any comparable or successor report) or on Schedule 13D under the
Exchange Act (or any comparable or successor report) which Schedule 13D does not
state any intention to or reserve the right to control or influence the
management or policies of the Company or engage in any of the actions specified
in Item 4 of such schedule (other than the disposition of the Common Stock) and,
within 10 Business Days of being requested by the Company to advise it regarding
the same, certifies to the Company that such Person acquired shares of Common
Stock in excess of 9.9% inadvertently or without knowledge of the terms of the
Rights and who or which, together with all Affiliates and Associates, thereafter
does not acquire additional shares of Common

                                        2

<PAGE>

Stock while the Beneficial Owner of 10% or more of the shares of Common Stock
then outstanding; provided, however, that if the Person requested to so certify
fails to do so within 10 Business Days, then such Person shall become an
Acquiring Person immediately after such 10 Business Day period.

               (b) "Act" shall mean the Securities Act of 1933, as amended.

               (c) "Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii) hereof.

               (d) "Adverse Person" shall mean any Person declared as such by
the Board, (A) upon (i) a determination that such Person, alone or together with
its Affiliates and Associates, has become the Beneficial Owner of a number of
shares of Common Stock determined to be substantial (which amount shall in no
event be less than 5% of the outstanding shares of Common Stock) and (ii) a
determination by the Board after reasonable inquiry and investigation, including
such consultation with such persons as such directors shall deem appropriate and
taking into account, to the extent determined by the Board to be relevant, past
actions or positions of such Person with respect to other issuers, that (1) such
beneficial ownership by such Person is intended to cause or is reasonably likely
to cause the Company to repurchase the Common Stock beneficially owned by such
Person or to cause pressure on the Company to take action or enter into a
transaction or series of transactions which would provide such Person with
short-term financial gain under circumstances where the Board determines that
the best long-term interests of the Company and its stockholders, but for the
actions and possible actions of such Person, would not be served by taking such
action or entering into such transactions or series of transactions at that time
or (2) such beneficial ownership is causing or is reasonably likely to cause a
material adverse impact (including, but not limited to, impairment of
relationships with customers or impairment of the Company's ability to maintain
its competitive position) on the business or prospects of the Company; or (B)
upon a determination that such Person is a present or future interested
stockholder (as defined by M.G.L. Chapter 110F) or a filer of a Schedule 13G (as
referenced in such Chapter 110F) or a Schedule 13D with respect to shares of
Common Stock who, without the prior approval of the Board: (i) has increased,
after the later of the date of this Agreement and the date on which such Person
first became an interested stockholder or first filed a Schedule 13G or Schedule
13D, its beneficial ownership of Common Stock within any twelve month period by
an amount equal to the lesser of (1) one percent of the outstanding shares of
Common Stock or (2) such fraction of a percentage of the outstanding shares of
Common Stock as is equal to the quotient obtained by dividing 1 by the number of
percentage

                                        3

<PAGE>

points (including fractions of a percentage point) by which the percentage of
the outstanding shares of Common Stock beneficially owned by such Person on the
later of the date of this Agreement and the date on which the Person first
became an interested stockholder or first filed a Schedule 13G or Schedule 13D
exceeds 5% of the outstanding shares of Common Stock; or (ii) has taken, after
the date of this Agreement and during the three year period following the date
such Person first became an interested stockholder or a Schedule 13G or Schedule
13D filer, any public action which, in the good faith judgment of the Board, has
the purpose or effect of advocating that the Company pursue, or otherwise
seeking to cause the Company to pursue, a potential sale, unless such Person has
made a bona fide proposal to effect a business combination of the Company with
such Person or with another entity in compliance with the provisions of such
Chapter 110F; provided, however, that the Board may determine not to declare a
Person to be an Adverse Person if, prior to the time that such Person acquired
5% or more of the shares of Common Stock then outstanding (or, in the case of a
Person who is the beneficial owner of the 5% or more of the outstanding Common
Stock as of the date of this Agreement, within 90 days following adoption of
this Agreement), such Person provided to the Board in writing a statement of
such Person's purpose and intentions in connection with the proposed acquisition
of Common Stock, together with any other information reasonably requested of
such Person by the Board, and the Board, based on such statement and reasonable
inquiry and investigation, including consultation with such persons as the
directors shall deem appropriate, determines to notify and notifies such Person
in writing that it will not declare such Person to be an Adverse Person;
provided further, that the Board may expressly condition in any manner a
determination not to declare a Person an Adverse Person on such conditions as
the Board may select, including without limitation, such Person's not acquiring
more than a specified amount of stock and/or on such Person's not taking actions
inconsistent with the purposes and intentions disclosed by such Person in the
statement provided to the Board. In the event that the Board should at any time
determine, upon reasonable inquiry and investigation, including consultation
with such Persons as the directors shall deem appropriate, that such Person has
not met or complied with any condition specified by the Board, the Board may at
any time thereafter declare such Person to be an Adverse Person pursuant to the
provisions hereof.

          The following examples are provided as illustrations of the operation
of the formula set forth in clause (B)(i) above:

          -- If a Person's beneficial ownership of Common Stock on the first day
such Person becomes an interested stockholder or first files a Schedule 13D

                                        4

<PAGE>

or Schedule 13G with respect to its ownership of Common Stock was 5% of the
shares of Common Stock then outstanding, such Person could be determined to be
an Adverse Person if such Person, without the prior approval of the Board,
increased its beneficial ownership of Common Stock in the subsequent
twelve-month period to 6% or more of the shares of Common Stock then
outstanding. Where such Person's beneficial ownership of Common Stock during the
twelve-month period following the date such Person becomes an interested
stockholder or first files a Schedule 13D or Schedule 13G with respect to its
ownership of Common Stock remained at 5.9% of the Common Stock then outstanding,
such Person could be determined to be an Adverse Person where such Person,
without the prior approval of the Board, increased its beneficial ownership of
Common Stock within the subsequent twelve-month period to 6.9% or more of the
shares of Common Stock then outstanding.

          -- If a Person's beneficial ownership of Common Stock on the first day
such Person becomes an interested stockholder or first files a Schedule 13D or
Schedule 13G with respect to its ownership of Common Stock was 7% of the shares
of Common Stock then outstanding, such Person could be determined to be an
Adverse Person if such Person increases its beneficial ownership of Common Stock
in any twelve-month period by 1/2 of 1% or more of the shares of Common Stock
then outstanding (1)/(7-5) = 1/2. Where such Person's beneficial ownership of
Common Stock remained at 7.4% of the shares of Common Stock then outstanding
during the twelve-month period following the date such Person becomes an
interested stockholder or first files a Schedule 13D or Schedule 13G with
respect to its ownership of Common Stock, such Person could be determined to be
an Adverse Person where such Person, without the prior approval of the Board,
increased its beneficial ownership of Common Stock within the subsequent
twelve-month period to 7.9% or more of the shares of Common Stock then
outstanding.

               (e) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.

               (f) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:

                    (i) which such Person or any of such Person's Affiliates or
     Associates, directly or indirectly, has the right to acquire (whether such
     right is exercisable immediately or only after the passage of time)
     pursuant to any agreement, arrangement or understanding (whether or not in
     writing) or upon the exercise of

                                        5

<PAGE>

     conversion rights, exchange rights, other rights, warrants or options, or
     otherwise; provided, however, that a Person shall not be deemed the
     "Beneficial Owner" of, or to "beneficially own," (A) securities tendered
     pursuant to a tender or exchange offer made by such Person or any of such
     Person's Affiliates or Associates until such tendered securities are
     accepted for purchase or exchange, (B) securities issuable upon exercise of
     Rights at any time prior to the occurrence of a Triggering Event (as
     hereinafter defined), or (C) securities issuable upon exercise of Rights
     from and after the occurrence of a Triggering Event which Rights were
     acquired by such Person or any of such Person's Affiliates or Associates
     prior to the Distribution Date (as hereinafter defined) or pursuant to
     Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant to
     Section 11(i) hereof in connection with an adjustment made with respect to
     any Original Rights;

                    (ii) which such Person or any of such Person's Affiliates or
     Associates, directly or indirectly, has the right to vote or dispose of or
     has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
     General Rules and Regulations under the Exchange Act), including pursuant
     to any agreement, arrangement or understanding, whether or not in writing;
     provided, however, that a Person shall not be deemed the "Beneficial Owner"
     of, or to "beneficially own," any security under this subparagraph (ii) as
     a result of an agreement, arrangement or understanding to vote such
     security if such agreement, arrangement or understanding: (A) arises solely
     from a revocable proxy given in response to a public proxy or consent
     solicitation made pursuant to, and in accordance with, the applicable
     provisions of the General Rules and Regulations under the Exchange Act, and
     (B) is not reportable by such Person on Schedule 13D under the Exchange Act
     (or any comparable or successor report); or

                    (iii) which are beneficially owned, directly or indirectly,
     by any other Person (or any Affiliate or Associate thereof) with which such
     Person (or any of such Person's Affiliates or Associates) has any
     agreement, arrangement or understanding (whether or not in writing), for
     the purpose of acquiring, holding, voting (except pursuant to a revocable
     proxy as described in the proviso to subparagraph (ii) of this paragraph
     (e)) or disposing of any

                                        6

<PAGE>

     voting securities of the Company; provided, however, that nothing in this
     paragraph (e) shall cause a Person engaged in business as an underwriter of
     securities to be the "Beneficial Owner" of, or to "beneficially own," any
     securities acquired through such Person's participation in good faith in a
     firm commitment underwriting until the expiration of forty days after the
     date of such acquisition, and then only if such securities continue to be
     owned by such Person at the expiration of such forty day period.

               (g) "Board" shall mean the Board of Directors of the Company.

               (h) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the Commonwealth of
Massachusetts are authorized or obligated by law or executive order to close.

               (i) "close of business" on any given date shall mean 5:00 P.M.,
Boston time, on such date; provided, however, that if such date is not a
Business Day, it shall mean 5:00 P.M., Boston time, on the next succeeding
Business Day.

               (j) "Common Stock" shall mean the common stock, par value $0.10
per share, of the Company, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.

               (k) "Common Stock Equivalents" shall have the meaning set forth
in Section 11(a)(iii) hereof.

               (l) "Current Market Price" shall have the meaning set forth in
Section 11(d)(i) hereof.

               (m) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.

               (n) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.

               (o) "Equivalent Preferred Stock" shall have the meaning set forth
in Section 11(b) hereof.

                                        7

<PAGE>

               (p) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

               (q) "Exchange Ratio" shall have the meaning set forth in Section
24 hereof.

               (r) "Expiration Date" shall have the meaning set forth in Section
7(a) hereof.

               (s) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.

               (t) "Person" shall mean any individual, firm, corporation,
partnership or other entity.

               (u) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.10 per share, of the Company, and, to
the extent that there are not a sufficient number of shares of Series A Junior
Participating Preferred Stock authorized to permit the full exercise of the
Rights, any other series of preferred stock of the Company designated for such
purpose containing terms substantially similar to the terms of the Series A
Junior Participating Preferred Stock.

               (v) "Principal Party" shall have the meaning set forth in Section
13(b) hereof.

               (w) "Purchase Price" shall have the meaning set forth in Section
4(a) hereof.

               (x) "Qualified Offer" shall have the meaning set forth in Section
11(a)(ii) hereof.

               (y) "Record Date" shall have the meaning set forth in the
preamble of this Agreement.

               (z) "Rights" shall have the meaning set forth in the preamble of
this Agreement.

               (aa) "Rights Agent" shall have the meaning set forth in the
preamble of this Agreement.

                                        8

<PAGE>

               (bb) "Rights Certificate" shall have the meaning set forth in
Section 3(a) hereof.

               (cc) "Rights Dividend Declaration Date" shall have the meaning
set forth in the preamble of this Agreement.

               (dd) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.

               (ee) "Section 13 Event" shall mean any event described in clauses
(x), (y) or (z) of Section 13(a) hereof.

               (ff) "Spread" shall have the meaning set forth in Section
11(a)(iii) hereof.

               (gg) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed or amended pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such other than pursuant to a Qualified Offer.

               (hh) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.

               (ii) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.

               (jj) "Summary of Rights" shall have the meaning set forth in
Section 3(b) hereof.

               (kk) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.

               (ll) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.

          Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the

                                        9

<PAGE>

Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Stock) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-rights agents as
it may deem necessary or desirable upon ten (10) days prior written notice to
the Rights Agent. The Rights Agent shall have no duty to supervise, and in no
event be liable for, the acts or omissions of any such co-Rights Agent.

          Section 3. Issuance of Rights Certificates.

               (a) Until the earlier of (i) the close of business on the tenth
Business Day (or such later date as the Board shall determine) after the Stock
Acquisition Date (or, if the tenth Business Day after the Stock Acquisition Date
occurs before the Record Date, the close of business on the Record Date), (ii)
the close of business on the tenth Business Day (or such later date as the Board
shall determine) after the date that a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) is first published or sent or given within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would become an Acquiring Person, in either
instance other than pursuant to a Qualified Offer, or (iii) the close of
business on the tenth Business Day (or such later date as the board shall
determine) after the Board determines that a Person is an Adverse Person (the
earlier of (i), (ii) or (iii) being herein referred to as the "Distribution
Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph
(b) of this Section 3) by the certificates for the Common Stock registered in
the names of the holders of the Common Stock (which certificates for Common
Stock shall be deemed also to be certificates for Rights) and not by separate
certificates, and (y) the Rights will be transferable only in connection with
the transfer of the underlying shares of Common Stock (including a transfer to
the Company). As soon as practicable after the Distribution Date, the Rights
Agent will send by first-class, insured, postage-prepaid mail, to each record
holder of the Common Stock as of the close of business on the Distribution Date,
at the address of such holder shown on the records of the Company, one or more
rights certificates, in substantially the form of Exhibit A hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section
11(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and

                                       10

<PAGE>

appropriate rounding adjustments (in accordance with Section 14(a) hereof) so
that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.

               (b) The Company will make available, as promptly as practicable
following the Record Date, a copy of a Summary of Rights, in substantially the
form attached hereto as Exhibit B (the "Summary of Rights"), to any holder of
Rights who may so request from time to time prior to the Expiration Date. With
respect to certificates for the Common Stock outstanding as of the Record Date,
or issued subsequent to the Record Date, unless and until the Distribution Date
shall occur, the Rights will be evidenced by such certificates for the Common
Stock and the registered holders of the Common Stock shall also be the
registered holders of the associated Rights. Until the earlier of the
Distribution Date or the Expiration Date (as such term is defined in Section
7(a) hereof), the transfer of any certificates representing shares of Common
Stock in respect of which Rights have been issued shall also constitute the
transfer of the Rights associated with such shares of Common Stock.

               (c) Rights shall be issued in respect of all shares of Common
Stock which are issued (whether originally issued or from the Company's
treasury) after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date. Certificates representing such shares of Common
Stock shall also be deemed to be certificates for Rights, and shall bear the
following legend if such certificates are issued after the Record Date but prior
to the earlier of the Distribution Date or the Expiration Date:

          This certificate also evidences and entitles the holder hereof to
     certain Rights as set forth in the Renewed Rights Agreement between LSB
     Corporation (the "Company") and the Rights Agent thereunder (the "Rights
     Agent") dated as of November 17, 2005 (the "Rights Agreement"), the terms
     of which are hereby incorporated herein by reference and a copy of which is
     on file at the principal offices of the Company. Under certain
     circumstances, as set forth in the Rights Agreement, such Rights will be
     evidenced by separate certificates and will no longer be evidenced by this
     certificate. The Company will mail to the holder of this certificate a copy
     of the Rights Agreement, as in effect on the date of mailing, without
     charge, promptly after receipt of a written request therefor. Under certain
     circumstances set forth in the Rights Agreement, Rights issued to, or held
     by, any

                                       11

<PAGE>

     Person who is, was or becomes an Acquiring Person, an Adverse Person or any
     Affiliate or Associate thereof (as such terms are defined in the Rights
     Agreement), whether currently held by or on behalf of such Person or by any
     subsequent holder, may become null and void.

With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.

          Section 4. Form of Rights Certificates.

               (a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit A hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of one one-hundredths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such exercise price
per one one-hundredth of a share, the "Purchase Price"), but the amount and type
of securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.

               (b) Any Rights Certificate issued pursuant to Section 3(a),
Section 11(i) or Section 22 hereof that represents Rights beneficially owned by:
(i) an Acquiring Person, an Adverse Person or any Associate or Affiliate of an
Acquiring Person or an Adverse Person, (ii) a transferee of an Acquiring Person
or an Adverse Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person or the Adverse Person becomes such, or
(iii) a transferee of an Acquiring Person or an Adverse Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person or the Adverse Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person or the Adverse

                                       12

<PAGE>

Person to holders of equity interests in such Acquiring Person or Adverse Person
or to any Person with whom such Acquiring Person or Adverse Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:

     The Rights represented by this Rights Certificate are or were beneficially
     owned by a Person who was or became an [Acquiring] [Adverse] Person or an
     Affiliate or Associate of an [Acquiring] [Adverse] Person (as such terms
     are defined in the Rights Agreement). Accordingly, this Rights Certificate
     and the Rights represented hereby may become null and void in the
     circumstances specified in Section 7(e) of the Rights Agreement.

          Section 5. Countersignature and Registration.

               (a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, any Vice Chairman of the Board or its
President or any Vice President and by the Treasurer or any Assistant Treasurer
or the Secretary or any Assistant Secretary, either manually or by facsimile
signature. The Rights Certificates shall be countersigned by the Rights Agent,
either manually or by facsimile signature, and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificates may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.

               (b) Following the Distribution Date, the Rights Agent will keep,
or cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer,

                                       13

<PAGE>

books for registration and transfer of the Rights Certificates issued hereunder.
Such books shall show the names and addresses of the respective holders of the
Rights Certificates, the number of Rights evidenced on its face by each of the
Rights Certificates and the date of each of the Rights Certificates.

          Section 6. Transfer, Split-Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

               (a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the close of business on the Distribution
Date, and at or prior to the close of business on the Expiration Date, any
Rights Certificate or Certificates (other than Rights Certificates representing
Rights that may have been exchanged pursuant to Section 24 hereof) may be
transferred, split up, combined or exchanged for another Rights Certificate or
Certificates, entitling the registered holder to purchase a like number of one
one-hundredths of a share of Preferred Stock (or, following a Triggering Event,
Common Stock, other securities, cash or other assets, as the case may be) as the
Rights Certificate or Certificates surrendered then entitles such holder (or
former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Certificates to be transferred,
split up, combined or exchanged at the principal office or offices of the Rights
Agent designated for such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer of
any such surrendered Rights Certificate until the registered holder shall have
completed and signed the certificate contained in the form of assignment on the
reverse side of such Rights Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section
14 hereof and Section 24 hereof, countersign and deliver to the Person entitled
thereto a Rights Certificate or Rights Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Rights Certificates.

               (b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the

                                       14

<PAGE>

Rights Agent and cancellation of the Rights Certificate, if mutilated, the
Company will execute and deliver a new Rights Certificate of like tenor to the
Rights Agent for countersignature and delivery to the registered owner in lieu
of the Rights Certificate so lost, stolen, destroyed or mutilated.

          Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.

               (a) Subject to Section 7(e) hereof, at any time after the
Distribution Date, the registered holder of any Rights Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein including,
without limitation, the restrictions on exercisability set forth in Section
9(c), Section 11(a)(iii) and Section 23 hereof) in whole or in part upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-hundredths of a share (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earlier of (i) 5:00 P.M., Boston time, on
December 18, 2016, or such later date as may be established by the Board prior
to the expiration of the Rights (such date, as it may be extended by the Board,
the "Final Expiration Date" or (ii) the time at which the Rights are redeemed or
exchanged as provided in Section 23 and Section 24 hereof (the earlier of (i)
and (ii) being herein referred to as the "Expiration Date").

               (b) The Purchase Price for each one one-hundredth of a share of
Preferred Stock pursuant to the exercise of a Right initially shall be $85.00,
shall be subject to adjustment from time to time as provided in Section 11 and
Section 13(a) hereof and shall be payable in accordance with paragraph (c)
below.

               (c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-hundredth of a share of Preferred Stock (or other shares,
securities, cash or other assets, as the case may be) to be purchased as set
forth below and an amount equal to any applicable transfer tax, the Rights Agent
shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition
from any transfer agent of the shares of Preferred Stock (or make available, if
the Rights Agent is the transfer agent for such shares) certificates for the
total number of one one-hundredths of a share of Preferred Stock to be purchased
and the Company hereby irrevocably authorizes its transfer agent to comply with
all such requests, or (B) if the Company

                                       15

<PAGE>

shall have elected to deposit the total number of shares of Preferred Stock
issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of one one-hundredths of a share of Preferred Stock as are to be
purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or, upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate. The payment of
the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii)
hereof) shall be made in cash or by certified bank check or bank draft payable
to the order of the Company. In the event that the Company is obligated to issue
other securities (including Common Stock) of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate. The Company reserves the right to require prior to the occurrence
of a Triggering Event that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock would be issued.

               (d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing the Rights remaining unexercised shall be issued by the Rights Agent
and delivered to, or upon the order of, the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, subject to the provisions of Section 14 hereof.

               (e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person, an Adverse Person or an Associate
or Affiliate of an Acquiring Person or Adverse Person, (ii) a transferee of an
Acquiring Person or Adverse Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person or Adverse Person becomes such,
or (iii) a transferee of an Acquiring Person or an Adverse Person (or of any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person or the Adverse Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person or Adverse Person to holders of equity interests in such
Acquiring Person or Adverse Person or to any Person with whom the Acquiring
Person or the Adverse Person has

                                       16

<PAGE>

any continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or any other Person
as a result of its failure to make any determinations with respect to an
Acquiring Person or Adverse Person or any of their respective Affiliates,
Associates or transferees hereunder.

               (f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.

          Section 8. Cancellation and Destruction of Rights Certificates.

          All Rights Certificates surrendered for the purpose of exercise,
transfer, split-up, combination or exchange shall, if surrendered to the Company
or any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.

          Section 9. Reservation and Availability of Capital Stock.

                                       17

<PAGE>

               (a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement including
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.

               (b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.

               (c) The Company shall use its best efforts to (i) file, as soon
as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, a registration statement under the Act, with respect
to the securities purchasable upon exercise of the Rights on an appropriate
form, (ii) cause such registration statement to become effective as soon as
practicable after such filing, and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Act) until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the date of the expiration of the
Rights. The Company will also take such action as may be appropriate under, or
to ensure compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights. The Company may
temporarily suspend, for a period of time not to exceed ninety (90) days after
the date set forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension has been rescinded. In addition, if the Company shall
determine that a registration statement is required following the Distribution
Date, the Company may temporarily suspend the exercisability of the Rights until
such time as a registration statement has been declared effective.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification in
such jurisdiction shall not have been obtained, the

                                       18

<PAGE>

exercise thereof shall not be permitted under applicable law, or a registration
statement shall not have been declared effective.

               (d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all one one-hundredths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.

               (e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of one one-hundredths of a
share of Preferred Stock (or Common Stock and/or other securities, as the case
may be) upon the exercise of Rights. The Company shall not, however, be required
to pay any transfer tax which may be payable in respect of any transfer or
delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of one one-hundredths of a share of Preferred Stock (or
Common Stock and/or other securities, as the case may be) in respect of a name
other than that of the registered holder of the Rights Certificates evidencing
Rights surrendered for exercise or to issue or deliver any certificates for a
number of one one-hundredths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such tax shall have been
paid (any such tax being payable by the holder of such Rights Certificates at
the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.

          Section 10. Preferred Stock Record Date. Each person in whose name any
certificate for a number of one one-hundredths of a share of Preferred Stock (or
Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be)

                                       19

<PAGE>

transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.

          Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.

               (a)(i) In the event the Company shall at any time after the date
     of this Agreement (A) declare a dividend on the Preferred Stock payable in
     shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
     (C) combine the outstanding Preferred Stock into a smaller number of
     shares, or (D) issue any shares of its capital stock in a reclassification
     of the Preferred Stock (including any such reclassification in connection
     with a consolidation or merger in which the Company is the continuing or
     surviving corporation), except as otherwise provided in this Section 11(a)
     and Section 7(e) hereof, the Purchase Price in effect at the time of the
     record date for such dividend or of the effective date of such subdivision,
     combination or reclassification, and the number and kind of shares of
     Preferred Stock or capital stock, as the case may be, issuable on such
     date, shall be proportionately adjusted so that the holder of any Right
     exercised after such time shall be entitled to receive, upon payment of the
     Purchase Price then in effect, the aggregate number and kind of shares of
     Preferred Stock or capital stock, as the case may be, which, if such Right
     had been exercised immediately prior to such date and at a time when the
     Preferred Stock transfer books of the Company were open, such holder would
     have owned upon such exercise and been entitled to receive by virtue of
     such dividend, subdivision, combination or reclassification. If an event
     occurs which would require an adjustment under both this Section 11(a)(i)
     and Section 11(a)(ii) hereof, the adjustment provided for in this Section
     11(a)(i) shall be in addition to, and shall be made prior to, any
     adjustment required pursuant to Section 11(a)(ii) hereof.

                    (ii) In the event (A) any Person shall, at any time after
     the Rights Dividend Declaration Date, become an

                                       20

<PAGE>

     Acquiring Person, unless the event causing such Person to become an
     Acquiring Person is a transaction set forth in Section 13(a) hereof, or is
     an acquisition of shares of Common Stock pursuant to a tender offer or an
     exchange offer for all outstanding shares of Common Stock at a price and on
     terms determined by at least a majority of the members of the Board who are
     not officers of the Company and who are not representatives, nominees,
     Affiliates or Associates of an Acquiring Person, after receiving advice
     from one or more investment banking firms, to be (a) at a price which is
     fair to stockholders and not inadequate (taking into account all factors
     which such members of the Board deem relevant, including, without
     limitation, prices which could reasonably be achieved if the Company or its
     assets were sold on an orderly basis designed to realize maximum value) and
     (b) otherwise in the best interests of the Company and its stockholders (a
     "Qualified Offer"), or (B) the Board shall declare any Person to be an
     Adverse Person, then, promptly following the occurrence of such event,
     proper provision shall be made so that each holder of a Right (except as
     provided below and in Section 7(e) hereof) shall thereafter have the right
     to receive, upon exercise thereof at the then current Purchase Price in
     accordance with the terms of this Agreement, in lieu of a number of one
     one-hundredths of a share of Preferred Stock, such number of shares of
     Common Stock as shall equal the result obtained by (x) multiplying the then
     current Purchase Price by the then number of one one-hundredths of a share
     of Preferred Stock for which a Right was exercisable immediately prior to
     the first occurrence of a Section 11(a)(ii) Event, and (y) dividing that
     product (which, following such first occurrence, shall thereafter be
     referred to as the "Purchase Price" for each Right and for all purposes of
     this Agreement) by 50% of the Current Market Price (determined pursuant to
     Section 11(d) hereof) per share of Common Stock on the date of such first
     occurrence (such number of shares, the "Adjustment Shares").

                    (iii) In the event that the number of shares of Common Stock
     which is authorized by the Company's Restated Certificate of Incorporation,
     but not outstanding or reserved for issuance for purposes other than upon
     exercise of the Rights, is not sufficient to permit the exercise in full of
     the Rights in accordance with the foregoing subparagraph (ii) of this
     Section 11(a), the Company shall (A) determine the value of the Adjustment
     Shares issuable upon the exercise of a Right (the "Current Value"), and (B)
     with respect to each Right (subject to Section 7(e) hereof), make adequate
     provision to substitute for the Adjustment Shares, upon the

                                       21

<PAGE>

     exercise of a Right and payment of the applicable Purchase Price, (1) cash,
     (2) a reduction in the Purchase Price, (3) Common Stock or other equity
     securities of the Company (including, without limitation, shares, or units
     of shares, of preferred stock, such as the Preferred Stock, which the Board
     has deemed to have essentially the same value or economic rights as shares
     of Common Stock (such shares of preferred stock being referred to as
     "Common Stock Equivalents")), (4) debt securities of the Company, (5) other
     assets, or (6) any combination of the foregoing, having an aggregate value
     equal to the Current Value (less the amount of any reduction in the
     Purchase Price), where such aggregate value has been determined by the
     Board based upon the advice of a nationally recognized investment banking
     firm selected by the Board; provided, however, that if the Company shall
     not have made adequate provision to deliver value pursuant to clause (B)
     above within thirty (30) days following the later of (x) the first
     occurrence of a Section 11(a)(ii) Event and (y) the date on which the
     Company's right of redemption pursuant to Section 23 expires (the later of
     (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger
     Date"), then the Company shall be obligated to deliver, upon the surrender
     for exercise of a Right and without requiring payment of the Purchase
     Price, shares of Common Stock (to the extent available) and then, if
     necessary, cash, which shares and/or cash have an aggregate value equal to
     the Spread. For purposes of the preceding sentence, the term "Spread" shall
     mean the excess of (i) the Current Value over (ii) the Purchase Price. If
     the Board determines in good faith that it is likely that sufficient
     additional shares of Common Stock could be authorized for issuance upon
     exercise in full of the Rights, the thirty (30) day period set forth above
     may be extended to the extent necessary, but not more than ninety (90) days
     after the Section 11(a)(ii) Trigger Date, in order that the Company may
     seek shareholder approval for the authorization of such additional shares
     (such thirty (30) day period, as it may be extended, is herein called the
     "Substitution Period"). To the extent that the Company determines that
     action should be taken pursuant to the first and/or third sentences of this
     Section 11(a)(iii), the Company (1) shall provide, subject to Section 7(e)
     hereof, that such action shall apply uniformly to all outstanding Rights,
     and (2) may suspend the exercisability of the Rights until the expiration
     of the Substitution Period in order to seek such shareholder approval for
     such authorization of additional shares and/or to decide the appropriate
     form of distribution to be made pursuant to such first sentence and to
     determine the value thereof. In the event of any such suspension, the
     Company shall issue a public

                                       22

<PAGE>

     announcement stating that the exercisability of the Rights has been
     temporarily suspended, as well as a public announcement at such time as the
     suspension is no longer in effect. For purposes of this Section 11(a)(iii),
     the value of each Adjustment Share shall be the Current Market Price per
     share of the Common Stock on the Section 11(a)(ii) Trigger Date and the per
     share or per unit value of any Common Stock Equivalent shall be deemed to
     equal the Current Market Price per share of the Common Stock on such date.

               (b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Preferred Stock entitling them
to subscribe for or purchase (for a period expiring within forty-five (45)
calendar days after such record date) Preferred Stock (or shares having the same
rights, privileges and preferences as the shares of Preferred Stock ("Equivalent
Preferred Stock")) or securities convertible into Preferred Stock or Equivalent
Preferred Stock at a price per share of Preferred Stock or per share of
Equivalent Preferred Stock (or having a conversion price per share, if a
security convertible into Preferred Stock or Equivalent Preferred Stock) less
than the Current Market Price (as determined pursuant to Section 11(d) hereof)
per share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock and/or
Equivalent Preferred Stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or Equivalent Preferred Stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid by delivery of consideration, part or all of which may be in a form
other than cash, the value of such consideration shall be as determined in good
faith by the Board, whose determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights Agent and the holders
of the Rights. Shares of Preferred Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record date is fixed,
and in the event that such rights or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.

                                       23

<PAGE>

               (c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation), cash (other than a regular quarterly cash dividend out
of the earnings or retained earnings of the Company), assets (other than a
dividend payable in Preferred Stock, but including any dividend payable in stock
other than Preferred Stock) or evidences of indebtedness, or of subscription
rights or warrants (excluding those referred to in Section 11(b) hereof), the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the Current Market Price (as
determined pursuant to Section 11(d) hereof) per share of Preferred Stock on
such record date, less the fair market value (as determined in good faith by the
Board, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets or evidences of indebtedness so
to be distributed or of such subscription rights or warrants applicable to a
share of Preferred Stock, and the denominator of which shall be such Current
Market Price (as determined pursuant to Section 11(d) hereof) per share of
Preferred Stock. Such adjustments shall be made successively whenever such a
record date is fixed, and in the event that such distribution is not so made,
the Purchase Price shall be adjusted to be the Purchase Price which would have
been in effect if such record date had not been fixed.

          (d)(i) For the purpose of any computation hereunder, other than
     computations made pursuant to Section 11(a)(iii) hereof, the Current Market
     Price per share of Common Stock on any date shall be deemed to be the
     average of the daily closing prices per share of such Common Stock for the
     thirty (30) consecutive Trading Days immediately prior to such date, and
     for purposes of computations made pursuant to Section 11(a)(iii) hereof,
     the Current Market Price per share of Common Stock on any date shall be
     deemed to be the average of the daily closing prices per share of such
     Common Stock for the ten (10) consecutive Trading Days immediately
     following such date; provided, however, that in the event that the Current
     Market Price per share of the Common Stock is determined during a period
     following the announcement by the issuer of such Common Stock of (A) a
     dividend or distribution on such Common Stock payable in shares of such
     Common Stock or securities convertible into shares of such Common Stock
     (other than the Rights), or (B) any subdivision, combination or
     reclassification of such Common Stock, and the ex-dividend date for such
     dividend or distribution, or the record date for such subdivision,
     combination or reclassification shall not have occurred prior to the
     commencement of the requisite thirty (30) Trading Day or ten (10) Trading
     Day period, as set forth above, then, and in each such case, the Current
     Market Price shall be properly

                                       24

<PAGE>

     adjusted to take into account ex-dividend trading. The closing price for
     each day shall be the last sale price, regular way, or, in case no such
     sale takes place on such day, the average of the closing bid and asked
     prices, regular way, in either case as reported in the principal
     consolidated transaction reporting system with respect to securities listed
     or admitted to trading on the New York Stock Exchange or, if the shares of
     Common Stock are not listed or admitted to trading on the New York Stock
     Exchange, as reported in the principal consolidated transaction reporting
     system with respect to securities listed on the principal national
     securities exchange on which the shares of Common Stock are listed or
     admitted to trading or, if the shares of Common Stock are not listed or
     admitted to trading on any national securities exchange, the last quoted
     price or, if not so quoted, the average of the high bid and low asked
     prices in the over-the-counter market, as reported by the National
     Association of Securities Dealers Automated Quotation System ("NASDAQ") or
     such other system then in use, or, if on any such date the shares of Common
     Stock are not quoted by any such organization, the average of the closing
     bid and asked prices as furnished by a professional market maker making a
     market in the Common Stock selected by the Board. If on any such date no
     market maker is making a market in the Common Stock, the fair value of such
     shares on such date as determined in good faith by the Board shall be used.
     The term "Trading Day" shall mean a day on which the principal national
     securities exchange on which the shares of Common Stock are listed or
     admitted to trading is open for the transaction of business or, if the
     shares of Common Stock are not listed or admitted to trading on any
     national securities exchange, a Business Day. If the Common Stock is not
     publicly held or not so listed or traded, Current Market Price per share
     shall mean the fair value per share as determined in good faith by the
     Board, whose determination shall be described in a statement filed with the
     Rights Agent and shall be conclusive for all purposes.

                    (ii) For the purpose of any computation hereunder, the
     Current Market Price per share of Preferred Stock shall be determined in
     the same manner as set forth above for the Common Stock in clause (i) of
     this Section 11(d) (other than the last sentence thereof). If the Current
     Market Price per share of Preferred Stock cannot be determined in the
     manner provided above or if the Preferred Stock is not publicly held or
     listed or traded in a manner described in clause (i) of this Section 11(d),
     the Current Market Price per share of Preferred Stock shall be conclusively
     deemed to be an amount equal to 100 (as such number may be appropriately
     adjusted for such events as stock splits, stock dividends and
     recapitalizations with respect to the Common Stock occurring after the date
     of this Agreement)

                                       25

<PAGE>

     multiplied by the Current Market Price per share of the Common Stock. If
     neither the Common Stock nor the Preferred Stock is publicly held or so
     listed or traded, Current Market Price per share of the Preferred Stock
     shall mean the fair value per share as determined in good faith by the
     Board, whose determination shall be described in a statement filed with the
     Rights Agent and shall be conclusive for all purposes.

               (e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a share of
Common Stock or other share or one-millionth of a share of Preferred Stock, as
the case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three (3) years from the date of the transaction which mandates such
adjustment, or (ii) the Expiration Date.

               (f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.

               (g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.

               (h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths

                                       26

<PAGE>

of a share of Preferred Stock (calculated to the nearest one-millionth) obtained
by (i) multiplying (x) the number of one one-hundredths of a share covered by a
Right immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.

               (i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any adjustment
in the number of one one-hundredths of a share of Preferred Stock purchasable
upon the exercise of a Right. Each of the Rights outstanding after the
adjustment in the number of Rights shall be exercisable for the number of one
one-hundredths of a share of Preferred Stock for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one-ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the
Rights Certificates have been issued, shall be at least ten (10) days later than
the date of the public announcement. If Rights Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.

               (j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-hundredths of a share of Preferred Stock issuable
upon the exercise of the Rights, the Rights Certificates theretofore and
thereafter issued may continue to express the Purchase Price per one
one-hundredth

                                       27

<PAGE>

of a share and the number of one one-hundredth of a share which were expressed
in the initial Rights Certificates issued hereunder.

               (k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the number
of one one-hundredths of a share of Preferred Stock issuable upon exercise of
the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable such number of one one-hundredths of
a share of Preferred Stock at such adjusted Purchase Price.

               (l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-hundredths of a share of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of one one-hundredths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.

               (m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board shall determine to be
advisable in order that any (i) consolidation or subdivision of the Preferred
Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less
than the Current Market Price, (iii) issuance wholly for cash of shares of
Preferred Stock or securities which by their terms are convertible into or
exchangeable for shares of Preferred Stock, (iv) stock dividends or (v) issuance
of rights, options or warrants referred to in this Section 11, hereafter made by
the Company to holders of its Preferred Stock shall not be taxable to such
stockholders.

               (n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of

                                       28

<PAGE>

related transactions, assets, cash flow or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any other Person or Persons (other than the Company and/or any of
its Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), if (x) at the time of or immediately after such consolidation,
merger or sale there are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights or (y)
prior to, simultaneously with or immediately after such consolidation, merger or
sale, the shareholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.

               (o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.

               (p) Anything in this Agreement to the contrary notwithstanding,
in the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, the number
of Rights associated with each share of Common Stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately following the
occurrence of such event.

               (q) The failure by the Board to declare a Person to be an Adverse
Person following such Person becoming the Beneficial Owner of 5% or more of the
outstanding Common Stock shall not imply that such Person is not an Adverse
Person or limit the Board's right at any time in the future to declare such
Person to be an Adverse Person.

                                       29

<PAGE>

          Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 and Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate and (c) if a
Distribution Date has occurred, mail a brief summary thereof to each holder of a
Rights Certificate. The Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment therein contained.

          Section 13. Consolidation, Merger or Sale or Transfer of Assets, Cash
Flow or Earning Power.

               (a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (y)
any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
Person or cash or any other property, or (z) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer),
in one transaction or a series of related transactions, assets, cash flow or
earning power aggregating more than 50% of the assets, cash flow or earning
power of the Company and its Subsidiaries (taken as a whole) to any Person or
Persons (other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o) hereof), then, and in
each such case (except as may be contemplated by Section 13(d) hereof), proper
provision shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, such number of validly authorized and issued, fully paid,
non-assessable and freely tradeable shares of Common Stock of the Principal
Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be equal
to the result obtained by (1) multiplying the then current Purchase Price by the
number of one one-hundredths of a share of Preferred Stock for which a Right is
exercisable immediately prior to the first occurrence of a Section 13 Event (or,
if a Section 11(a)(ii) Event has occurred prior

                                       30

<PAGE>

to the first occurrence of a Section 13 Event, multiplying the number of such
one one-hundredths of a share for which a Right was exercisable immediately
prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price
in effect immediately prior to such first occurrence of a Section 11(a)(ii)
Event), and (2) dividing that product (which, following the first occurrence of
a Section 13 Event, shall be referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by 50% of the Current Market Price
(determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock
of such Principal Party on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall
be of no effect following the first occurrence of any Section 13 Event.

               (b) "Principal Party" shall mean:

                    (i) in the case of any transaction described in clause (x)
     or (y) of the first sentence of Section 13(a), the Person that is the
     issuer of any securities into which shares of Common Stock of the Company
     are converted in such merger or consolidation, and if no securities are so
     issued, the Person that is the other party to such merger or consolidation;
     and

                    (ii) in the case of any transaction described in clause (z)
     of the first sentence of Section 13(a), the Person that is the party
     receiving the greatest portion of the assets, cash flow or earning power
     transferred pursuant to such transaction or transactions; provided,
     however, that in any such case, (1) if the Common Stock of such Person is
     not at such time and has not been continuously over the preceding twelve
     (12) month period registered under Section 12 of the Exchange Act, and such
     Person is a direct or indirect Subsidiary of another Person the Common
     Stock of which is and has been so registered, "Principal Party" shall refer
     to such other Person; and (2) in case such Person is a Subsidiary, directly
     or indirectly, of more than one Person, the Common Stock of two or

                                       31

<PAGE>

     more of which are and have been so registered, "Principal Party" shall
     refer to whichever of such Persons is the issuer of the Common Stock having
     the greatest aggregate market value.

               (c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will:

                    (i) prepare and file a registration statement under the Act,
     with respect to the Rights and the securities purchasable upon exercise of
     the Rights on an appropriate form, and will use its best efforts to cause
     such registration statement to (A) become effective as soon as practicable
     after such filing and (B) remain effective (with a prospectus at all times
     meeting the requirements of the Act) until the Expiration Date; and

                    (ii) take all such other action as may be necessary to
     enable the Principal Party to issue the securities purchasable upon
     exercise of the Rights, including but not limited to the registration or
     qualification of such securities under all requisite securities laws of
     jurisdictions of the various states and the listing of such securities on
     such exchanges and trading markets as may be necessary or appropriate; and

                    (iii) will deliver to holders of the Rights historical
     financial statements for the Principal Party and each of its Affiliates
     which comply in all respects with the requirements for registration on Form
     10 under the Exchange Act.

The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).

                                       32

<PAGE>

               (d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons who acquired shares of Common Stock pursuant to a tender offer
or exchange offer for all outstanding shares of Common Stock which is a
Qualified Offer as such term is defined in Section 11(a)(ii)(B) hereof (or a
wholly owned subsidiary of any such Person or Persons), (ii) the price per share
of Common Stock offered in such transaction is not less than the price per share
of Common Stock paid to all holders of shares of Common Stock whose shares were
purchased pursuant to such tender offer or exchange offer and (iii) the form of
consideration being offered to the remaining holders of shares of Common Stock
pursuant to such transaction is the same as the form of consideration paid
pursuant to such tender offer or exchange offer. Upon consummation of any such
transaction contemplated by this Section 13(d), all Rights hereunder shall
expire.

          Section 14. Fractional Rights and Fractional Shares.

          (a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, the Company shall pay to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights, selected by the Board.
If on any such date no such market maker is making a market in the Rights, the
fair

                                       33

<PAGE>

value of the Rights on such date as determined in good faith by the Board shall
be used.

               (b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
one one-hundredth of a share of Preferred Stock) upon exercise of the Rights or
to distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-hundredth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-hundredth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value of
one one-hundredth of a share of Preferred Stock shall be one one-hundredth of
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.

               (c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of shares of Common Stock upon exercise
of the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one (1) share of Common Stock. For purposes of this
Section 14(c), the current market value of one share of Common Stock shall be
the closing price per share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) on the Trading Day immediately prior to the date of such
exercise.

               (d) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.

          Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights

                                       34

<PAGE>

Certificate in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement.

          Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:

               (a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;

               (b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;

               (c) subject to Section 6(a) and Section 7(f) hereof, the Company
and the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and

               (d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.

                                       35

<PAGE>

          Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one
one-hundredths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.

          Section 18. Concerning the Rights Agent.

               (a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
gross negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises.

               (b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.

          Section 19. Merger or Consolidation or Change of Name of Rights Agent.

                                       36

<PAGE>

               (a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust, stock transfer or other shareholder services business of
the Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto; but only if such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.

               (b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.

          Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:

               (a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.

               (b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person or
Adverse Person and the determination of Current Market Price) be proved or

                                       37

<PAGE>

established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by the Chairman of the Board, any Vice Chairman of the
Board, the President, any Vice President, the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.

               (c) The Rights Agent shall be liable hereunder only for its own
gross negligence, bad faith or willful misconduct.

               (d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.

               (e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11, Section 13 or Section 24 hereof or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after actual notice of any
such adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock or Preferred Stock to be issued pursuant to this Agreement or
any Rights Certificate or as to whether any shares of Common Stock or Preferred
Stock will, when so issued, be validly authorized and issued, fully paid and
nonassessable.

               (f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.

                                       38

<PAGE>

               (g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, any Vice Chairman of the Board, the President, any Vice
President, the Secretary, any Assistant Secretary, the Treasurer or any
Assistant Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer.

               (h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become peculiarly interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.

               (i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
selection and continued employment thereof.

               (j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.

               (k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

               (l) Notwithstanding anything to the contrary contained herein,
the Rights Agent shall not be liable for any delays or failures in performance
resulting from acts beyond its reasonable control including, without limitation,
acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions,
interruptions

                                       39

<PAGE>

or malfunction of computer facilities, or loss of data due to power failures or
mechanical difficulties with information storage or retrieval systems, labor
difficulties, war, or civil unrest.

          Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and, if such resignation occurs after the Distribution Date, to
the registered holders of the Rights Certificates by first-class mail. In the
event the transfer agency relationship in effect between the Company and the
Rights Agent terminates, the Rights Agent will be deemed to resign automatically
on the effective date of such termination; and any required notice will be sent
by the Company. The Company may remove the Rights Agent or any successor Rights
Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock and Preferred Stock, by registered or certified mail, and, if such
removal occurs after the Distribution Date, to the holders of the Rights
Certificates by first-class mail. If the Rights Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be (a) a legal business entity organized and
doing business under the laws of the United States or of the State of New York
or of any other state of the United States, in good standing, having an office
in the State of New York, which is authorized under such laws to exercise
corporate trust, stock transfer or shareholder services powers and which has at
the time of its appointment as Rights Agent a combined capital and surplus of at
least $50,000,000 or (b) an affiliate of a legal business entity described in
clause (a) of this sentence. After appointment, the successor Rights Agent shall
be vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and, if such appointment occurs after
the

                                       40

<PAGE>

Distribution Date, mail a notice thereof in writing to the registered holders of
the Rights Certificates. Failure to give any notice provided for in this Section
21, however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.

          Section 22. Issuance of New Rights Certificates. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by the Board to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to
the redemption or expiration of the Rights, the Company (a) shall, with respect
to shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.

          Section 23. Redemption and Termination. The Board may, at its option,
at any time prior to the earlier of (i) the close of business on the tenth
Business Day following the Stock Acquisition Date (or, if the Stock Acquisition
Date shall have occurred prior to the Record Date, the close of business on the
tenth Business Day following the Record Date) or (ii) the Final Expiration Date,
redeem all but not less than all of the then outstanding Rights at a redemption
price of $0.001 per Right, as such amount may be appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such redemption price being hereinafter referred to as the
"Redemption Price") and the Company may, at its option pay the Redemption Price
in cash, shares of Common Stock, (based on the Current Market Price of the
Common Stock of the date of redemption) or any other form of consideration
deemed appropriate by the Board. Notwithstanding the foregoing, the Board may
not redeem any Rights following a determination that any Person is an Adverse
Person. Notwithstanding anything

                                       41

<PAGE>

contained in this Agreement to the contrary, the Rights shall not be exercisable
after the first occurrence of a Section 11(a)(ii) Event until such time as the
Company's right of redemption hereunder has expired.

          Section 24. Exchange.

               (a) The Board may, at its option, at any time after any Person
becomes an Acquiring Person or an Adverse Person, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for Common
Stock at an exchange ratio of one share of Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board shall not
be empowered to effect such exchange at any time after any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or any such Subsidiary, or any entity holding Common Stock for or
pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Stock then outstanding.

               (b) Immediately upon the action of the Board ordering the
exchange of any Rights pursuant to subsection (a) of this Section 24 and without
any further action and without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of a holder of such Rights shall
be to receive that number of shares of Common Stock equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio. The Company shall
promptly give public notice of any such exchange; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Stock for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other than Rights
which have become void pursuant to the provisions of Section 7(e) hereof) held
by each holder of Rights.

               (c) In any exchange pursuant to this Section 24, the Company, at
its option, may substitute Preferred Stock (or Equivalent Preferred Stock, as
such term is defined in paragraph (b) of Section 11 hereof) for Common Stock
exchangeable for Rights, at the initial rate of one one-hundredth of a share of

                                       42

<PAGE>

Preferred Stock (or Equivalent Preferred Stock) for each share of Common Stock,
as appropriately adjusted to reflect stock splits, stock dividends and other
similar transactions after the date hereof.

               (d) In the event that there shall not be sufficient shares of
Common Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights.

               (e) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares of Common Stock, there
shall be paid to the registered holders of the Rights Certificates with regard
to which such fractional shares of Common Stock would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
share of Common Stock. For the purposes of this subsection (e), the current
market value of a whole share of Common Stock shall be the closing price of a
share of Common Stock (as determined pursuant to the second sentence of Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange
pursuant to this Section 24.

          Section 25. Notice of Certain Events.

               (a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular periodic cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one transaction or a series of related transactions,
of more than 50% of the assets, cash flow or earning power of the Company and
its Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Company and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company

                                       43

<PAGE>

shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock, whichever shall be the earlier.

               (b) In case a Section 11(a)(ii) Event shall occur, then, in any
such case, (i) the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of the occurrence of such event, which shall specify
the event and the consequences of the event to holders of Rights under Section
11(a)(ii) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if
appropriate, other securities.

          Section 26. Notices. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing by the Rights Agent with the Company) as follows:

          LSB Corporation
          30 Massachusetts Avenue
          North Andover, Massachusetts 01845
          Attention: ___________________

Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing by the Rights Agent with the Company) as follows:

          Computershare Trust Company, N.A.
          150 Royall Street
          Canton, MA 02021
          Attention: General Counsel

                                       44

<PAGE>

          Notices or demands authorized by this Agreement to be given or made by
the Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the records of the Company.

          Section 27. Supplements and Amendments. Prior to the Distribution
Date, the Company and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Agreement without the approval of any
holders of certificates representing shares of Common Stock. From and after the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder or (iv) to change or supplement the provisions hereunder in any manner
which the Company may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Rights Certificates (other than an
Acquiring Person, an Adverse Person or any Affiliate or Associate of an
Acquiring Person or an Adverse Person). Upon the delivery of a certificate from
an appropriate officer of the Company which states that the proposed supplement
or amendment is in compliance with the terms of this Section 27, the Rights
Agent shall execute such supplement or amendment. Notwithstanding anything
herein to the contrary, this Agreement may not be amended (other than pursuant
to clauses (i) or (ii) of the next preceding sentence) at a time when the Rights
are not redeemable.

          Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

          Section 29. Determinations and Actions by the Board, etc. For all
purposes of this Agreement, any calculation of the number of shares of Common
Stock or any other class of capital stock outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding shares of Common Stock of which any Person is the Beneficial Owner,
shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act. The Board shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board or to the Company, or as may
be necessary or

                                       45

<PAGE>

advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights, to declare that a Person is an Adverse Person or to amend the
Agreement). All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board in good faith, shall (x) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties, and (y) not subject the Board or any of the
directors on the Board to any liability to the holders of the Rights.

          Section 30. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).

          Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid language from this
Agreement would adversely affect the purpose or effect of this Agreement, the
right of redemption set forth in Section 23 hereof shall be reinstated and shall
not expire until the close of business on the tenth Business Day following the
date of such determination by the Board. Without limiting the foregoing, if any
provision requiring a specific group of directors to act is held to by any court
of competent jurisdiction or other authority to be invalid, void or
unenforceable, such determination shall then be made by the Board in accordance
with applicable law and the Company's Articles of Organization and By-laws.

          Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the Commonwealth of Massachusetts for all purposes shall be governed by

                                       46

<PAGE>

and construed in accordance with the laws of such Commonwealth applicable to
contracts made and to be performed entirely within such Commonwealth.

          Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.

          Section 34. Descriptive Headings. Descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.

Attest:                                 LSB CORPORATION

/s/ Barbara Biondo                      By /s/ Paul A. Miller
-------------------------------------      -------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title: President & CEO
       ------------------------------

Attest:                                 COMPUTERSHARE TRUST COMPANY, N.A.

/s/ Jeff Seiders                        By /s/ Tyler Haynes
-------------------------------------      -------------------------------------
Name: Jeff Seiders                      Name: Tyler Haynes
Title: Account Manager                  Title: Managing Director

                                       47

<PAGE>

                                                                       Exhibit A

                          [Form of Rights Certificate]

Certificate No. R-                                               ________ Rights

NOT EXERCISABLE AFTER DECEMBER 18, 2016 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001
PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ADVERSE
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN [ACQUIRING] [ADVERSE] PERSON OR AN AFFILIATE OR ASSOCIATE OF AN [ACQUIRING]
[ADVERSE] PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]*

                               Rights Certificate

                                 LSB CORPORATION

          This certifies that _______________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the
Renewed Rights Agreement, dated as of November 17, 2005 (the "Rights
Agreement"), between LSB Corporation, a Massachusetts corporation (the
"Company"), and Computershare Trust Company, N.A.(the "Rights Agent"), to
purchase from the Company at any time prior to 5:00 P.M. (Boston time) on
December 18, 2016 (unless such date is extended prior thereto by the Board) at
the office or offices of

----------
*    The portion of the legend in brackets shall be inserted only if applicable
     and shall replace the preceding sentence.

                                        1

<PAGE>

the Rights Agent designated for such purpose, or its successors as Rights Agent,
one one-hundredth of a fully paid, non-assessable share of Series A Junior
Participating Preferred Stock (the "Preferred Stock") of the Company, at a
purchase price of $85.00 per one one-hundredth of a share (the "Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase and related Certificate duly executed. The number
of Rights evidenced by this Rights Certificate (and the number of shares which
may be purchased upon exercise thereof) set forth above, and the Purchase Price
per share set forth above, are the number and Purchase Price as of November 17,
2005, based on the Preferred Stock as constituted at such date. The Company
reserves the right to require prior to the occurrence of a Triggering Event (as
such term is defined in the Rights Agreement) that a number of Rights be
exercised so that only whole shares of Preferred Stock will be issued.

          Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person, an Adverse Person
or an Affiliate or Associate of any such Person (as such terms are defined in
the Rights Agreement), (ii) a transferee of any such Acquiring Person, Adverse
Person, Associate or Affiliate, or (iii) under certain circumstances specified
in the Rights Agreement, a transferee of a person who, after such transfer,
became an Acquiring Person, an Adverse Person or an Affiliate or Associate of an
Acquiring Person or Adverse Person, such Rights shall become null and void and
no holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.

          As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities, which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events.

          This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.

                                        2

<PAGE>

          This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.

          Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option
(unless the Board shall have made a determination that a Person is an Adverse
Person) at a redemption price of $0.001 per Right at any time prior to the
earlier of the close of business on (i) the tenth Business Day following the
Stock Acquisition Date (as such time period may be extended pursuant to the
Rights Agreement), and (ii) the Final Expiration Date. In addition, under
certain circumstances following the Stock Acquisition Date, the Rights may be
exchanged, in whole or in part, for shares of the Common Stock, or shares of
preferred stock of the Company having essentially the same value or economic
rights as such shares. Immediately upon the action of the Board authorizing any
such exchange, and without any further action or any notice, the Rights (other
than Rights which are not subject to such exchange) will terminate and the
Rights will only enable holders to receive the shares issuable upon such
exchange.

          No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement. The Company, at its election, may require that a number of Rights be
exercised so that only whole shares of Preferred Stock would be issued.

          No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give consent to or withhold consent from any corporate
action, or, to receive notice of meetings or other actions

                                        3

<PAGE>

affecting stockholders (except as provided in the Rights Agreement), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.

          This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.

                                        4

<PAGE>

          WITNESS the facsimile signature of the proper officers of the Company.

Dated as of [___________].

                                        LSB CORPORATION

                                        By
                                           -------------------------------------
                                        Title:
                                               ---------------------------------

Countersigned:

COMPUTERSHARE TRUST COMPANY, N.A.

By
   -------------------------------------
   Authorized Signature

                                        5

<PAGE>

                  [Form of Reverse Side of Rights Certificate]

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such
               holder desires to transfer the Rights Certificate.)

          FOR VALUE RECEIVED ______________________________________ hereby
sells, assigns and transfers unto ______________________________________

    _________________________________________________________________________
                  (Please print name and address of transferee)

this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Rights Certificate on the books of the within named
Company, with full power of substitution.

Dated: __________________, ___

                                        ----------------------------------------
                                        Signature

Signature Guaranteed:

                                   Certificate

          The undersigned hereby certifies by checking the appropriate boxes
that:

          (1) this Rights Certificate [_________] is [_________] is not being
sold, assigned and transferred by or on behalf of a Person who is or was an
Acquiring Person, an Adverse Person or an Affiliate or Associate of any such
Person (as such terms are defined pursuant to the Rights Agreement);

          (2) after due inquiry and to the best knowledge of the undersigned, it
[_________] did [_________] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person, an Adverse Person or an Affiliate or Associate of any such Person.

Dated: _______________, ___             ----------------------------------------
                                        Signature

Signature Guaranteed:

<PAGE>

                                     NOTICE

          The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.

<PAGE>

                          FORM OF ELECTION TO PURCHASE

              (To be executed if holder desires to exercise Rights
                     represented by the Rights Certificate.)

To: LSB Corporation

          The undersigned hereby irrevocably elects to exercise _______________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:

Please insert social security
or other identifying number ____________________

________________________________________________________________________________
                         (Please print name and address)

________________________________________________________________________________

          If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:

Please insert social security
or other identifying number  ___________________

________________________________________________________________________________
                         (Please print name and address)

________________________________________________________________________________

Dated: _______________, ___

                                        ----------------------------------------
                                        Signature

Signature Guaranteed:

<PAGE>

                                   Certificate

          The undersigned hereby certifies by checking the appropriate boxes
that:

          (1) the Rights evidenced by this Rights Certificate [_________] are
[_________] are not being exercised by or on behalf of a Person who is or was an
Acquiring Person, an Adverse Person or an Affiliate or Associate of any such
Person (as such terms are defined pursuant to the Rights Agreement);

          (2) after due inquiry and to the best knowledge of the undersigned, it
[_________] did [_________] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person.

Dated: ______________, ___              ----------------------------------------
                                        Signature

Signature Guaranteed:

<PAGE>

                                     NOTICE

          The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.

<PAGE>

                                                                       Exhibit B

                          SUMMARY OF RIGHTS TO PURCHASE
                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

          On November 17, 2005, the Board of LSB Corporation (the "Company")
declared a dividend distribution of one Right for each outstanding share of
Company Common Stock to stockholders of record at the close of business upon the
"Expiration Date" under the Rights Agreement, dated as of December 19, 1996,
between the Company and the Rights Agent thereunder (the "Record Date"). Each
Right entitles the registered holder to purchase from the Company a unit
consisting of one one-hundredth of a share (a "Unit") of Series A Junior
Participating Preferred Stock, par value $.10 per share (the "Series A Preferred
Stock") at a Purchase Price of $85.00 per Unit, subject to adjustment. The
description and terms of the Rights are set forth in a Renewed Rights Agreement
(the "Rights Agreement") between the Company and Computershare Trust Company,
N.A. as Rights Agent dated as of November 17, 2005.

          Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. Subject to certain exceptions specified in the
Rights Agreement, the Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 business days (or such
later date as the Board shall determine) following a public announcement by the
Company that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 10% or more of the
outstanding shares of Common Stock (the "Stock Acquisition Date"), other than as
a result of repurchases of stock by the Company or certain inadvertent actions
by institutional or certain other stockholders, (ii) 10 business days (or such
later date as the Board shall determine) following the commencement of a tender
offer or exchange offer that would result in a person or group becoming an
Acquiring Person or (iii) 10 business days (or such later date as the Board
shall determine) after the Board shall declare any person to be an Adverse
Person, upon (a) a determination that such person, (1) alone or together with
its Affiliates and Associates, has become the beneficial owner of a number of
shares of Common Stock determined to be substantial (which amount shall in no
event be less than 5% of the outstanding shares of Common Stock) and (2) that
(A) such beneficial ownership by such Person is intended to cause or is
reasonably likely to cause the Company to repurchase the Common Stock
beneficially owned by such Person or to cause pressure on the Company to take
action or enter into a transaction or series of transactions which would provide
such Person with short-term financial gain under circumstances where the Board
determines that the best long-term interests of the Company and its
stockholders, but for the actions and possible actions of such Person, would not
be served by taking such action or entering into such transactions or series of
transactions at that time or (B) such beneficial

                                        1

<PAGE>

ownership is causing or is reasonably likely to cause a material adverse impact
(including, but not limited to, impairment of relationships with customers or
impairment of the Company's ability to maintain its competitive position) on the
business or prospects of the Company; or (b) a determination that such Person is
a present or future interested stockholder (as defined by M.G.L. Chapter 110F)
or a filer of a Schedule 13G (as referenced in such Chapter 110F) or a Schedule
13D with respect to shares of Common Stock who, without the prior approval of
the Board: (I) has increased, after the later of the date of this Agreement and
the date on which such Person first became an interested stockholder or first
filed a Schedule 13G or Schedule 13D, its beneficial ownership of Common Stock
by one percent or more of the outstanding Common Stock within any twelve month
period; or (II) has taken, after the date of this Agreement and during the three
year period following the date such Person first became an interested
stockholder or a Schedule 13G or Schedule 13D filer, any public action which, in
the good faith judgment of the Board, has the purpose or effect of advocating
that the Company pursue, or otherwise seeking to cause the Company to pursue, a
potential sale, unless such Person has made a bona fide proposal to effect a
business combination of the Company with such Person or with another entity in
compliance with the provisions of such Chapter 110F . Until the Distribution
Date, (x) the Rights will be evidenced by the Common Stock certificates and will
be transferred with and only with such Common Stock certificates, (y) new Common
Stock certificates issued after the Record Date will contain a notation
incorporating the Rights Agreement by reference and (z) the surrender for
transfer of any certificates for Common Stock outstanding will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificate. Pursuant to the Rights Agreement, the Company reserves the right to
require prior to the occurrence of a Triggering Event (as defined below) that,
upon any exercise of Rights, a number of Rights be exercised so that only whole
shares of Preferred Stock will be issued.

          The Rights are not exercisable until the Distribution Date and will
expire at 5:00 P.M. (Boston time) on December 18, 2016, unless such date is
extended or the Rights are earlier redeemed or exchanged by the Company as
described below.

          As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board, only shares of Common Stock issued prior to the Distribution Date
will be issued with Rights.

          In the event that (i) a Person becomes an Acquiring Person, except
pursuant to an offer for all outstanding shares of Common Stock which the
independent directors determine to be fair and not inadequate and to otherwise
be in the best interests of the Company and its stockholders, after receiving
advice from one or more investment banking firms (a "Qualified Offer") or (ii)
the Board

<PAGE>

declares any Person to be an Adverse Person, each holder of a Right will
thereafter have the right to receive, upon exercise, Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times the exercise price of the Right. Notwithstanding any
of the foregoing, following the occurrence of the event set forth in this
paragraph, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person or an Adverse
Person will be null and void. However, Rights are not exercisable following the
occurrence of the event set forth above until such time as the Rights are no
longer redeemable by the Company as set forth below.

          For example, at an exercise price of $85.00 per Right, each Right not
owned by an Acquiring Person or an Adverse Person (or by certain related
parties) following an event set forth in the preceding paragraph would entitle
its holder to purchase $170.00 worth of Common Stock (or other consideration, as
noted above) for $85.00. Assuming that the Common Stock had a per share value of
$17.00 at such time, the holder of each valid Right would be entitled to
purchase 10 shares of Common Stock for $85.00.

          In the event that, at any time following the Stock Acquisition Date,
(i) the Company engages in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than with an entity
which acquired the shares pursuant to a Qualified Offer), (ii) the Company
engages in a merger or other business combination transaction in which the
Company is the surviving corporation and the Common Stock of the Company is
changed or exchanged, or (iii) 50% or more of the Company's assets, cash flow or
earning power is sold or transferred, each holder of a Right (except Rights
which have previously been voided as set forth above) shall thereafter have the
right to receive, upon exercise, common stock of the acquiring company having a
value equal to two times the exercise price of the Right. The events set forth
in this paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."

          At any time after a person becomes an Acquiring Person and prior to
the acquisition by such person or group of fifty percent (50%) or more of the
outstanding Common Stock, the Board may exchange the Rights (other than Rights
owned by such person or group which have become void), in whole or in part, at
an exchange ratio of one share of Common Stock, or one one-hundredth of a share
of Preferred Stock (or of a share of a class or series of the Company's
preferred stock having equivalent rights, preferences and privileges), per Right
(subject to adjustment).

          The Purchase Price payable, and the number of Units of Preferred Stock
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock,

<PAGE>

(ii) if holders of the Preferred Stock are granted certain rights or warrants to
subscribe for Preferred Stock or convertible securities at less than the current
market price of the Preferred Stock, or (iii) upon the distribution to holders
of the Preferred Stock of evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or warrants (other than
those referred to above).

          With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Preferred Stock on the last
trading date prior to the date of exercise.

          In general, at any time until ten business days following the Stock
Acquisition Date, the Company may redeem the Rights in whole, but not in part,
at a price of $0.001 per Right (payable in cash, Common Stock or other
consideration deemed appropriate by the Board). The Company may not redeem the
Rights if the Board has previously declared a person to be an Adverse Person.
Immediately upon the action of the Board ordering redemption of the Rights the
Rights will terminate and the only right of the holders of Rights will be to
receive the $.001 redemption price.

          Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company or in the event of the redemption of the
Rights as set forth above.

          Any of the provisions of the Rights Agreement may be amended by the
Board prior to the earlier to occur of the determination that a person is an
Adverse Person or the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Board in order to cure
any ambiguity, to make changes which do not adversely affect the interests of
holders of Rights, or to shorten or lengthen any time period under the Rights
Agreement. The foregoing notwithstanding, no amendment may be made at such time
as the Rights are not redeemable.

          A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A, dated
[__________], 2006. A copy of the Rights Agreement is available free of charge
from the Rights Agent. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, which is incorporated herein by reference.

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