Document:

Exhibit
      10.48

     

    

    FINAL
      EXECUTION COPY

    

    

    

    

    

    

    

    ASSET
      CONTRIBUTION AND EXCHANGE AGREEMENT

    

    dated
      as of October 3, 2006

    

    by
      and among

    

    

    NOVAMED
      ACQUISITION COMPANY, INC.,

    

    

    SURGERY
      CENTER OF CLEVELAND, L.L.C.

    

    AND

    

    ITS
      MEMBERS

    

    
      
        
        

      

      
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    ASSET
      CONTRIBUTION AND EXCHANGE AGREEMENT

     

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

     

    RECITALS

    

    A.    Seller
      is
      engaged in the business of owning and operating a licensed ambulatory surgery
      center located
      at 137 25th
      Street
      NE, Cleveland, Tennessee 37311 (the
      “Business”).

     

    B.    Pursuant
      to the terms hereof, immediately prior to the Closing (as defined herein),
      Seller will transfer substantially all of its assets (other than the Excluded
      Assets), and certain liabilities described herein, to a newly formed Delaware
      limited liability company, NovaMed Surgery Center of Cleveland, LLC (the
“New
      LLC”)
      in
      exchange for one hundred percent (100%) of the membership interests in the
      New
      LLC (“New
      LLC Interests”).

     

    C.    As
      a
      condition precedent to Closing, Seller and NovaMed must satisfy certain
      conditions as described in this Agreement. 

     

    D.    Contemporaneous
      with the consummation of the transactions contemplated herein, Seller desires
      to
      transfer and sell to NovaMed, and NovaMed desires to acquire from Seller,
      sixty-five percent (65%) of the total New LLC Interests in exchange for the
      Purchase Price (as defined herein), all on the terms and conditions hereinafter
      set forth.

     

    NOW,
      THEREFORE,
      in
      consideration of the mutual covenants of the parties as hereinafter set forth
      and other good and valuable consideration, the receipt and sufficiency of which
      hereby are acknowledged, the parties hereto hereby agree as
      follows:

     

    ARTICLE
      I.

    CONTRIBUTION
      OF ASSETS
      TO NEW LLC AND OTHER
      PRE-CLOSING COVENANTS

     

    1.1.    Formation
      of the New LLC.
      Prior
      to the Closing, the New LLC shall be formed pursuant to the Certificate of
      Formation in the form attached hereto as Exhibit
      1.1-1.

     

    1.2.    Transfer
      of Assets to New LLC. Immediately
      prior to the Closing, and as a condition precedent to the transactions
      contemplated herein, Seller will transfer (the “New
      LLC Asset Transfer”)
      substantially all of its assets, free and clear of all Liens, in exchange for
      one hundred percent (100%) of the New LLC Interests, which assets
      (the “Assets”),
      include, without limitation, the following (except
      to the extent that any of Seller’s assets or properties are designated as
      Excluded Assets in Section
      1.3
      below):

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (a)    all
      inventory and supplies with respect to the Business (collectively, the
“Inventory”);

     

    (b)    all
      of
      the tangible and intangible personal property with respect to the Business,
      including, without limitation, machinery, equipment, fixtures, phone numbers,
      computer hardware and software that are listed on Schedule
      1.2(b)
      (collectively, the “Personal
      Property”);

     

    (c)    all
      prepaid expenses relating to the Business set forth on Schedule
      1.2(c);

     

    (d)    all
      contract rights with respect to the contracts, agreements, commitments or
      relationships (oral or written) listed on Schedule
      1.2(d),
      purchase orders, licenses and leases pertaining to the Business, including
      all
      leasehold improvements, rights under any restrictive covenants accruing to
      the
      benefit of the Business and any provider agreements relating to the operation
      of
      the Business (collectively, the “Assumed
      Contracts”);

     

    (e)    all
      names
      and tradenames of Seller and the Business, including, without limitation, “The
      Surgery Center of Cleveland” and all derivations thereof;

     

    (f)    all
      records, files and papers primarily pertaining to the Business, including
      general business records, accounting records and Medical Records;

     

    (g)    all
      Permits, licenses and certificates of need relating to the operation of the
      Business,
      to the
      extent transferable or assignable;

     

    (h)    all
      causes of action, claims, warranties, guarantees, refunds, rights of recovery
      and set-off of every kind and character, relating primarily to the Assets or
      the
      Business;

     

    (i)    all
      casualty insurance and warranty proceeds of Seller received after the Closing
      Date with respect to damage to, nonconformance of, or loss to, the
      Assets;

     

    (j)    to
      the
      extent permitted by law, all accounts receivable or other rights to receive
      payment owing to Seller (the “Accounts
      Receivable”);

     

    (k)    all
      of
      the goodwill of and associated with the Business; 

     

    (l)    the
      real
      property, personal property, inventory, supplies, equipment and contracts owned
      by any Member or any Affiliate of Seller or any Member primarily used in, or
      necessary for, the continued conduct of the Business and set forth on
Schedule
      1.2(l)
      (collectively, the “Member
      Assets”),
      and

     

    (m)    all
      fee
      simple interests in the real property located at 137 25th
      Street
      NE, Cleveland, Tennessee 37311 (the “25th
      Street Real Property”).

     

    1.3.    Excluded
      Assets.
      Notwithstanding anything to the contrary contained herein, the Assets do not
      include the following (collectively, the “Excluded
      Assets”):

     

    (a)    Seller’s
      and Members’ rights under this Agreement, including the consideration paid,
      directly or indirectly, to Seller and Members pursuant to this
      Agreement
      and the
      Transaction Documents;

     

    
      
        
        

      

      
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    (b)    the
      tax
      records relating to the Business;

     

    (c)    the
      Employee Benefit Plans relating to the employees of the Business and any and
      all
      rights therein or in the assets thereof;

     

    (d)    all
      Material Contracts other than the Assumed Contracts; 

     

    (e)    all
      cash-on-hand and cash equivalents as of the Closing Date; and

     

    (f)    all
      personal effects of Seller, any Member
      or their
      respective Affiliates that are located at the location of the Business other
      than the Member Assets as specified on Schedule
      1.3(f).

     

    1.4.    Excluded
      Liabilities.
      Notwithstanding
      anything to the contrary contained in this Agreement (except for the sentence
      immediately following) or in any Transaction Document, the New LLC will not
      assume, agree to pay, perform and discharge or in any way be responsible for
      any
      debts, liabilities or obligations of the Business, Seller, any Member or any
      of
      their respective Affiliates of any kind or nature whatsoever, arising out of,
      relating to, resulting from, or caused by any transaction, status, event,
      condition, occurrence or situation relating to, arising out of or in connection
      with the Business, the Assets, Seller or any Member existing, arising or
      occurring on or prior to the Closing Date, including, without limitation, any
      liabilities or obligations relating to or arising from the Excluded Assets
      (the
“Excluded
      Liabilities”).
      Notwithstanding the foregoing, Seller will contribute into New LLC, and New
      LLC
      will assume and thereafter pay and fully satisfy when due, all liabilities
      and
      obligations: (a) which
      arose prior to the New LLC Asset Transfer and represent normal and current
      trade
      payables incurred by Seller in connection with the operation of the Business
      in
      the ordinary course of business, consistent with past custom and practice (to
      the extent not delinquent), including without limitation those set forth on
      Schedule
      1.4(a)
      (which
      Schedule will be updated by Seller as of the Closing Date) (“Accounts
      Payable”);
      (b)
      the other accrued liabilities of Seller which have been incurred in the ordinary
      course of business, consistent with past custom and practice, and which are
      specifically set forth on Schedule
      1.4(b)
      (which
      Schedule will be updated by Seller as of the Closing Date) (“Accrued
      Liabilities”);
      and
      (c) arising after the New LLC Asset Transfer under any Assumed Contract (except
      for any liability or obligation arising from any breach or failure to perform
      under any of the foregoing prior to the Closing Date) (all such liabilities
      and
      obligations to be so contributed into, and assumed by, the New LLC being
      collectively referred to herein as the “New
      LLC Assumed Liabilities”).

     

    1.5.    Satisfaction
      of Liabilities.
      Excluding the New LLC Assumed Liabilities, Seller agrees to satisfy all
      liabilities of Seller relating to the Business prior to the New LLC Asset
      Transfer, or as and when they become due and payable, which
      liabilities include, without limitation:

     

    (a)    all
      payroll expense and other compensation due and owing Seller’s employees for the
      period preceding the Closing Date (excluding any paid time off or other
      employee-related accruals to the extent they are included in Accrued
      Liabilities); and

     

    (b)    all
      Taxes, including payroll taxes, sales taxes and income taxes accrued up to
      the
      New LLC Asset Transfer (but excluding any such Taxes to the extent they are
      included in Accrued Liabilities).

     

    1.6.    Prorations.
      NovaMed
      and Seller shall prorate, as of the Closing Date, all personal property lease
      payments, real estate and personal property Taxes, utilities, charges,
      assessments and other similar charges normally prorated upon the sale of assets
      of a going concern. The proration shall be set forth on Schedule
      1.6
      attached
      hereto.

     

    
      
        
        

      

      
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    ARTICLE
      II.

    SALE
      OF NEW LLC INTERESTS BY SELLER TO NOVAMED

     

    2.1.    Sale
      of Transferred LLC Interests.
      In
      reliance upon the representations and warranties of NovaMed contained herein,
      and on the terms and conditions hereinafter set forth, Seller hereby agrees
      to
      sell, assign, transfer, convey and deliver to NovaMed at the Closing, free
      and
      clear of all Liens, all of Seller’s right, title and interest in and to
      sixty-five percent (65%) of the issued and outstanding New LLC Interests (the
      “Transferred
      LLC Interests”).
      In
      reliance upon the representations and warranties of Seller and Members contained
      herein, and on the terms and conditions hereinafter set forth, NovaMed hereby
      agrees to purchase the Transferred LLC Interests from Seller for the Purchase
      Price set forth in Article
      III
      hereof.

     

    2.2.    Ownership
      of New LLC following Transactions.
      As a
      result of the sales described in this Article
      II:
      (a)
      NovaMed shall own sixty-five percent (65%) percent of the New LLC Interests
      in
      the New LLC, and (b) the Members shall collectively and individually own
      thirty-five percent (35%) the New LLC Interests in the New LLC. 

     

    ARTICLE
      III.

    CONSIDERATION
      AND MANNER OF PAYMENT

     

    3.1.    Purchase
      Price.
      The
      aggregate purchase price for the Transferred LLC Interests shall be Nine Million
      Eight Hundred Fifty Thousand and No/100 Dollars ($9,850,000) (the “Purchase
      Price”),
      which
      the parties agree is the fair market value of the Transferred LLC
      Interests.

     

    3.2.    Payment
      of Purchase Price.
      At the
      Closing,
      NovaMed
      will pay to Seller, by wire transfer of immediately available funds to Seller’s
      designated bank account, an amount
      equal to the Purchase Price, according to the wire transfer instructions
      attached as Exhibit
      3.2.

     

    3.3.    Purchase
      Price Adjustment.
      Medicare placed a brief hold on payments for all claims for the last nine days
      of the Federal fiscal year, September 22, 2006 through September 30, 2006.
      To
      address this delay with respect to any potential impact on the Accounts
      Receivable balance as of the Closing Date, the parties hereto have agreed to
      increase the Purchase Price by $12,866.01, which amount shall be payable at
      Closing in accordance with Section 3.2 hereof. 

     

    ARTICLE
      IV.

    SELLER’S
      AND MEMBERS’ REPRESENTATIONS AND WARRANTIES

     

    Each
      of
      Seller and Members hereby represents and warrants, jointly and severally, to
      NovaMed as of the Closing Date, as follows:

     

    4.1.    Seller’s
      Organization, Good Standing and Authority.
      Seller
      is a limited liability company duly organized, validly existing and in good
      standing under Tennessee law.
      Each of
      Seller and Members has full capacity, power, right and authority to enter into
      and perform their respective obligations under this Agreement and each of the
      Transaction Documents to which each of them is a party. This Agreement and
      each
      of the Transaction Documents to which each is a party have been duly executed
      and delivered by each of Seller and Members, and constitute the valid and
      binding obligations of Seller and Members, enforceable against them in
      accordance with their respective terms, except as the same may be limited by
      applicable bankruptcy, insolvency, reorganization, moratorium or other similar
      laws affecting the rights of creditors generally and the availability of
      equitable remedies. 

     

    
      
        
        

      

      
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    4.2.    Assets.
      

     

    (a)    Seller
      has full power and authority to carry on the Business as it is currently being
      conducted and to own and hold under lease the properties and assets it now
      owns
      or holds under lease. Upon
      consummation of the transactions contemplated by this Agreement, Seller will
      have conveyed, and the New LLC will be vested with, good and marketable title
      to
      the Assets, free and clear of all Liens. 

     

    (b)    The
      Assets constitute all tangible or intangible property, rights and assets
      necessary for the conduct by Seller of the Business as conducted during the
      twelve months preceding the Closing Date and, to the knowledge of Seller, there
      is no need to acquire or replace any material assets. Seller
      has good and marketable title to the Assets, in each case free and clear of
      any
      and all Liens. All
      of
      the Assets that are personal property are in operable condition and repair
      and
      none of such property requires any repair or replacement except for maintenance
      in the ordinary course of business. Except as set forth on Schedule
      4.2,
      none of
      the Assets are held under any lease, security agreement, conditional sales
      contract or other title retention or security agreement or are located other
      than at the Facility.

     

    4.3.    Approvals.
      Except
      as set forth on Schedule
      4.3,
      no
      consent, approval, order or authorization of, or registration, declaration,
      notice or filing with, any national, state, provincial, local, governmental,
      judicial, public, quasi-public or administrative authority or agency
      (collectively, “Governmental
      Authority”)
      or
      other Person is required to be made or obtained by Seller or any Member in
      connection with the authorization, execution, delivery and performance of this
      Agreement or any other Transaction Document, or the consummation of the
      transactions contemplated hereby and thereby.

     

    4.4.    New
      LLC Interests.
      Immediately
      prior to the Closing Date, Seller will be the only record and beneficial holder
      of the New LLC Interests. Seller
      has good and marketable title to the New LLC Interests free and clear of all
      Liens, and has full right, power and authority to transfer the Transferred
      LLC
      Interests to NovaMed as provided herein, without obtaining the consent of any
      third party (other than the Manager of the New LLC (the “Manager”)
      as set
      forth in the terms and conditions of the Operating Agreement of the New LLC).
      Upon consummation of the transactions contemplated herein, Seller shall have
      transferred good and marketable title to the Transferred LLC Interests free
      and
      clear of all Liens.  

     

    4.5.    Financial
      Statements.
      Seller
      has previously delivered to NovaMed unaudited financial statements of Seller,
      to
      the extent available for the years ending
      December
      31, 2004 and December 31, 2005, consisting of a balance sheet,
      statement of operations and members’ equity and statement of cash flows, and an
      interim profit and loss statement for the seven-month period ending on July
      31,
      2006 (“Financial
      Statements”).
      Except as set forth on Schedule
      4.5,
      each of
      the Financial Statements (a) has been prepared in accordance with the accrual
      basis method of accounting
      consistent with past practice; (b)
      is
      true, complete and correct in all material respects as of the respective dates
      and for the respective periods above stated; (c) fairly presents in all material
      respects the financial position of Seller at such dates and the results of
      its
      operations for the periods ended on such dates; and (d) is in all material
      respects consistent with Seller’s books and records.

     

    4.6.    Absence
      of Undisclosed Liabilities.
      Neither
      Seller nor any Member, with respect to the Business, has any material debts,
      liabilities or obligations of any nature (whether accrued, absolute, contingent,
      direct, indirect, perfected, inchoate, unliquidated or otherwise and whether
      due
      or to become
      due) arising out of transactions entered into at or prior to the Closing, or
      any
      transaction, series of transactions, action or inaction at or prior to the
      Closing, or any state of facts or condition
      existing at or prior to the Closing (regardless of when such liability or
      obligation is asserted),
      including but not limited to guarantees, liabilities or obligations on account
      of Taxes or governmental charges or penalties, interest or fines thereon or
      in
      respect thereof, except (a) to the extent specifically reflected and accrued
      for
      or reserved against in the Financial Statements, (b) for liabilities
      specifically set forth on Schedule
      4.6,
      (c)
      Taxes or governmental charges that are not yet due and payable, or (d) to the
      extent specifically disclosed in any other representation and warranty in this
      Agreement. 

     

    
      
        
        

      

      
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    4.7.    Inventory.
      All of
      the Inventory is usable in the ordinary course of business, is fully paid for
      and not subject to consignment or conditional sales arrangements and no material
      portion of the Inventory is obsolete or damaged.

     

    4.8.    Taxes.
      Seller
      has filed all Tax Returns on
      a
      timely basis that it is required to have filed in connection with the operation
      of the Business, and such returns are true, complete and correct.
      Seller
      has paid
      all Taxes, interest and penalties, if any, reflected on such Tax Returns or
      otherwise due and payable by them. Any deficiencies proposed as a result of
      any
      governmental audits of such Tax Returns have been paid or settled, and there
      are
      no present disputes as to Taxes payable by Seller in connection with the
      operation of the Business. With respect to all amounts of Taxes imposed on
      Seller for which Seller is or could be liable, whether to taxing authorities
      or
      to other Persons, with respect to all
      taxable periods or portions of periods ending on or before the Closing Date,
      all
      applicable Tax laws and agreements have been fully complied with, and all such
      amounts required to be paid by Seller to taxing authorities or others on or
      before the Closing Date have been paid, or have been fully accrued for or fully
      reserved against on the Financial Statements. No issues have been raised and
      are
      currently pending by any taxing authority in connection with any of the Tax
      Returns. No waivers of statutes of limitations with respect to the Tax Returns
      have been given by or requested from Seller or any Member. There are no Liens
      for Taxes (other than current taxes not yet due and payable) upon any asset
      of
      Seller. Seller is not a party to any Tax-indemnity, Tax-sharing, Tax allocation
      or other similar agreements or arrangements.

     

    4.9.    Material
      Contracts.
      Schedule
      4.9
      is a
      correct and complete list of every material written contract, agreement,
      relationship or commitment, every material oral contract, commitment, agreement
      or relationship, to which Seller is a party or by which Seller is bound and,
      to
      the extent directly related to the operation of the Business, to which any
      Member is a party or by which any Member is bound (the “Material
      Contracts”),
      correct and complete copies of which previously have been furnished to NovaMed.
      Except as set forth on Schedule
      4.9,
      neither
      Seller nor any Member party to such a Material Contract is in default, and
      no
      event has occurred which with the giving of notice or the passage of time or
      both would constitute a default by such party, under any Material
      Contract,
      and, to
      the knowledge of Seller or any Member, no event has occurred which with the
      giving of notice or the passage of time or both would constitute such a default
      by any party to any such Material Contract.

     

    4.10.    Real
      Property.
      Seller
      owns a fee simple interest in the 25th
      Street
      Real Property. At Closing, Seller will convey by Limited Warranty Deed, fee
      simple absolute title, to the 25th Street Real Property to the New LLC.
The
      25th
      Street Real Property constitutes all real properties used or occupied by Seller
      in connection with the Business or reflected on the Financial
      Statements.
      Upon
      conveyance of the 25th Street Real Property by Limited Warranty Deed to the
      New
      LLC, the New LLC will have a fee simple absolute ownership interest in the
      25th
      Street Real Property, which interest will be free and clear of all Liens, except
      for Liens created by the New LLC. With respect to the 25th Street Real Property:
      (a) Seller has all easements
      and rights necessary to conduct the Business; (b) no portion thereof is subject
      to any pending or, to the knowledge of Seller or any Member, threatened
      condemnation proceeding or proceeding by any public
      authority; (c) the buildings, plants and structures, including
      heating, ventilation
      and air conditioning systems, roof, foundation and floors, are in good operating
      condition and repair, subject only to ordinary wear and tear, and are not in
      violation of any zoning or other Rules; (d) there are no leases, subleases,
      licenses, concessions or other agreements, written or oral, granting to any
      party or parties the right of use or occupancy of any portion of the
25th
      Street Real Property; (e) the 25th Street Real Property is supplied with
      utilities and other services necessary for the operation of such
      facilities;
      (f) the 25th Street Real Property is not located within a wetland or an
      area of flood hazard for which flood insurance is required to be obtained;
      and
      (g) there are no public improvements which may result in special assessments
      against or otherwise affect the 25th Street Real Property.
      

     

    
      
        
        

      

      
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    4.11.    Litigation.
      Except
      as set forth on Schedule
      4.11,
      there
      are no claims, counterclaims, actions, suits, orders, proceedings (arbitration,
      mediation or otherwise), investigations or judgments pending or, to the
      knowledge of Seller or any Member, threatened against or involving Seller,
      the
      Business or, with respect to the Business, any Member, or relating to the
      transactions contemplated hereby, at law or in equity, in any court or agency,
      or before or by any Governmental Authority, nor, to the knowledge of Seller
      or
      any Member, are there any facts, conditions or incidents that could be
      reasonably expected to result in any such actions, suits, proceedings
      (arbitration, mediation or otherwise) or investigations.
      Except
      as set forth on Schedule
      4.11,
      neither
      Seller nor any Member, as it relates to the operation of the Business, is
      subject to any judgment, order or decree of any court or Governmental
      Authority.
      None of
      the matters set forth on Schedule
      4.11
      could
      reasonably be expected to result in any Material Adverse Effect on Seller,
      the
      Assets, the Business or the New LLC.

     

    4.12.    Compliance
      with Applicable Laws; Permits.
      

     

    (a)    Each
      of
      Seller and Members, in their conduct of the Business through the Closing Date,
      have complied, in all material respects, with applicable federal, state and
      local laws and the rules and regulations of all Governmental Authorities having
      authority over them, including, without limitation, agencies concerned with
      occupational safety, environmental protection, employment practices, Fraud
      and
      Abuse Laws and Medicare and Medicaid requirements applicable to the Members’ and
      Seller's
      billing procedures (except denials of claims in the ordinary course of
      business). Neither Seller nor any Member has received any written notice of
      Seller’s violation of any such rules or regulations, whether corrected or not,
      within the last five (5) years. Seller is eligible to receive payment under
      Titles XVIII and XIX of the Social Security Act.
      Seller
      has timely and accurately filed all requisite reports, returns, data, and other
      information required by all Governmental Authorities which control, directly
      or
      indirectly, any of Seller’s activities to be filed with any commissions, boards,
      bureaus, and agencies and has paid all sums heretofore due with respect to
      such
      reports and returns. No such report or return has been inaccurate, incomplete
      or
      misleading in any material respect. Seller has timely and accurately filed
      all
      requisite reimbursable claims and other reports required to be filed or
      otherwise filed in connection with all state and federal Medicare and Medicaid
      programs in which Seller participates that are due on or before the Closing
      Date
      or which relate to services provided on or before the Closing Date, and Seller
      has not billed for any services that were not provided at the Facility. There
      are no claims scheduled, pending or, to Seller’s knowledge, threatened before
      any authority, including without limitation any intermediary, carrier, or other
      state or federal agency with respect to any Medicare and Medicaid claim filed
      by
      Seller on or before the Closing Date, or program compliance matters. Except
      for
      routinely scheduled Medicare and Medicaid program participation and
      certification surveys pursuant to Seller’s Medicare and Medicaid contracts and
      filings, no valid program integrity review related to Seller has been conducted
      by any authority in connection with the Medicare or Medicaid programs and no
      such review is scheduled, pending, or to Seller’s knowledge, threatened against
      or affecting Seller, the Business, the Facility, or the consummation of the
      transactions contemplated hereby.

     

    (b)    Seller
      holds all the permits, licenses, certificates of need and other approvals of
      Governmental Authorities necessary or material for the current conduct,
      ownership, use, occupancy and operation of the Business and the 25th
      Street
      Real Property, including, without limitation, those identified on Schedule
      4.12(b)
      (“Permits”).
      Seller is in compliance in all material respects with such Permits, all of
      which
      are in full force and effect, and Seller has not received any written notices
      to
      the contrary. All of the Permits are in good standing, and to Seller’s
      knowledge, no suspension, cancellation or adverse action is threatened against
      the Permits, and there is no reasonable basis for believing that any Permits
      will not be renewed upon expiration. 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (c)    Seller
      and Members are not in violation of any applicable fraud and abuse laws
      including, without limitation, 18 U.S.C. §201 (bribery of public officials); 18
      U.S.C. §286 (conspiracy to defraud government with respect to claims); 18 U.S.C.
§287 (false, fictitious or fraudulent claims); 18 U.S.C. §371 (conspiracy to
      commit offense or to defraud the government); 18 U.S.C. §666 (theft or bribery
      concerning programs receiving federal funds); 42 U.S.C. §1320a-7a (civil
      monetary penalties); 42 U.S.C. §1320a-7b (criminal penalties); and 42 U.S.C.
§1395nn (prohibited referrals), each as they may be amended or renumbered from
      time to time.

     

    4.13.    Transaction
      Not a Breach.
      Except
      as set forth in Schedule
      4.13,
      the
      execution, delivery and performance by Seller and any Member of this Agreement
      and the Transaction Documents will not:

     

    (a)    Result
      in
      a breach of any of the terms or conditions of, or constitute a default under,
      or
      in any manner release any party thereto from any obligation under any mortgage,
      note, bond, indenture, contract, agreement, license or other instrument or
      obligation of any kind or nature by which Seller or the Business may be bound
      or
      affected;

     

    (b)    Violate
      or conflict with any order, writ or injunction of any court, administrative
      agency or Governmental Authority to which Seller or any Member is subject;
      

     

    (c)    Constitute
      an event which would permit any party to terminate any agreement or accelerate
      the maturity of any indebtedness or other obligation;

     

    (d)    Violate
      any provision of the organizational documents of Seller;

     

    (e)    Result
      in
      the creation or imposition of any Lien upon any property of Seller;
      or

     

    (f)    Require
      any authorization, consent, approval, exemption or other action by or notice
      to
      any court, Governmental Authority or any other Person.

     

    4.14.    Conduct
      of Business.
      Since
      the Review Date, Seller has conducted the Business in the ordinary course of
      business, consistent with past custom and practice, and has incurred no material
      liabilities other than in the ordinary course of business, consistent with
      past
      custom and practice, and there has been no Material Adverse Effect on the
      assets, financial condition, operating results, employee or patient relations
      or
      business activities of Seller or the Business. Without limiting the foregoing,
      since the Review Date, Seller has not, except in the ordinary course of
      business, consistent with past custom and practice, or as otherwise set forth
      on
Schedule
      4.14:

     

    (a)    Incurred
      any obligation or liability, absolute, accrued, contingent or otherwise, whether
      due or to become due, whether individually or in the aggregate, that has had
      or
      could be reasonably expected to result in a Material Adverse
      Effect;

     

    (b)    Pledged
      or subjected any of its assets to any Lien;

     

    (c)    Voluntarily
      or involuntarily sold, transferred, abandoned, surrendered, leased or otherwise
      disposed of any of its assets having an aggregate value in excess of
      $10,000;

     

    (d)    Canceled
      or compromised any material debt or claim, or waived or released any right
      of
      substantial value;

     

    
      
        
        

      

      
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    (e)    Received
      any written notice of termination of any contract, lease or other agreement,
      or
      suffered any damage, destruction or loss that, individually or in the aggregate,
      has had or could be reasonably expected to result in a Material Adverse
      Effect;

     

    (f)    Instituted,
      settled or agreed to settle any litigation, action, proceeding or arbitration;
      

     

    (g)    Made
      any
      purchase commitment other than in the ordinary course of business, consistent
      with past custom and practice, exceeding $10,000 per commitment or $25,000
      in
      the aggregate;

     

    (h)    Modified
      the timing, course of conduct or other cash management activities with respect
      to the collection of accounts receivable of the Business;

     

    (i)    Failed
      to
      pay any accounts or notes payable or any other obligations consistent with
      past
      practices, except for bona fide disputes arising in the ordinary course of
      business;

     

    (j)    Entered
      into any material transaction, contract or commitment other than in the ordinary
      course of business, consistent with past custom and practice, other than the
      transactions contemplated by the Transaction Documents;

     

    (k)    Suffered
      any event or events, whether individually or in the aggregate, that has had
      or
      could be reasonably expected to result in a Material Adverse Effect;
      or

     

    (l)    Issued
      any equity interests or entered into any agreement or understanding to do
      so.

     

    4.15.    Health,
      Safety and Environment.
      Seller
      has never generated, transported, treated, stored, disposed of or otherwise
      handled any Hazardous Materials at any site, location or facility in connection
      with its business or any of its assets in violation of any applicable
      Environmental and Safety Requirements (as hereinafter defined), nor does the
      25th
      Street
      Real Property contain (including containment by means of any underground storage
      tank) any Hazardous Materials. Seller: (i) is in material compliance with all
      applicable federal, state and local laws, rules, regulations, ordinances and
      requirements relating to public health and safety, worker health and safety
      and
      pollution and protection of the environment, all as amended or hereafter amended
      (“Environmental
      and Safety Requirements”),
      and
      (ii) possesses all required permits, licenses, certifications and approvals
      and
      has filed all notices or applications required thereby or pertaining thereto.
      Seller has never been subject to, or received any written notice of, any
      private, administrative or judicial inquiry, investigation, order or action,
      or
      any written notice of any intended or threatened private, administrative, or
      judicial inquiry, investigation, order or action relating to the presence or
      alleged presence of Hazardous Materials in, under or upon any property leased
      or
      owned by Seller, nor has Seller any knowledge of any such inquiry,
      investigation, order, action or notice. There are no pending, or to the
      knowledge of Seller or any Member, threatened, investigations, actions, orders
      or proceedings (or written notices of potential investigations, actions, orders
      or proceedings) from any Governmental Authority or any other entity regarding
      any matter relating to Environmental and Safety Requirements.

     

    4.16.    Employees.
      Schedule
      4.16
      is a
      true, complete and correct list setting forth the names and current compensation
      rate and compensation of all individuals employed by Seller. There
      has
      been no material increase, other than in the ordinary course of business,
      consistent with past custom and practice, in the compensation or rate of
      compensation payable to any employees of Seller since the Review Date, nor
      since
      that date has there been any promise to any employee listed on Schedule
      4.16,
      orally
      or in writing, of any bonus or increase in compensation, except for increases
      in
      the ordinary course of business consistent with Seller’s past compensation
      practices and listed on Schedule 4.16,
      and
      obligations incurred under existing bonus, insurance, pension or other Employee
      Benefit Plans described on Schedule
      4.19
      or
Schedule
      4.20.
      Except
      as set forth on Schedule
      4.16,
      there
      has been no promise to any employee listed on Schedule
      4.16,
      orally
      or in writing, of any guaranty of employment following the Closing
      Date.

     

    
      
        
        

      

      
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    4.17.    Insurance.
      Schedule
      4.17
      sets
      forth a list of all policies of insurance currently in effect with respect
      to
      which Seller is a party or otherwise the beneficiary of coverage, specifying
      the
      insurer and coverage limits. All such insurance is in full force and effect
      and
      all premiums due on such policies have been paid. Such insureds have complied
      in
      all material respects with the provisions of all such policies. Seller has
      previously delivered to NovaMed complete and correct copies of all such
      policies, together with all riders and amendments thereto in the possession
      of
      Seller. Except as set forth on Schedule
      4.17,
      there
      are no claims or asserted claims reported to insurers under such policies,
      including all medical malpractice claims and similar types of claims, actions
      or
      proceedings asserted against any of Seller and the Members at any time within
      the past five (5) years.

     

    4.18.    Affiliate
      Transactions.
      Excluding ordinary course distributions to its equity holders, there are no
      transactions involving the transfer of any cash, property or rights to or from
      Seller from, to or for the benefit of any Affiliate or former Affiliate of
      Seller (“Affiliate
      Transactions”)
      during
      the period commencing January 1, 2005 and continuing through the date hereof
      or
      any existing commitments of Seller to engage in the future in any Affiliate
      Transactions. 

     

    4.19.    Employee
      Benefit Plans.
      Except
      as set forth in Schedule
      4.19,
      neither
      Seller nor any Plan Affiliate has maintained, sponsored, adopted, made
      contributions to or obligated itself to make contributions to or to pay any
      benefits or grant rights under or with respect to any “Employee Pension Benefit
      Plan” (as defined in Section 3(2) of ERISA), “Employee Welfare Benefit Plan” (as
      defined in Section 3(1) of ERISA), “multi-employer plan” (as defined in Section
      3(37) of ERISA), any collective bargaining agreement, plan of deferred
      compensation, medical plan, life insurance plan, long-term disability plan,
      dental plan or other plan providing for the welfare of any of Seller’s employees
      or former employees or beneficiaries thereof, personnel
      policy (including but not limited to vacation time, holiday pay, bonus programs,
      moving expense reimbursement programs and sick leave), material fringe benefit,
      excess benefit plan,
      bonus or incentive plan (including but not limited to stock options, restricted
      stock, stock bonus and deferred bonus plans), severance agreement, salary
      reduction agreement, top hat plan or deferred compensation plan,
      change-of-control agreement, employment agreement, consulting agreement or
      any
      other benefit, program, policy, arrangement, agreement or contract
      (collectively, “Employee
      Benefit Plans”),
      whether or not written or terminated, which reasonably could give rise to or
      result in Seller or such Plan Affiliate having any debt, liability, claim or
      obligation of any kind or nature, whether accrued, absolute, contingent, direct,
      indirect, known or unknown,
      perfected or inchoate or otherwise and whether or not due or to become due.
      Correct and complete copies of all Employee Benefit Plans previously have been
      furnished to NovaMed. The Employee
      Benefit Plans are in compliance in all material respects with governing
      documents and agreements and with applicable laws.
      Seller
      represents that it has complied, in all material respects, with the applicable
      requirements of COBRA through the Closing Date.

     

    4.20.    Personnel
      Agreements, Plans and Arrangements.
      Except
      as listed in Schedule
      4.20,
      neither
      Seller nor any Member is a party to or obligated in connection with the Business
      with respect to any outstanding contracts with current or former employees,
      agents, consultants,
      or advisers. 

     

    4.21.    Certain
      Payments.
      None of
      Seller, the Members, any director, officer, agent, or employee of Seller or
      any
      other Person associated with or acting for or on behalf of Seller has, directly
      or indirectly, made any contribution, gift, bribe, rebate, payoff, influence
      payment, kickback, or other payment to any Person, private or public, regardless
      of form, whether in money, property, or services (i) for securing patients
      or
      referrals, (ii) for patients or referrals secured, (iii) to obtain special
      concessions or for special concessions already
      obtained, for or in respect of Seller, or (iv) in violation of any
      law.

     

    
      
        
        

      

      
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    4.22.    Workers
      Compensation.
      Schedule
      4.22
      sets
      forth all expenses, obligations, duties and liabilities relating to any pending,
      threatened or ongoing claims by employees and former employees (including
      dependents and spouses) of Seller (or its predecessors),
      and the extent of any specific accrual on or reserve therefor set forth on
      the
      Financial Statements, for costs, expenses and other liabilities under any
      workers compensation laws, regulations, requirements or programs. Except as
      set
      forth on Schedule
      4.22,
      to
      Seller’s knowledge, no claim, injury, fact, event or condition exists which
      would give rise to a material claim by any employees or
      former
      employees (including dependents and spouses) of Seller under any workers
      compensation laws, regulations, requirements or programs. Since the Review
      Date,
      there has been no material change, other than in the ordinary course of
      business, in the information disclosed in Schedule
      4.22.

     

    4.23.    Accounts
      Receivable/Accounts Payable.
      

     

    (a)    Accounts
      Receivable.
      Except
      as set forth on Schedule
      4.23(a),
      the
      Accounts Receivable are valid, binding and legally enforceable obligations
      and
      are owned by Seller free and clear of all Liens, and, except for contractual
      allowances and adjustments, reserves for bad debts and other adjustments that
      are consistent with those adjustments made in preparing the Financial
      Statements, will not be subject to any offset, counterclaim or other adverse
      claim or defense, and may be transferred to the New LLC to the extent permitted
      by law. The Accounts Receivable arose in the ordinary and usual course of the
      business, and the Accounts Receivable are set forth on the books and records
      of
      Seller. Schedule
      4.23(a)
      contains
      a complete and accurate list of all Accounts Receivable as of the date stated
      thereon. Seller
      does not know of any reason why the Accounts Receivable would not be collectible
      according to approximately the same ratios as accounts receivable have been
      historically collectible.

     

    (b)    Accounts
      Payable and Accrued Liabilities.
      Schedule
      1.4(a)
      and
Schedule
      1.4(b)
      sets
      forth a complete and correct list of the Accounts Payable and Accrued
      Liabilities. Each of the Accounts Payable and Accrued Liabilities are valid
      and
      have been incurred in connection with the operation of the Business in the
      ordinary course of business, consistent with Seller’s past custom and practice.

     

    4.24.    Brokers.
      All
      negotiations relating to this Agreement and the Transaction Documents, and
      the
      transactions contemplated hereby and thereby, have been carried on without
      the
      intervention of any Person acting on behalf of any of Seller or any Member
      in
      such a manner as to give rise to any valid claim for any broker’s or finder’s
      fee or similar compensation against NovaMed.

     

    4.25.  HIPAA.
      Seller
      and Members represent and
      warrant that (a) all of the Purchased Assets being sold and/or provided by
      Seller to NovaMed under this Agreement, including without limitation, any
      computer hardware and/or software, are in compliance with the Health Insurance
      Portability and Accountability Act of 1996 (Public Law 104-91, 42 U.S.C. 1301
      et.
      seq.)
      and
      regulations promulgated thereunder (collectively, “HIPAA”),
      and
      applicable state laws having similar subject matter to HIPAA (“State
      HIPAA”),
      and
      (b) Seller conducted its business and activities, including, without limitation,
      its billing and collection activities, its medical records management
      activities, and its general practice management activities, in a manner that
      complied with HIPAA and State HIPAA.

     

    4.26.  Rates
      and Reimbursement Policies.
      Seller
      does not have any rate appeal currently pending before any Governmental
      Authority or any administrator of any third-party payor program. 

     

    
      
        
        

      

      
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    4.27.  Physicians.
      None of
      the physicians who utilize the Center other than Dr. Kyle (collectively,
      the “Physicians”)
      have
      threatened to discontinue or to terminate his or her relationship with the
      Seller and the provision of services at the Facility. To the knowledge of Seller
      or any Member, none of the Physicians have expressed plans to retire from the
      practice of medicine in the next five (5) years nor to be involved in the
      development or operations of another ambulatory surgery center. During the
      three
      (3) years preceding the Closing Date, each of the Physicians:

     

    (a)    Has
      been
      duly licensed and registered, and is in good standing by his or her state to
      engage in the practice of medicine, and said license and registration have
      not
      been suspended, revoked or restricted in any manner; and

     

    (b)    Has
      had
      valid professional liability insurance in place in the amounts set forth on
      Schedule
      4.27(b)
      and has
      not indicated any intent to terminate or reduce his or her professional
      liability coverage.

     

    4.28.    Certain
      Representations With Respect to the Facility.

     

    (a)    The
      Facility is qualified for participation in the Medicare program. Complete and
      accurate copies of the Facility’s existing letter of acceptance as a Medicare
      provider has been furnished to NovaMed. Seller is presently in compliance with
      all of the Medicare
      conditions of Participation and all applicable terms and conditions required
      for
      the Facility to remain a qualified Medicare provider.

     

    (b)    The
      Facility is qualified for participation in the Medicaid program. Complete and
      accurate copies of Seller’s existing Medicaid contracts have been furnished to
      NovaMed. Seller is presently in compliance with all of the terms, conditions
      and
      provisions of such contracts.

     

    4.29.    No
      Designated Health Services.
      Seller
      does not provide any services that constitute “designated health services”
within the meaning of 42 U.S.C. d
      1395nn.

     

    4.30.    No
      Misrepresentation.
      None of
      the representations and warranties of Seller and Members set forth in this
      Agreement, in any of the certificates, schedules, lists, documents, exhibits,
      or
      other instruments delivered, or to be delivered, to NovaMed as contemplated
      by
      any provision hereof
      (including the Transaction Documents), contain any untrue statement of a
      material fact or omit
      to
      state a material fact necessary to make the statements contained herein or
      therein not misleading.
      To the
      knowledge of Seller or any Member, there are no material facts which have not
      been disclosed to NovaMed which have a Material Adverse Effect, or could
      reasonably be anticipated to have a Material Adverse Effect, on the Business
      or
      Seller’s or Member’s ability to consummate the transactions contemplated
      hereby.

     

    ARTICLE
      V.

    NOVAMED’S
      REPRESENTATIONS AND WARRANTIES

     

    NovaMed
      hereby represents and warrants to Seller and the Members as of the Closing
      Date
      as follows:

     

    5.1.    Organization.
      NovaMed
      is a corporation duly organized, validly existing and in good standing under
      the
      laws of the State of Delaware.

     

    5.2.    Authorization.
      NovaMed
      has full power, right and authority to enter into and perform its obligations
      under this Agreement and each of the Transaction Documents to which it is a
      party. The execution, delivery and performance by NovaMed of this Agreement
      and
      each of the Transaction Documents to which it is a party have been
      duly
      and properly authorized by all requisite corporate action in accordance with
      applicable law and with NovaMed’s Certificate of Incorporation.
      This
      Agreement and each of the Transaction Documents to which NovaMed is a party
      have
      been duly executed and delivered by NovaMed and are the valid and binding
      obligation of NovaMed and are enforceable against
      NovaMed in accordance with their respective terms, except as the same may be
      limited by applicable bankruptcy, insolvency, reorganization, moratorium or
      other similar laws affecting the rights of creditors generally and the
      availability of equitable remedies. 

     

    
      
        
        

      

      
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    5.3.    Transaction
      Not a Breach.
      The
      execution, delivery and performance of this Agreement and the Transaction
      Documents by NovaMed will not violate and conflict with,
      or
      result in the breach of any of the terms, conditions, or provisions of NovaMed’s
      Certificate of Incorporation or of any contract, agreement, mortgage, or other
      instrument or obligation of any nature to which NovaMed is a party or by which
      NovaMed is bound. 

     

    5.4.    Acquisition
      of Transferred LLC Interests.
      NovaMed
      is acquiring the Transferred LLC Interests for its own account and not with
      a
      view to the distribution or resale thereof. NovaMed has no intention of selling
      the Transferred LLC Interests in a public distribution in violation of federal
      securities laws or any applicable state securities laws. 

     

    5.5.    Broker.
      All
      negotiations relating to this Agreement and the Transaction Documents, and
      the
      transactions contemplated hereby and thereby, have been carried on without
      the
      intervention of any Person acting on behalf of NovaMed in such a manner as
      to
      give rise to any valid claim for any broker’s or finder’s fee or similar
      compensation against Seller. 

     

    5.6.    Approvals.
      Except
      as set forth on Schedule
      5.6,
      no
      consent, approval, order or authorization of, or registration, declaration
      notice or filing with, any Governmental Authority or other Person is required
      to
      be made or obtained by NovaMed in connection with the authorization, execution,
      delivery and performance of this Agreement or any other Transaction Document,
      or
      the consummation of the transactions contemplated hereby and
      thereby.

     

    5.7.    No
      Misrepresentation.
      None of
      the representations and warranties of NovaMed set forth in this Agreement or
      in
      any of the certificates, schedules, lists, documents, exhibits, or other
      instruments delivered, or to be delivered, to Seller as contemplated by any
      provision hereof (including the Transaction Documents), contain any untrue
      statement of a material
      fact or omit
      to
      state a material fact necessary to make the statements contained herein or
      therein not misleading. 

     

    ARTICLE
      VI.

    ADDITIONAL
      AGREEMENTS

     

    6.1.    Release
      of Liens and Lien Searches.
      Seller
      shall procure all applicable releases of liens with respect to those Liens
      set
      forth on Schedule
      4.2,
      prior
      to or contemporaneously with the New LLC Asset Transfer or the Closing. Seller
      shall provide NovaMed with all information and other assistance required for
      the
      parties to file all applicable UCC termination statements (in form and manner
      required by NovaMed or its lenders). Following the filing of all such UCC
      termination statements, there shall be no remaining
      financing statements, judgments, taxes or other Liens outstanding against Seller
      or any of its assets as of the Closing Date.

     

    6.2.    Employees;
      Labor Relations.

     

    (a)    Continuing
      Employees.
      New LLC
      shall offer to employ the employees of Seller listed on Schedule
      6.2(a)
      (the
“Continuing
      Employees”)
      as of
      the Closing Date, on the terms and conditions established by New LLC in its
      sole
      discretion. Such offer of employment by New LLC shall not be deemed to create
      a
      continuing right to employment for any Continuing Employees. Seller shall be
      solely responsible for all liabilities relating, directly or indirectly, to
      any
      of Seller’s employees who do not accept New LLC’s offer of employment. Seller
      shall be solely responsible for any employment-related claims filed by any
      employees of Seller which relate to facts and circumstances existing on and
      prior to the Closing Date, or arise from or relate to completion of the
      transactions contemplated by this Agreement or the Transaction Documents,
      regardless of when filed. 

     

    
      
        
        

      

      
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    (b)    COBRA
      Notice.
      Seller
      agrees that it shall be responsible for all liabilities arising under COBRA
      with
      respect to any event occurring prior to and on the Closing Date.

     

    (c)    Noncompetition
      Agreements.
      Seller
      hereby waives any noncompetition provision that may apply to the Continuing
      Employees with respect to New LLC’s hiring of the Continuing
      Employees.

     

    (d)    Employee
      Benefit Plans.
      Seller
      acknowledges that it will be solely responsible for administering and/or
      terminating its Employee Benefit Plans following the Closing.

     

    6.3.    Post-Closing
      Remittances; New LLC’s Appointment as Attorney-In-Fact.
      If,
      after the Closing Date, Seller shall receive any remittance from any account
      debtors with respect to the Accounts Receivable, Seller shall endorse such
      remittance to the order of the New LLC and forward it to the New LLC promptly
      following receipt thereof.
      Seller
      hereby irrevocably constitutes and appoints New LLC and any officer or agent
      of
      New LLC as Seller’s true and lawful attorney-in-fact, with full power and
      authority, in the place and stead of Seller for the limited purposes of
      receiving, collecting, indorsing, negotiating and cashing any and all cash,
      checks, drafts, payments, accounts receivable and other instruments
      (collectively the “Items”)
      which
      are payable to Seller and which represent Items related to the Business or
      which
      represent payment on Accounts Receivable related to the Business, and which
      in
      accordance with the terms of this Agreement, have been sold, conveyed, assigned
      or transferred to New LLC or are otherwise for the account of New LLC hereby.
      Seller further agrees to execute all documents and take such other action as
      New
      LLC may reasonably request to confirm the power granted to New LLC by this
      Section
      6.3.
      Notwithstanding the foregoing, in no event shall New LLC receive, collect,
      indorse, negotiate or cash such Items pursuant to the above authority if to
      do
      so would be to violate the laws, regulations or other written guidance of any
      state or federal health program. In such event, New LLC and Seller agree to
      take
      such actions as necessary to convey such payments to New LLC consistent with
      applicable laws and regulations.

     

    6.4.    Further
      Assurances.
      The
      parties hereto shall execute such further documents, and perform such further
      acts, as may be reasonably necessary to transfer and convey the Assets to the
      New LLC, and the Transferred LLC Interests to NovaMed, all on the terms
      contained herein, and to otherwise comply with the terms of this Agreement
      and
      consummate the transactions contemplated herein.

     

    6.5.    Professional
      Liability Tail Coverage.
      To the
      extent Seller’s professional liability insurance policy for the Facility is on a
      claims-made basis (rather than an occurrence basis), Seller shall obtain an
      extended reporting (“tail”) professional liability insurance policy covering
      acts and omissions occurring at the Facility prior to the Closing Date, in
      an
      amount equal to the professional liability insurance carried immediately prior
      to the Closing Date, or such other amount, and for such period of time, as
      determined by mutual agreement of NovaMed and Seller. Upon NovaMed’s request,
      Seller shall provide New LLC with proof of such tail professional liability
      coverage. The cost and expense of such tail coverage shall be borne solely
      by
      Seller. 

     

    6.6.    Credentialing.
      As of
      the Closing Date, the Members and other physicians credentialed by the Facility
      immediately prior to the Closing Date shall receive provisional privileges
      to
      perform surgical procedures at the Facility that will be operated by the New
      LLC
      from and after the Closing Date. As a condition to receiving these provisional
      privileges, each of the Members hereby agree, and shall cause all of such other
      credentialed physicians to agree, that following the Closing Date he or she
      will
      comply with all of the New LLC’s credentialing requests (including, without
      limitation, providing New LLC with any reasonably requested information and
      completing any applicable credentialing forms) so that the New LLC may complete
      its credentialing review process for each physician by the expiration date
      of
      the provisional privileges. 

     

    
      
        
        

      

      
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    6.7.    Asset
      Transfers.
      To the
      extent of any Member Assets, the Seller will cause the party owning the
      applicable Member Assets to contribute such Member Assets to Seller for
      contribution to the New LLC, free and clear of all Liens, prior to the Closing
      Date. 

     

    6.8.    Real
      Estate Matters.
      

     

    (a)    On
      behalf
      of New LLC, NovaMed shall obtain
      a
      commitment (“Commitment”) issued by a title insurance company (the “Title
      Company”) for the issuance of ALTA Owner’s Policy of Title Insurance (Form 1970)
      for the 25th Street Real Property (a “Title Policy”), in an amount of the
      approximate fair market value of the 25th Street Real Property. The Commitment
      shall show fee simple title to the parcel vested in the Seller, subject only
      to
      current real estate taxes not yet due or payable as of the Closing Date and
      the
      Permitted Exceptions. The Title Policy to be issued by the Title Company shall
      have all standard and general exceptions deleted to the fullest extent permitted
      by applicable law and regulations, including but not limited to the standard
      survey exception and any exception relating to rights of parties in possession,
      and shall at NovaMed’s option, contain such endorsements as may be reasonably
      requested by NovaMed. At Closing, Seller and the Members, as applicable, shall
      deliver or cause to be delivered such affidavits or other instruments as the
      Title Company may reasonably require to delete the standard and general
      exceptions and to provide the endorsements required hereunder. Notwithstanding
      anything to the contrary contained in this Agreement, the premium for the Title
      Policy at the Closing, including the premium for deletion of the standard survey
      exception, and for any other endorsements reasonably requested by NovaMed herein
      shall be paid by Seller. Seller shall pay or otherwise be responsible for any
      costs, expenses, deposits or security required to insure over an Unpermitted
      Encumbrance (as defined herein) or Survey Defect (as defined
      herein).

     

    (b)    On
      behalf
      of New LLC, NovaMed shall obtain an as-built survey for the 25th Street Real
      Property (“Survey”) prepared by a registered land surveyor or engineer, licensed
      in the state of Tennessee, dated on or after the date of this Agreement,
      certified to New LLC, the Title Company, and such other entities as NovaMed
      may
      designate in writing, and in accordance with the Minimum Standard Detail
      Requirements for ALTA/ACSM Land Title Surveys, jointly established and adopted
      by ALTA, ACSM and NSPS in 1999, and including all Table A items, and pursuant
      to
      the Accuracy Standards (as adopted by ALTA, NSPS and ACSM and in effect on
      the
      date of certification) such that the survey measurements are made in accordance
      with the Minimum Angle, Distance and Closure Requirements for Survey
      Measurements Which Control Land Boundaries for ALTA/ACSM Land Title Surveys,
      sufficient to cause the Title Company to delete the standard printed survey
      exception to the extent permitted. Seller shall pay the entire cost of obtaining
      the Survey.

     

    (c)    If
      (i)
      the Commitment discloses a title exception other than a Permitted Encumbrance
      (an “Unpermitted Encumbrance”) or (ii) the Survey discloses any encroachment,
      overlap, boundary dispute, gap or any other matter which renders title to the
      25th Street Real Property uninsurable or reflects that any utility service
      to
      the improvements or access thereto does not lie wholly within the 25th Street
      Real Property, or within an unencumbered easement for the benefit of the 25th
      Street Real Property, or reflects any other matter adversely affecting the
      present use or value of the 25th Street Real Property (any of the foregoing,
      a
“Survey Defect”), then NovaMed shall give written notice to the Seller
      specifying NovaMed's objections (the "Title Objections") to one or more of
      the
      Unpermitted Encumbrances or Survey Defects, together with a copy of the
      Commitment and Survey, within ten (10) business days after NovaMed’s receipt of
      the Commitment (including legible copies of all exceptions listed on Schedules
      B
      and C of the Commitment) and Survey. Seller and the Members, at their sole
      cost
      and expense and using commercially reasonable efforts, shall either (x) cause
      all Unpermitted Encumbrances to be removed from the Commitment and/or all Survey
      Defects to be eliminated from the Survey prior to the Closing, or (y) if Seller
      and the Members reasonably determine that they are unable to cure any
      Unpermitted Encumbrance or Survey Defect (1) due to impracticality, or (2)
      because it is not commercially reasonable to do so, Seller and the Members
      shall
      promptly notify NovaMed in writing which Title Objections they cannot or will
      not satisfy, in which event NovaMed shall have the option of (A) waiving the
      unsatisfied Title Objections, in which event the unsatisfied Title Objections
      will become Permitted Exceptions, or (B) terminating this Agreement as provided
      in Article X. 

     

    
      
        
        

      

      
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    (d)    As
      of the
      Closing Date Seller shall have delivered to NovaMed the following materials
      that
      are in the Seller’s and/or Members possession: (i) complete and legible copies
      of all Material Contracts relating to or affecting the 25th Street Real Property
      as set forth on Schedule 4.9 and (ii) complete copies of all existing title
      insurance policies, title reports or commitments, surveys, appraisals,
      mechanical and structural reports, engineering plans, architectural drawings,
      and soil studies and similar reports, if any, with respect to the 25th Street
      Real Property. Seller shall reimburse NovaMed for the cost of its environmental
      report conducted by a consultant retained by NovaMed. Seller shall also be
      responsible for all transfer taxes associated with the transfer of the
      25th
      Street
      Real Property to New LLC.

     

    ARTICLE
      VII.

    CLOSING

     

    7.1.    Time
      and Place.
      The
      closing of the transactions that are the subject of this Agreement shall be
      consummated at a closing (the “Closing”)
      simultaneous with the execution and delivery of this Agreement and the other
      Transaction Documents by the applicable parties, which execution and delivery
      shall be via facsimile effective as of the Closing Date, with original documents
      to be exchanged by nationally recognized overnight courier for delivery on
      the
      next business day after the Closing Date.

     

    7.2.    Conditions
      Precedent.
      As a
      condition precedent to the consummation of the transactions contemplated herein:
      (a) Seller shall have consummated the New LLC Asset Transfer in accordance
      with
      the terms and conditions of Article
      I
      hereof;
      and (b)
      the New LLC shall have received all necessary state licensure and Medicare
      approvals to commence the New LLC’s ownership and operation of the Business or,
      if such approvals are pending as of the Closing Date, the New LLC shall have
      received certificates or other assurance from the applicable Governmental
      Authorities satisfactory to NovaMed that such approvals shall be given upon
      receipt of evidence of the Closing of the Transaction (with the understanding
      that upon commencement of operations, there may be billing delays associated
      with procuring third party payor provider numbers). 

     

    7.3.    Deliveries
      of Seller and Members.
      At the
      Closing, Seller and Members will execute and deliver or cause to be executed
      and
      delivered to NovaMed: 

     

    (a)    a
      Contribution Agreement to evidence the New LLC Asset Transfer and to effectively
      vest the New LLC with full, complete and marketable right, title and interest
      in
      and to the Assets, in
      substantially the form attached hereto as Exhibit
      7.3(a) (the
      “Contribution
      Agreement”);

     

    (b)    the
      Limited Liability Company Agreement of the New LLC, in the form attached hereto
      as Exhibit
      7.3(b)
      (the
“Operating
      Agreement”);

     

    
      
        
        

      

      
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    (c)    a
      certificate of the Secretary of Seller as to (i) copies of resolutions of its
      Manager(s) and Members authorizing the execution, delivery and performance
      of
      this Agreement and the Transaction Documents; (ii) a Certificate of Good
      Standing issued by the Secretary of State of Tennessee; (iii) its Operating
      Agreement; (iv) incumbency and specimen signatures with respect to its officers
      executing this Agreement and any Transaction Documents; and (v) its Articles
      of
      Organization certified by the Secretary of State of Tennessee.

     

    (d)    any
      required third party consents, filings, and certificates from Seller or any
      third party (including, any Governmental Authority) relating to the transfer
      of
      the Assets, including without limitation, all consents from the State of
      Tennessee regarding the transfer of all Permits and licenses relating to the
      ownership and operation of the Facility, and copies of all written consents
      obtained in connection with the transfer of the Material Contracts;

     

    (e)    clearance
      certificates or similar documents required by any state taxing authority in
      order to relieve NovaMed of any obligation to withhold any portion of the
      Purchase Price;

     

    (f)    the
      Assignment of LLC Interests, substantially in the form attached as Exhibit
      7.3(f) (the
      “Assignment
      of LLC Interests”),
      duly
      executed by Seller;

     

    (g)    a
      Limited
      Warranty Deed, in a form provided by NovaMed and reasonably satisfactory to
      the
      Seller and the Members, conveying the 25th Street Real Property to the New
      LLC,
      subject only to general real estates taxes not yet due or payable and those
      title exceptions agreed to by NovaMed in writing (collectively, the "Permitted
      Exceptions")

     

    (h)    the
      Title
      Policy (or a mark-up of the commitment reflecting the Title Policy to be issued
      pursuant to the Commitment) as provided in Section
      6.7;

     

    (i)    all
      applicable documentation releasing Liens covering, concerning or relating to
      the
      Assets, in form and substance reasonably acceptable to NovaMed; 

     

    (j)    Redemption
      Agreement pursuant to which Seller redeems Physician Members’ ownership
      interests in Seller in exchange for Seller’s membership interests in the New
      LLC, effective immediately following the Closing Date; and 

     

    (k)    such
      other documents and instruments as NovaMed or its counsel reasonably shall
      deem
      necessary to consummate the transactions contemplated hereby.

     

    All
      documents delivered to NovaMed shall be in form and substance reasonably
      satisfactory to counsel for NovaMed.

     

    7.4.    Deliveries
      of NovaMed.
      At the
      Closing, NovaMed will deliver or will cause the New LLC to deliver to Seller
      simultaneously with the delivery of the items referred to in Section
      7.3
      above:

     

    (a)    the
      payment of the Purchase Price;

     

    (b)    the
      Operating Agreement;

     

    (c)    certificate
      of the Secretary of NovaMed as to (i) copies of resolutions of its board of
      directors authorizing the execution, delivery and performance of this Agreement
      and the Transaction Documents; and (ii) incumbency and specimen signatures
      with
      respect to its officers executing this Agreement and any Transaction
      Documents; 

     

    
      
        
        

      

      
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    (d)    a
      duly
      executed Management Agreement (the “Management
      Agreement”)
      between NovaMed Management Services, LLC and the New LLC, substantially in
      the
      form of attached Exhibit
      7.4(d);

     

    (e)    the
      Assignment of LLC Interests, duly executed by NovaMed; and

     

    (f)    such
      other documents and instruments as Seller or its counsel reasonably shall deem
      necessary to consummate the transactions contemplated hereby.

     

    All
      documents delivered to Seller shall be in form and substance reasonably
      satisfactory to the counsel for Seller. 

     

    7.5.    Change
      of Ownership Process.
      To the
      extent from and after the Closing there are any actions necessary to confirm
      or
      effect all reasonably necessary licensure and regulatory approvals required
      in
      connection with New LLC’s ownership and operation of the Business (the receipt
      of which is a condition precedent to the Closing), Seller, Members and their
      respective agents and representatives agree to cooperate with NovaMed and New
      LLC in connection these filings and applications, and will use commercially
      reasonable efforts to respond in a timely manner to any information or signature
      requests reasonably required in connection with these applications and
      notices.

     

    ARTICLE
      VIII.

    INTENTIONALLY
      OMITTED 

     

    ARTICLE
      IX.

    INTENTIONALLY
      OMITTED

     

    ARTICLE
      X.

    INTENTIONALLY
      OMITTED

     

    ARTICLE
      XI.

    COVENANT
      NOT TO COMPETE

     

    11.1.    Acknowledgment.
      Each of
      Seller and Members acknowledges and agrees that in order to assure that the
      Business will retain its value as a “going concern,” it is necessary that Seller
      and Members undertake not to utilize their present special knowledge of the
      Business to compete with NovaMed and the Business during the Restricted Period
      after the acquisition of Transferred LLC Interests; provided
      that
      NovaMed acknowledges that the Physician Members (excluding Dr. Kyle) will
      continue to have an interest in the Business through their ownership of a
      minority interest in the New LLC. Each of Seller and Members further
      acknowledges that (a) NovaMed has been and/or will be engaged in the Business;
      (b) each of Seller and Members possesses extensive knowledge and a unique
      understanding of the Business, as well as (subsequent to the transactions
      contemplated by this Agreement) the proprietary and confidential information
      concerning the Business; (c) the agreements and covenants
      contained in this Section 11.1
      are
      essential to protect NovaMed and the value of the Business and are a condition
      precedent to NovaMed’s willingness to pay for the Transferred LLC Interests; (d)
      NovaMed would be irreparably damaged if Seller and/or any Member were to violate
      the terms and conditions of this Article
      XI;
      and (e)
the
      geographic, temporal and business scope of the restrictive covenants in this
      Article XI are reasonable. 

     

    11.2.    Non-Compete.
      Each of
      Seller and Members hereby agrees that for the five-year period beginning on
      the
      Closing Date (the “Restricted
      Period”;
      provided,
      that
      in the
      event that any such party is determined to have violated the covenants set
      forth
      in this Article
      XI,
      the
      Restricted Period shall be extended day for day for the time period that such
      party is in violation of any such covenant), he, she or it shall not, directly
      or indirectly,
      act as
      a director, officer, member or partner of, or own any equity or other financial
      interest in, any
      Person that owns and/or operates an ambulatory surgery center, licensed surgical
      facility or any other outpatient surgical facility that is located within a
      thirty (30) mile radius of the current location of the Business.
      Notwithstanding the foregoing, and without limiting the terms of the Operating
      Agreement, Seller and/or any Member
      may (a)
      be a director on the Board of Trustees of a hospital, (b) serve on the medical
      staff of any hospital, (c) own an interest in the New LLC in accordance with
      the
      terms of the Operating Agreement; and (d) practice medicine in his or her own
      office or the office of the professional entity in which he
      or she
      is an employee or owner.
      In
      addition, notwithstanding the restrictions set forth in this Section
      11.2,
      the
      Members listed
      on
Schedule
      11.2
      may
      continue to own their equity interests in the facilities set forth across from
      their names on Schedule
      11.2,
      provided at no time during the Restricted Period shall any such Member other
      than ASCOA increase his ownership interests in such listed facilities (except
      in
      the event such increase in ownership interest is the result of no action or
      further investment by such Member (e.g.
      another
      investor is redeemed by the entity)); ASCOA shall be free to increase its
      ownership interests in such listed facility. 

     

    
      
        
        

      

      
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    11.3.    Property
      of the Business.
      All
      memoranda, notes, lists, records and other documentation or papers (and all
      copies thereof), including such items stored in computer memories, or microfiche
      or by any other means, which will become the New LLC’s property (after
      the consummation
      of transactions contemplated by this Agreement), are and shall be the New LLC’s
      property and shall be delivered to the New LLC promptly on the request of
      NovaMed.

     

    11.4.    Blue-Pencil.
      If any
      court of competent jurisdiction shall at any time deem the term of this
      Agreement or any particular restrictive covenant contained in this Article
      XI
      too
      lengthy or the territory too extensive, the other provisions of this
Article
      XI shall
      nevertheless stand, the Restricted Period herein shall be deemed to be the
      longest period permissible by law under the circumstances and the territory
      described in Section
      11.2
      shall be
      deemed to comprise the largest territory permissible by law under the
      circumstances. The court in each case shall reduce the Restricted Period and/or
      territory described in Section
      11.2
      to
      permissible duration or size.

     

    11.5.    Remedies.
      

     

    (a)    Each
      of
      Seller and Members acknowledges and agrees that the covenants set forth in
      this
Article
      XI
      are
      reasonable and necessary for the protection of NovaMed and the New LLC’s
      business interests, that irreparable
      injury will result if Seller or any Member breaches any of the terms of said
      restrictive covenants,
      and that in the event of actual or threatened breach of any such restrictive
      covenants, NovaMed will have no adequate remedy at law. Each of Seller and
      Members accordingly agrees that in the event of any actual or threatened breach
      by any of them of any of the covenants set forth in this Article XI,
      NovaMed
      shall be entitled to immediate temporary injunctive and other equitable relief,
      without bond and without the necessity of showing actual monetary damages,
      subject to hearing as soon thereafter as possible. Nothing contained herein
      shall be construed as prohibiting NovaMed from pursuing any other remedies
      available to it for such breach or threatened breach, including the recovery
      of
      any damages which it is able to prove.
      The
      parties also agree that the existence of any claim or cause of action by Seller
      or any Member against NovaMed or any Affiliate, whether predicated upon this
      Agreement or otherwise, shall not constitute a defense to the enforcement of
      the
      restrictive covenants set forth herein, but shall be litigated separately.
      

     

    (b)    To
      the
      extent Seller or a particular Member breaches a covenant set forth in this
      Article
      XI,
      then
      such breach shall only create liability for such breaching Party and shall
      not
      create liability or responsibility for any other non-breaching Party.

     

    
      
        
        

      

      
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    11.6    Assignment.
      Seller
      and Members agree that the rights granted in this Article XI to NovaMed may
      be
      assigned by NovaMed at its sole and absolute discretion in connection with
      any
      transaction involving a sale of assets by NovaMed (or any other transaction
      substantially similar in effect). All of the provisions of this Article XI
      shall
      inure to any successors of NovaMed, all of which are specifically third party
      beneficiaries of this Article XI with full rights hereunder. In addition, the
      parties hereto agree that an assignee of the rights hereunder is an intended,
      direct third party beneficiary of Article XI and may enforce such rights in
      its
      own name in addition to or in lieu of NovaMed.

     

    11.7    Patient
      Freedom.
      The
      parties hereto agree that the benefits afforded either party hereunder are
      not
      payment for, and are not in any way contingent upon the referral, admission
      or
      any other arrangement for, the provision of any item or service offered by
      any
      party hereto. Nothing in this Agreement shall be construed to limit the freedom
      of any patient of Seller or any Member
      to
      choose the facility
      or physician from whom any patient shall receive health care services or limit
      or interfere with Seller or any Member’s ability to exercise professional
      judgment in treating patients or their ability to provide medical services
      to
      patients.

     

    ARTICLE
      XII.

    POST-CLOSING
      COVENANTS

     

    12.1.    Indemnification
      by Seller and Members.
      From
      and after the Closing, each Member (on a Pro Rata Basis (as defined in
Section
      13.1))
      agrees
      to severally (but not jointly as more specifically described in Section
      12.6
      below)
      indemnify NovaMed and its respective Affiliates (including, without limitation,
      the New LLC) and each of their respective officers, directors, managers,
      employees, agents and fiduciaries (each, a “NovaMed
      Indemnified Party”),
      from
      and against, and to pay to a NovaMed Indemnified Party
      or reimburse
      a NovaMed Indemnified Party for any and all liabilities
      (whether
      contingent, fixed or unfixed, liquidated or unliquidated, or otherwise),
      obligations, deficiencies, demands, claims, suits, actions, or causes of action,
      assessments, losses, costs, expenses, interest, fines, penalties, damages or
      costs or expenses of any and all investigations, proceedings, judgments,
      environmental analyses, remediations, settlements and compromises (including
      reasonable fees and expenses of attorneys, accountants and other experts) but
      excluding Consequential Damages (as defined in Section
      13.1)
      (individually and collectively, the “Losses”)
      actually sustained or incurred by any NovaMed Indemnified Party relating to,
      resulting from, arising out of or otherwise by virtue of any of the
      following:

     

    (a)    any
      misrepresentation or breach of a representation or warranty contained in this
      Agreement by Seller or any Member, or non-compliance with or breach by Seller
      or
      any Member of any of the covenants or agreements contained in this Agreement
      to
      be performed by Seller or Members;

     

    (b)    the
      operation of the Business, including the use of the Assets and the Excluded
      Assets, on or prior to the Closing Date, provided, however, that to the extent
      that any matter related to the operation of the Business, including the use
      of
      the Assets, on prior to the Closing Date, is addressed in the representations
      and warranties contained in Article IV and is covered by Section 12.1(a) hereof,
      such matters shall be excluded from this Section 12.1(b) (other than with
      respect to Third Party Claims);

     

    (c)    any
      Tax
      liability of Seller or any Member whatsoever,
      including without limitation any Tax liability with respect to or arising from
      the transactions contemplated hereby or the structuring of the transactions
      contemplated hereby or any Tax liability under the Tennessee bulk sales
      laws;

     

    (d)    any
      violations of or obligations under Environmental and Safety Requirements
      relating to acts, omissions, circumstances or conditions to the extent existing
      or arising on or prior to the Closing Date, whether or not such acts, omissions,
      circumstances or conditions constituted a violation of Environmental and Safety
      Requirements as then in effect;

     

    
      
        
        

      

      
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    (e)    to
      the
      extent not covered by insurance, any liabilities relating to or arising from
      the
      provision of (or failure to provide) professional medical services, including
      any liabilities relating to the failure, prior to the Closing Date, to adhere
      to
      or comply with any Medicare and Medicaid requirements or Fraud and Abuse
      Laws;

     

    (f)    any
      action, demand, proceeding, investigation or claim (whenever made) by any third
      party (including Governmental Authorities) against or affecting NovaMed or
      its
      Affiliates which, if successful, would give rise to or evidence the existence
      of
      or relate to a misrepresentation or breach of any of the representations or
      warranties contained this Agreement or the non-compliance with or breach of
      any
      of the covenants contained in this Agreement by Seller or any
      Member;

     

    (g)    the
      Excluded Assets or Excluded Liabilities; or

     

    (h)    any
      claim
      for payment of fees and/or expenses as a broker or finder in connection with
      the
      origin, negotiation, execution or consummation of this Agreement based upon
      any
      alleged agreement between the claimant and Seller or any Member.

     

    12.2.    Indemnification
      by NovaMed.
      From
      and after the Closing, NovaMed agrees to indemnify, Seller, Members and their
      respective Affiliates, and their respective officers, directors, managers,
      members, shareholders, employees, trustees, agents, representatives, heirs
      and
      executors other than the New LLC (each, a “Seller
      Indemnified Party”)
      from
      and against, and to pay to a Seller Indemnified Party or reimburse a Seller
      Indemnified Party for any
      and
      all Losses actually sustained or incurred by any Seller Indemnified Party
      relating to, resulting from, arising out of or otherwise by virtue of any of
      the
      following:

     

    (a)    any
      misrepresentation or breach of a representation or warranty contained in this
      Agreement by NovaMed, or non-compliance with or breach by NovaMed of any of
      the
      covenants or agreements contained in this Agreement to be performed by
      NovaMed;

     

    (b)    any
      action, demand, proceeding, investigation or claim (whenever made) by any third
      party (including Governmental Authorities) against or affecting Seller, Members
      or their respective Affiliates which, if successful, would give rise to or
      evidence the existence of or relate to a misrepresentation or breach of any
      of
      the representations or warranties contained in this Agreement or the
      non-compliance with or breach of any of the covenants contained in this
      Agreement by NovaMed; or

     

    (c)    any
      claim
      for payment of fees and/or expenses as a broker or finder in connection with
      the
      origin, negotiation, execution or consummation of this Agreement based upon
      any
      alleged agreement between the claimant and NovaMed.

     

    12.3.    Indemnification
      Procedure.

     

    (a)    Third
      Party Claims.
      In the
      event that subsequent to the Closing any Person entitled to indemnification
      under this Agreement (an “Indemnified Party”)
      asserts a claim for indemnification or receives notice of the assertion of
      any
      claim or of the
      commencement of any action or proceeding by any entity that is not a party
      to
      this Agreement or an Affiliate of a party to this Agreement (including, but
      not
      limited to any domestic or foreign court or Governmental Authority, federal,
      state or local) (a “Third
      Party Claim”)
      against such Indemnified Party, against which a party to this Agreement is
      required to provide indemnification under this Agreement (an “Indemnifying
      Party”),
      the
      Indemnified Party shall give written notice together with a statement of any
      available information regarding such claim to the Indemnifying Party within
      60
      days after learning of such claim (or within such shorter time as may be
      necessary to give the Indemnifying Party a reasonable opportunity to respond
      to
      such claim). The Indemnifying Party shall have the right, upon written notice
      to
      the Indemnified Party (the “Defense
      Notice”)
      within
      30 days after receipt from the Indemnified Party of notice of such claim, which
      notice by the Indemnifying Party shall specify the counsel it will
      appoint to defend such claim (“Defense
      Counsel”),
      to
      conduct at its expense the defense against such claim in its own name, or if
      necessary in the name of the Indemnified Party; provided,
      however,
      that
      the Indemnified Party shall have the right to approve the Defense Counsel,
      which
      approval shall not be unreasonably withheld, and in the event the Indemnifying
      Party and the Indemnified Party cannot agree upon such counsel within 10 days
      after the Defense Notice is provided, then the Indemnifying Party shall propose
      an alternate Defense Counsel, which shall be subject again to the Indemnified
      Party’s approval. If the parties still fail to agree on Defense Counsel, then,
      at such time, they shall mutually agree in good faith on a procedure to
      determine the Defense Counsel. The delivery of a Defense Notice shall not
      constitute an admission with respect to the claim for
      indemnification.

     

    
      
        
        

      

      
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    (i)    In
      the
      event that the Indemnifying Party shall fail to give the Defense Notice, it
      shall be deemed to have elected not to conduct the defense of the subject claim,
      and in such event the Indemnified Party shall have the right to conduct such
      defense in good faith and to compromise and settle the claim without the consent
      of the Indemnifying Party and the Indemnifying Party will be liable for all
      costs, expenses, settlement amounts or other Losses paid or incurred in
      connection therewith.

     

    (ii)    In
      the
      event that the Indemnifying Party does deliver a Defense Notice and thereby
      elects to conduct the defense of the subject claim, the Indemnified Party will
      cooperate with and make available to the Indemnifying Party such assistance
      and
      materials as it may reasonably request, all at the expense of the Indemnifying
      Party, and the Indemnified Party shall have the right at its expense to
      participate in the defense assisted by counsel of its own choosing, provided
      that the
      Indemnified Party shall have the right to compromise and settle the claim only
      with the prior written consent of the Indemnifying Party, which consent shall
      not be unreasonably withheld or delayed.

     

    (iii)    Without
      the prior written consent of the Indemnified Party, the Indemnifying Party
      will
      not enter into any settlement of any Third Party Claim or cease to defend
      against such claim, if pursuant to or as a result of such settlement or
      cessation, (i) injunctive or other equitable relief would be imposed against
      the
      Indemnified Party, or (ii) such settlement or cessation would lead to liability
      or create any financial or other obligation on the part of the Indemnified
      Party
      for which the Indemnified Party is not entitled to indemnification
      hereunder.

     

    (iv)    The
      Indemnifying Party shall not be entitled to control, and the Indemnified Party
      shall be entitled to have sole control over, the defense or settlement of any
      claim to the extent that claim seeks an order, injunction or other equitable
      relief against the Indemnified Party which, if successful, could materially
      interfere with the business, operations, assets or condition (financial or
      otherwise) of the Indemnified Party (and the cost of such defense shall
      constitute an amount for which the Indemnified Party is entitled to
      indemnification hereunder).

     

    (v)    If
      a firm
      decision is made to settle a Third Party Claim, which offer the Indemnifying
      Party is permitted to settle under this Section
      12.3(a),
      and the
      Indemnifying Party desires to accept and agree to such offer, the Indemnifying
      Party will give written notice to the Indemnified Party to that effect. If
      the
      Indemnified Party fails to consent to such firm offer within 15 calendar days
      after its receipt of such notice, the Indemnified Party may continue to contest
      or defend such Third Party Claim and, in such event, the maximum liability
      of
      the Indemnifying Party as to such Third Party Claim will not exceed the amount
      of such settlement offer, plus costs and expenses paid or incurred by the
      Indemnified Party through the end of such 15-day period.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    (vi)    Any
      judgment entered or settlement agreed upon in the manner provided herein shall
      be binding upon the Indemnifying Party, and shall conclusively be deemed to
      be
      an obligation with respect to which the Indemnified Party is entitled to prompt
      indemnification hereunder.

     

    (b)    Claims
      Not Third Party Claims.
      With
      respect to a claim for indemnification under this Article
      XII
      that is
      not a Third Party Claim:

     

    (i)    An
      Indemnification Notice shall, to the extent known and reasonably practicable,
      specify in reasonable detail the Losses included in the amount so stated, the
      date such item was paid or properly accrued, the basis for any anticipated
      liability and the specific representation, warranty or covenant to which each
      such item is related and the computation of the amount to which such Indemnified
      Party claims to be entitled hereunder (an “Indemnification
      Notice”)
      and be
      delivered to the Indemnifying Party.

     

    (ii)    In
      the
      event that the Indemnifying Party shall in good faith object to the
      indemnification of an Indemnified Party in respect of any claim or claims
      specified in any Indemnification Notice, the Indemnifying Party shall, within
      30
      days after delivery to the Indemnifying Party of such Indemnification Notice,
      deliver to the Indemnified Party written notice to such effect and the
      Indemnifying Party and the Indemnified Party shall, within the 30 day period
      beginning on the date of delivery to the Indemnified Party of such objection,
      attempt in good faith to agree upon the rights of the respective parties with
      respect to each of such claims to which the Indemnifying Party shall have so
      objected. If the Indemnifying Party, within 30 days after delivery of such
      Indemnification Notice, has not delivered written notice to the Indemnified
      Party announcing its objections to the claims asserted therein by the
      Indemnified Party, then such claims and the Indemnified Party's liability
      therefor shall be deemed accepted by the Indemnifying Party. If the Indemnified
      Party and the Indemnifying Party shall succeed in reaching agreement on their
      respective rights with respect to any of such claims, the Indemnified Party
      and
      the Indemnifying Party shall promptly prepare and sign a memorandum setting
      forth such agreement. If any such dispute has not been so resolved by
      negotiation under this Section
      12.3(b)(ii)
      within
      such 30 day time period, then the Indemnified Party and the Indemnifying Party
      shall seek to resolve such dispute in accordance with Section
      13.12
      hereof.

     

    (iii)    Claims
      for Losses (A) specified in any Indemnification Notice to which an Indemnifying
      Party shall not object in writing within 30 days of delivery of such
      Indemnification Notice, (B) which are agreed to in a memorandum of agreement
      of
      the nature described in Section
      12.3(b)(ii),
      (C) the
      validity and amount of which shall have been established by the dispute
      resolution process set forth in Section
      13.12
      hereof
      or which have been settled with the consent of the Indemnifying Party, are
      hereinafter referred to, collectively, as "Resolved
      Claims".
      Within
      ten days of the determination of the amount of any Resolved Claims, the
      Indemnifying Party shall pay to the Indemnified Party an amount equal to the
      Resolved Claim by wire transfer in immediately available funds to the account
      designated by the Indemnified Party in a notice to the Indemnifying Party not
      less than two business days prior to such payment.

     

    
      
        
        

      

      
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    12.4.    Failure
      to Give Timely Notice.
      A
      failure by an Indemnified Party to give timely, complete or accurate notice
      as
      provided in Section
      12.3
      will not
      affect the rights or obligations of any
      party
      hereunder except and only to the extent that, as a result of such failure,
      any
      party entitled to receive such notice was deprived of its right to recover
      any
      payment under its applicable insurance coverage or was otherwise directly and
      materially damaged as a result of such failure to give timely
      notice.

     

    12.5.    Survival.
      Notwithstanding anything contained to the contrary in this Agreement, all
      representations and warranties of the parties hereto contained in or arising
      out
      of the Transaction Documents, or in any schedule or certificate given in
      connection herewith and therewith, shall survive the Closing and shall continue
      in effect until the 18-month anniversary of the Closing Date; provided,
      however,
      that
      the representations and warranties set forth in Sections 4.2(a),
      4.4, 4.6, 4.8, 4.12(b), 4.15 and
      4.19 shall
      survive until (i) with respect to Sections 4.6
      and
4.12(b),
      the
      five-year anniversary of the Closing Date and (ii) with respect to each of
      the
      other foregoing Sections, the expiration of the statutes of limitation
      applicable to the specific representation or warranty with respect to which
      a
      claim is made. Unless a specified period is set forth in this Agreement (in
      which event such specified period will control),
      all covenants and indemnities contained in this Agreement will survive the
      Closing and remain in effect indefinitely.

     

    12.6.    Limitation
      on Indemnification.
      

     

    (a)    The
      aggregate amount of the Losses required to be paid by Seller and Members
      pursuant to Section
      12.1
      hereof
      shall not exceed the amount of the Purchase Price; provided,
      however,
      that no
      Member shall be liable, in the aggregate, for such Losses pursuant to
Section
      12.1
      that are
      in excess of such Member’s Pro Rata Basis of the Purchase Price. 

     

    (b)    The
      NovaMed Indemnified Parties shall be entitled to indemnification under
Section
      12.1(a)
      and
Section
      12.1(f)
      only if
      the aggregate amount of all Losses thereunder (on a cumulative basis) exceeds
      $150,000 (the “Basket
      Amount”),
      in
      which case the Seller and Members shall be obligated to indemnify the NovaMed
      Indemnified Parties only for the excess of the aggregate amount of all such
      Losses over the Basket Amount.

     

    (c)    Seller
      Indemnified Parties shall be entitled to indemnification under Section
      12.2(a)
      and
Section
      12.2(b)
      only if
      the aggregate amount of all Losses thereunder (on a cumulative basis) exceeds
      the Basket Amount, in which case Buyer shall be obligated to indemnify the
      Seller Indemnified Parties only for the excess of the aggregate amount of all
      such Losses over the Basket Amount. 

     

    (d)    The
      rights set forth in this Article
      XII
      shall be
      each party’s sole and exclusive remedy for any claim or dispute relating to any
      breach of a representation, warranty or covenant by the other parties under
      this
      Agreement; provided,
      however,
      that
      the limitations set forth in this Section
      12.6
      shall
      not apply, and the aggrieved party shall have all remedies available at law
      and
      in equity, in the case of (i) fraud or intentional misrepresentation by a party
      hereto or (ii) any claim or dispute arising under or relating to Article
      XI
      hereof.

     

    (e)    Notwithstanding
      anything to the contrary herein, nothing in this Section
      12.6
      shall be
      deemed to limit or impair NovaMed’s rights under Article
      XI
      hereof.
      In addition, for purposes of this Section
      12.6,
      in no
      event shall Losses be construed to include any remedies paid to NovaMed under
      Article
      XI.

     

    12.7.    Right
      of Offset.
      If any
      of Seller and Members is the Indemnifying Party and fail to make any payment
      as
      contemplated by this Article
      XII,
      or
      shall fail to make any payment when due under the terms of any of the
      Transaction Documents, then NovaMed may elect to offset such amount against
      any
      amount due and owing by the New LLC to Seller or such Member pursuant to the
      terms of the Operating Agreement
      (including, without limitation, any distributions payable to Seller or such
      Member). 

     

    
      
        
        

      

      
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    ARTICLE
      XIII.

    MISCELLANEOUS

     

    13.1.    Definitions.  For
      purposes of this Agreement, the following terms have the meaning set forth
      below:

     

    “Affiliate”
means
      an affiliate as defined in Rule 405 under the Securities Act of 1933, as
      amended, and includes any past and present Affiliate of a Person; provided
      that
      with respect to determining any Affiliate of NovaMed, such Affiliates shall
      include, without limitation, NovaMed, Inc. and any of its
      subsidiaries.

     

    “Code”
means
      the Internal Revenue Code of 1986, as amended.

     

    “Consequential
      Damages” shall
      mean consequential, special, exemplary or punitive damages, except to the extent
      that such damages relate to a Third Party Claim in which case they shall not
      be
      deemed “Consequential Damages” and shall be included in “Losses” for purposes of
Article
      XII
      hereof.

     

    “ERISA”
means
      the Employee Retirement Income Security Act of 1974, as amended.

     

    “Facility”
means
      the Medicare-certified, state-licensed ambulatory surgery center located at
      137
      25th
      Street
      NE, Cleveland, Tennessee 37311.

     

    “Fraud
      and Abuse Laws”
means
      all fraud and abuse laws promulgated under Section 1128(b) of the Social
      Security Act, 42 U.S.C. Section 1320a-7(b) and Section 1877 of the Social
      Security Act, 42 U.S.C. Section 1877, and all rules and regulations promulgated
      thereunder; any other federal, state or local law relating to the referral
      of
      patients to medical facilities owned by providers of medical services; and
      all
      federal statutes (whether set forth in Title XVIII of the Social Security Act
      or
      elsewhere) affecting the health insurance program for the aged and disabled
      established by Title XVIII of the Social Security Act and any statues succeeding
      thereto, together with all rules and regulations promulgated
      thereunder.

     

    “Hazardous
      Materials”
means
      (a) hazardous materials, hazardous substances, extremely hazardous substances
      or
      hazardous wastes, as those terms are defined by the Comprehensive Environmental
      Response, Compensation and Liability Act, 42 U.S.C. §9601 et seq., the Resource
      Conservation and Recovery Act, 42 U.S.C. §6901 et seq., and any other
      Environmental and Safety Requirements; (b) petroleum, including crude oil or
      any
      fraction thereof which is liquid at standard conditions of temperature and
      pressure (60 degrees Fahrenheit and 14.7 pounds per square inch absolute);
      (c)
      any radioactive material, including any source, special nuclear, or by-product
      material as defined in 42 U.S.C. §2011 et seq.; (d) asbestos in any form or
      condition; and (e) any other material, substance or waste to which liability
      or
      standards of conduct may be imposed under any Environmental and Safety
      Requirements.

     

    “Knowledge”
or
      “knowledge”
or
      “aware”
and
      all
      permutations thereof shall mean the knowledge of any of Luke Lambert, an officer
      of ASCOA, Connie Jones, Seller’s administrator, and the members of the Members’
Committee, which any such member shall be deemed to have “Knowledge” of a
      particular fact or other matter if: (i) such
      individual is actually aware of such fact or matter; or (ii) a prudent
      individual could be expected to discover or otherwise become aware of such
      fact
      or other matter in the course of conducting a reasonably comprehensive
      investigation concerning the existence of such fact or other matter.
A
      person
      (other than an individual) will be deemed to have “Knowledge” of a particular
      fact or other matter if any individual who is serving, or who has at any time
      served, as a director, or officer of such Person (or in any similar capacity)
      has, or at any time had, Knowledge of such fact or other matters. 

     

    
      
        
        

      

      
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    “Liens”
means
      any claims, liens, charges, restrictions, options, preemptive rights, mortgages,
      hypothecations, assessments, pledges, encumbrances or security interests of
      any
      kind or nature whatsoever provided, however, that Liens shall neither mean
      nor
      include Permitted Liens.

     

    “Material
      Adverse Effect”
means,
      with respect to any Person, a material adverse effect on the business, financial
      condition or results of operations of such Person or any of its subsidiaries,
      taken as a whole.

     

    “Medical
      Records”
      shall
      mean all medical records of patients treated at the Facility, including, without
      limitation, any and all medical charts, files, notes, transcripts, x-ray files,
      lab reports, other diagnostic information or materials, insurance information,
      billing and payment statements or records of any kind, explanations of benefits,
      and other information of or relating to any patient treated at the Facility,
      of
      any kind and in any form whatsoever; provided
      that
      Medical Records shall be limited to the records of the Facility and will not
      include records of the provider of professional medical services.

     

    “Members’
      Committee”
means
      a
      committee made up of Dr. Eddie N. Duncan, Dr. Nancy M. Blank and Dr. Jack P.
      Byrd and each of their successors. 

     

    “Permitted
      Liens”
means
      Liens for current Taxes not yet due and payable.

     

    “Person”
means
      any individual, sole proprietorship, partnership, joint venture, trust,
      undertaking, unincorporated association, corporation, entity, organization
      or
      Governmental Authority.

     

    “Pro
      Rata Basis”
      shall
      mean each Member’s percentage interest in Seller as set forth on Exhibit
      2.
      

     

    “Review
      Date”
means
      December 31, 2005. 

     

    “Tax”
means
      any federal, state, local or foreign income, gross receipts, franchise,
      estimated, alternative minimum, add-on minimum, sales, use, transfer,
      registration, value added, excise, natural resources, severance, stamp,
      occupation, premium, windfall profit, environmental, customs, duties, real
      property, personal property, capital stock, social security, unemployment,
      disability, payroll, license, employee or other withholding, or other tax,
      of
      any kind whatsoever, including any interest, penalties or additions to tax
      or
      additional amounts in respect of the foregoing; the foregoing shall include
      any
      transferee or secondary liability for a Tax and any liability assumed by
      agreement or arising as a result of being (or ceasing to be) a member of any
      Affiliated Group, as defined in Section 1504 of the Code (or being included,
      or
      required to be included, in any Tax Return relating thereto).

     

    “Tax
      Returns”
means
      returns, declarations, reports, claims for refund, information returns or other
      documents (including any related or supporting Schedules, statements or
      information) filed or required to be filed in connection with the determination,
      assessment or collection of any Taxes of any party or the administration of
      any
      laws, regulations or administrative requirements relating to any
      Taxes.

     

    “Transaction
      Documents”
means
      this Agreement and all agreements and instruments contemplated by and being
      delivered pursuant to or in connection with this Agreement.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    13.2.    Notices,
      Consents, etc.
      Any
      notices, consents or other communication required to be sent or given hereunder
      by any of the parties shall in every case be in writing and shall be deemed
      properly served if (a) delivered personally, (b) sent by registered or certified
      mail, in all such
      cases with first class postage prepaid, return receipt requested, (c) delivered
      by a nationally recognized overnight courier service, or (d) sent by facsimile
      transmission to the parties at the addresses as set forth below or at such
      other
      addresses as may be furnished in writing.

     

    (i)    If
      to
      Seller and Members:

    

    Members’
      Committee

    c/o
      NovaMed Surgery Center of Cleveland, LLC

    137
      25th
      Street
      NE

    Cleveland,
      Tennessee 37311

    Attention:
       Dr.
      Eddie
      N. Duncan

    Fax: 423-479-3060

    

    with
      a
      copy to:

    

    Miller
      & Martin PLLC

    1000
      Volunteer Building

    832
      Georgia Avenue

    Chattanooga,
      Tennessee 37402

    Attention: E.
      Mattias Jannerbo, Esq.

    Fax: 423-785-8480

    

    (ii)    If
      to
      ASCOA:

     

    Cataract
      and Laser Center Partners

    d/b/a
      Ambulatory Surgical Centers of America

    124
      Washington Street, Suite 4

    Norwell,
      Massachusetts 02061

    Attention:
      Luke Lambert

    Fax:
      509-272-5200

    

    with
      a
      copy to:

    

    McGuire
      Woods LLP

    77
      West
      Wacker Drive, Suite 4100

    Chicago,
      Illinois 60601

    Attention:
      Scott Becker

    Fax:
      212-920-6135

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    (ii)    If
      to
      NovaMed:

    

    NovaMed
      Acquisition Company, Inc.

    980
      North
      Michigan Avenue

    Suite
      1620

    Chicago,
      Illinois 60611

    Attention: Thomas
      S.
      Hall

    John
      W.
      Lawrence, Jr.

    Fax: (312)
      664-4250

    

    Date
      of
      service of such notice shall be (A) the date such notice is personally
      delivered, (B) three days after the date of mailing if sent by certified or
      registered mail, (C) one day after date of delivery to the overnight courier
      if
      sent by overnight courier or (D) the next succeeding business day after
      transmission by facsimile.

     

    13.3.    Certain
      Taxes.
      Seller
      and Members will (on a several Pro Rata Basis) pay all transfer taxes and other
      taxes and charges, if any (except for any sales taxes and income tax of NovaMed
      and its Affiliates),
      which may become payable in connection with the transactions contemplated by
      this Agreement.

     

    13.4.    Remedies
      Not Exclusive.
      No
      remedy conferred by any of the specific provisions of this Agreement or the
      Transaction Documents is intended to be exclusive of any other remedy. Each
      such
      remedy shall be cumulative, and in addition to every other such remedy or any
      other remedy existing at law or in equity.

     

    13.5.    Severability
      and Reformation.
      The
      unenforceability or invalidity of any provision of this Agreement shall not
      affect the enforceability or validity of any other provision. If any
      of the
      transactions contemplated herein or provisions hereof violates any applicable
      law, then the parties
      hereto agree to negotiate in good faith such changes to the structure and terms
      of the transactions provided for in this Agreement or the Transaction Documents
      as may be necessary to make these transactions, as restructured, lawful under
      applicable laws and regulations, without materially disadvantaging either party.
      The parties to this Agreement shall execute and deliver all documents or
      instruments necessary to effect or evidence the provisions of this Section
      13.5.

     

    13.6.    Amendment
      and Waiver.
      This
      Agreement may be amended, or any provision of this Agreement may be waived,
      provided
      that
      any
      such amendment or waiver will be binding on a party hereto only if such
      amendment or waiver is set forth in a writing executed by such
      party.
      The
      waiver by any party hereto of a breach of any provision of this Agreement shall
      not operate or be construed as a waiver of any other breach.

     

    13.7.    Counterparts.
      This
      Agreement may be executed simultaneously via facsimile or otherwise in two
      or
      more counterparts, each of which shall be deemed an original but all of which
      together shall constitute one and the same agreement and shall become effective
      when one or more counterparts have been signed by each of the parties hereto
      and
      delivered to the other.

     

    13.8.    Expenses.
      Except
      as otherwise specifically provided herein, each of the parties shall pay all
      costs and expenses incurred or to be incurred by it,
      him
      or her, as the case may be, in negotiating and preparing this Agreement and
      in
      closing and carrying out the transactions contemplated by this
      Agreement.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    13.9.    Construction.
      This
      Agreement shall be construed and enforced in accordance with, and all questions
      concerning the construction, validity, interpretation and performance
      of this
      Agreement shall be governed by, the laws of the State of Delaware, without
      giving effect to provisions thereof regarding conflict of laws.

     

    13.10.    Headings.
      The
      subject headings of Articles and Sections of this Agreement are included for
      purposes of convenience only and shall not affect the construction or
      interpretation of any of its provisions.

     

    13.11.    Assignment.
      This
      Agreement may not be assigned by Seller or any Member without the prior written
      consent of NovaMed. Subject
      to Section
      11.6
      hereof,
      NovaMed may assign this Agreement without the prior written consent of Seller
      or
      any Member.

     

    13.12.    Mediation
      and Arbitration.
      Except
      as expressly set forth herein, the parties hereto agree that any and all
      controversies, disputes or claims arising out of or in connection with this
      Agreement shall be solely and exclusively resolved in accordance with this
      Section
      13.12
      and not
      in any court of law or equity. The parties hereto shall first try in good faith
      to settle the dispute by mediation under the Commercial Mediation Rules of
      the
      American Arbitration Association (“AAA”)
      (such
      mediation session to be held in Atlanta, Georgia, and to commence within thirty
      (30) days after the appointment of the mediator by the AAA). If the controversy,
      claim or dispute cannot be settled by mediation, then by arbitration
      administered by the AAA under its Commercial Arbitration Rules (such arbitration
      to be held in Atlanta, Georgia before a single arbitrator mutually agreed upon
      by Seller and NovaMed and to commence within thirty (30) days after the
      appointment of the arbitrator by the AAA), and judgment on the award rendered
      by
      the arbitrator may be entered in any court having jurisdiction thereof.
      Notwithstanding the foregoing, nothing herein shall limit NovaMed’s rights to
      seek and obtain injunctive relief, specific performance or other equitable
      relief in any proceeding commenced in a federal or state court which may be
      brought to enforce any provision in Article
      XI
      hereof.

     

    13.13.    Entire
      Agreement.
      This
      Agreement, the Preamble and all the Schedules attached to this Agreement (all
      of
      which shall be deemed incorporated in the Agreement and made a part hereof)
      set forth the entire understanding of the parties with respect to the subject
      matter hereof, and shall not be modified or affected by any offer, proposal,
      statement or representation, oral or written, made by or for any party in
      connection with the negotiation of the terms hereof, and may be modified only
      by
      instruments signed by all of the parties hereto.

     

    13.14.    Third
      Parties.
      Nothing
      herein expressed or implied is intended or shall be construed to confer upon
      or
      give to any Person, other than the parties to this Agreement and
      their respective
      permitted successors and assigns, any rights or remedies under or by reason of
      this Agreement.

     

    13.15.    No
      Strict Construction.
      The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties hereto to express their mutual intent, and no rule of strict
      construction will be applied against any party hereto.

     

    13.16.    Public
      Announcement.
      Seller
      and Members acknowledge
      that NovaMed intends to publicly announce the transactions contemplated herein,
      whether through a press release, a filing with the Securities and Exchange
      Commission, or some other form or medium selected by NovaMed.

     

    13.17.    Members’
      Representative.

     

    (a)    Each
      of
      the Members hereby constitutes and appoints the Members’ Committee as the
      Members’ Representative and as agent and attorney-in-fact for and on behalf of
      each Member, with full powers of substitution (and, if substituted, the Members’
Representative will notify NovaMed in writing a reasonable period of time in
      advance of such substitution), to give and receive notices and communications,
      to agree to, negotiate, enter into settlements and compromises of, and demand
      dispute resolution and comply with orders of arbitrators, courts, tribunals
      or
      other Governmental Authority and awards of arbitrator, courts, tribunals or
      other Governmental Authority with respect to any claims or other matters that
      may arise under this Agreement or the Transaction Documents, and to take all
      actions and execute all such documents necessary or appropriate in the good
      faith discretion of the Members’ Representative for the accomplishment of the
      transactions contemplated by this Agreement and the Transaction Documents,
      including, without limitation, the power:

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    (i)    to
      receive and hold the proceeds payable pursuant to this Agreement and to
      distribute the same to the Members;

     

    (ii)    to
      execute and deliver the Transaction Documents, a closing statement and all
      other
      agreements, documents and other papers which the Members’ Representative deems
      necessary or appropriate in connection with this Agreement and the Transaction
      Documents, or any of the transactions contemplated hereby or
      thereby;

     

    (iii)    to
      terminate, amend, waive or interpret any provision of this Agreement or the
      Transaction Documents.

     

    (iv)    to
      act
      for each Member with regard to the indemnification matters referred to in this
      Agreement, including, without limitation, the power to compromise or settle
      any
      claim on behalf of such Member; and 

     

    (v)    to
      do or
      refrain from doing any further act or deed on behalf of each Member which the
      Members’ Representative deems necessary or appropriate in its sole discretion
      relating to the subject matter of this Agreement as fully and completely as
      such
      Member could if personally present.

     

    (b)    No
      bond
      shall be required of the Members’ Representative, and the Members’
Representative shall receive no compensation for its services.

     

    (c)    Each
      Member hereby appoints the Members’ Representative such Member’s agent for
      service of process for all purposes under this Agreement and the Transaction
      Documents, and agrees that service of any process, summons, notice or document
      pursuant to the Agreement to the Members’ Representative at its address shall be
      effective service of process of any action, suit or proceeding brought against
      such Member. 

     

    (d)    NovaMed
      may, for all purposes of this Agreement, assume and treat every notice, payment
      or any other action directed to the Members’ Representative as if such notice,
      payment or other action had been directed to each Member.

     

    (e)    Neither
      the Members’ Representative nor any of its agents or employees shall be liable
      to any Member of any error of judgment, or any action taken, suffered or omitted
      to be taken, under this Agreement except in the case of its gross negligence,
      willful misconduct or fraud. The Members’ Representative may consult with legal
      counsel, independent public accountants or other experts selected by it and
      shall not be liable for any action taken or omitted to be taken in good faith
      by
      it in accordance with the advice of such counsel, accounts or experts. NovaMed
      shall be entitled to reply on all statements, representations, agreements and
      decisions of the Members’ Representative.

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    (f)    By
      executing and delivering this Agreement, each Member hereby agrees to indemnify
      and hold the Members’ Representative harmless from any and all liability, loss,
      cost, damage or expense (including attorneys’ fees) reasonably incurred or
      suffered as a result of the performance of its duties under this Agreement,
      except such that arises from the gross negligence or willful misconduct or
      fraud
      of the Members’ Representative.

     

    (g)    A
      decision, act, consent or instruction of the Members’ Representative shall
      constitute a decision of all Members and shall be final, binding and conclusive
      upon each Members. NovaMed may rely upon any such decision, act, consent or
      instruction of the Members’ Representative as being the decision, act, consent
      or instruction of the Members. NovaMed is hereby relieved from any liability
      to
      any Person for any acts done by it in accordance with such decision, acts,
      consents or instruction of the Members’ Representative. The Members hereby
      releases and discharges NovaMed from and against any liability arising out
      of or
      in connection with the Members’ Representative actions or inactions on behalf of
      the Members.

     

    (h)    Notwithstanding
      the foregoing or anything else in this Agreement, the Members’ Representative
      shall have no authority to defend a breach or alleged breach by Member of
Article
      XI
      of this
      Agreement, as to which such Member shall have the sole authority to
      defend.

     

    13.18.    Members’
      Committee.
      Any
      action or inaction by the Members’ Committee shall require the approval of a
      majority of the three members of the Members’ Committee. Any member of the
      Members’ Committee who resigns or is otherwise unable to serve on the Members
      Committee shall be replaced by an individual elected by a majority of the
      Members.

     

    *
      *
      *

    

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    

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

     

    
      	
              SELLER:

               

              SURGERY
                CENTER OF CLEVELAND, L.L.C.

               

              By:/s/
                Eddie N. Duncan

              Its:
                President

            	
              NOVAMED:

               

              NOVAMED
                ACQUISITION COMPANY, INC.

               

              By: 
                /s/ Thomas S. Hall

              Thomas
                S. Hall, President

            

    

     

     

    
      	
              MEMBERS:

               

              CATARACT
                AND LASER CENTER PARTNERS, L.L.C.,
d/b/a Ambulatory Surgical Centers of
                America 

               

              By:/s/
                Luke M. Lambert

              Its:
                CEO

            	
               

               

               

              /s/
                Robert Beasley

              Robert
                Beasley, M.D.

            
	
               

              /s/
                Nancy M. Blank

              Nancy
                M. Blank, M.D.

            	
               

              /s/
                Jack P. Byrd

              Jack
                P. Byrd, M.D.

            
	
               

              /s/
                Marc Clark

              Marc
                Clark, M.D. 

            	
               

              /s/
                Eddie N. Duncan

              Eddie
                N. Duncan, M.D.

            
	
               

              /s/
                Bruce W. Faerber

              Bruce
                W. Faerber, M.D.

            	
               

              /s/
                Dennis C. Ford

              Dennis
                Clifford Ford, M.D.

            
	
               

              /s/
                Daniel V. Johnson

              Daniel
                V. Johnson, M.D.

            	
               

              /s/
                C. A. Kyle

              C.
                A. Kyle, M.D. 

            
	
               

              /s/
                Kenneth H. McCarley

              Kenneth
                H. McCarley, M.D.

            	
               

              /s/
                Thomas W. McGuire

              Thomas
                W. McGuire, M.D.

            
	
               

              /s/
                Michael T. Rumble

              Michael
                T. Rumble, M.D.

            	
               

              /s/
                Larry Shuster

              Larry
                Shuster, M.D. 

            
	
               

              /s/
                James P. Stone

              James
                Patterson Stone, M.D.

            	
               

              /s/
                Timothy A. Viser

              Timothy
                A. Viser, M.D.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              MEMBERS’
                COMMITTEE:

               

              /s/
                Eddie N. Duncan

              Eddie
                N. Duncan, M.D.

            	
               

               

              /s/
                Nancy M. Blank

              Nancy
                M. Blank, M.D.

            
	
               

              /s/
                Jack P. Byrd

              Jack
                P. Byrd, M.D.

            	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBITS*

     

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

    

       

    SCHEDULES*

     

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

    

       

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      1

    
 

    Physician
      Members

    

    

    Robert
      Beasley, M.D.

    Nancy
      M.
      Blank, M.D.

    Jack
      P.
      Byrd, M.D.

    Marc
      Clark, M.D.

    Eddie
      N.
      Duncan, M.D.

    Bruce
      W.
      Faerber, M.D.

    Dennis
      Clifford Ford, M.D.

    Daniel
      V.
      Johnson, M.D.

    C.
      A.
      Kyle, M.D.

    Kenneth
      H. McCarley, M.D.

    Thomas
      W.
      McGuire, M.D.

    Michael
      T. Rumble, M.D.

    Larry
      Shuster, M.D.

    James
      Patterson Stone, M.D.

    Timothy
      A. Viser, M.D.Unassociated Document

    
      EXHIBIT
        4.1

      

      

      Creative
        Vistas Inc (CVAS)

      STOCK
        OPTION PLAN

       

      1.    Purposes
        of Plan.
        The
        purposes of this Plan, which shall be known as the CVAS
        Stock
        Option Plan and is hereinafter referred to as the “Plan”, are (i) to provide
        incentives for key employees, directors, consultants and other individuals
        providing services to CVAS
        and its
        parent, subsidiaries and other affiliates (CVAS and/or its parent, subsidiaries
        and other affiliates, as the context may require, are referred to herein
        as the
“Company”) by encouraging their ownership of the common stock, no par
        value, of the Company (the “Stock”) and (ii) to aid the Company in retaining
        such key employees, directors, consultants and other individuals upon whose
        efforts the Company’s success and future growth depends and in attracting other
        such employees, directors, consultants and individuals.

       

      2.    Administration.
        The
        Plan shall be administered by the Board of Directors, or Compensation Committee
        of the Board of Directors or a subcommittee of the Compensation Committee
        appointed by the Compensation Committee, or by any other committee designated
        by
        the Board of Directors to administer the Plan (the committee or subcommittee
        administering the Plan is hereinafter referred to as the “Committee”). For
        purposes of administration, the Committee, subject to the terms of the Plan,
        shall have plenary authority to establish such rules and regulations, to
        make
        such determinations and interpretations, and to take such other administrative
        actions as it deems necessary or advisable. All determinations and
        interpretations made by the Committee shall be final, conclusive and binding
        on
        all persons, including all Optionees, any other holders of options and their
        legal representatives and beneficiaries.

       

      3.    Stock
        Available for Options.
        There
        shall be available for options under the Plan a total of 4,000,000
        shares
        of Stock, subject to any adjustments which may be made pursuant to Section
        5(f)
        hereof. Shares of Stock used for purposes of the Plan may be either authorized
        and unissued shares, or previously issued shares held in the treasury of
        the
        Company, or both. Shares of Stock covered by options which have terminated
        or
        expired prior to exercise shall be available for further options hereunder.
        The
        maximum aggregate number of shares of Stock that may be issued under the
        Plan
        under “incentive stock options” is 3,500,000 shares.

       

      4.    Eligibility.
        Options
        under the Plan may be granted to key employees of the Company, including
        officers or directors of the Company, and to consultants and other individuals
        providing services to the Company (each such grantee, an “Optionee”). Options
        may be granted to eligible individuals whether or not they hold or have held
        options previously granted under the Plan or otherwise granted or assumed
        by the
        Company. In selecting individuals for options, the Committee may take into
        consideration any factors it may deem relevant, including its estimate of
        the
        individual’s present and potential contributions to the success of the Company.
        Service as an

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

       

      employee,
        director, officer or consultant of or to the Company shall be considered
        employment for purposes of the Plan (and the period of such service shall
        be
        considered the period of employment for purposes of Section 5(d) of this
        Plan);
        provided, however, that incentive stock options may be granted under the
        Plan
        only to an individual who is an “employee” (as such term is used in Section 422
        of the Code) of the Company.

       

      5.    Terms
        and Conditions of Options.
        The
        Committee shall, in its discretion, prescribe the terms and conditions of
        the
        options to be granted hereunder, which terms and conditions need not be the
        same
        in each case, subject to the following:

       

      (a)    Option
        Price.
        The
        price at which each share of Stock covered by an option granted under the
        Plan
        may be purchased shall not be less than the Market Value (as defined in Section
        5(c) hereof) per share of Stock on the date of grant of the option. The date
        of
        the grant of an option shall be the date specified by the Committee in its
        grant
        of the option.

       

      (b)    Option
        Period.
        The
        period for exercise of an option shall in no event be more than five years
        from
        the date of grant. Options may, in the discretion of the Committee, be made
        exercisable in installments during the option period. Any shares not purchased
        on any applicable installment date may be purchased thereafter at any time
        before the expiration of the option period.

       

      (c)    Exercise
        of Options.
        In
        order to exercise an option, the Optionee shall deliver to the Company written
        notice specifying the number of shares of Stock to be purchased, together
        with
        cash or a certified or bank cashier’s check payable to the order of the Company
        in the full amount of the purchase price therefore; provided that, for the
        purpose of assisting an Optionee to exercise an option, the Company may make
        loans to the Optionee or guarantee loans made by third parties to the Optionee,
        on such terms and conditions as the Board of Directors may authorize. For
        purposes of the Plan, the Market Value per share of Stock shall be the last
        sale
        price regular way on the date of reference, or, in case no sale takes place
        on
        such date, the average of the closing high bid and low asked prices regular
        way,
        in either case on the principal national securities exchange on which the
        Stock
        is listed or admitted to trading, or if the Stock is not listed or admitted
        to
        trading on any national securities exchange, the last sale price reported
        on the
        National Market System of the National Association of Securities Dealers
        Automated Quotation System (“NASDAQ”) on such date, or the last sale price
        reported on the NASDAQ SmallCap Market on such date, or the average of the
        closing high bid and low asked prices in the over-the-counter market on such
        date, whichever is applicable, or if there are no such prices reported on
        NASDAQ
        or in the over-the-counter market on such date, as furnished to the Committee
        by
        any New York Stock Exchange member selected from time to time by the Committee
        for such purpose. If there is no bid or asked price reported on any such
        date,
        the Market Value shall be determined by the Committee in accordance with
        the
        regulations promulgated under Section 2031 of the Code, or by any other
        appropriate method selected by the Committee. If the Optionee so requests,
        shares of Stock purchased upon exercise of an option may be issued in the
        name
        of the Optionee or another person. An Optionee shall have none of the rights
        of
        a stockholder until the shares of Stock are issued to him.

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

       

      (d)    Effect
        of Termination of Employment.
        An
        option may not be exercised after the Optionee has ceased to be in the employ
        of
        the Company, except in the following circumstances:

       

      (i)    If
        the
        Optionee’s employment is terminated by action of the Company, or by reason of
        disability or retirement under any retirement plan maintained by the Company,
        the option may be exercised by the Optionee within three months after such
        termination, but only as to any shares exercisable on the date the Optionee’s
        employment so terminates;

       

      (ii)    In
        the
        event of the death of the Optionee during the three month period after
        termination of employment covered by (i) above, the person or persons to
        whom
        his rights are transferred by will or the laws of descent and distribution
        shall
        have a period of one year from the date of his death to exercise any options
        which were exercisable by the Optionee at the time of his death;
        and

       

      (iii)    In
        the
        event of the death of the Optionee while employed, the option shall thereupon
        become exercisable in full, and the person or persons to whom the Optionee’s
        rights are transferred by will or the laws of descent and distribution shall
        have a period of one year from the date of the Optionee’s death to exercise such
        option.

       

      In
        no
        event shall any option be exercisable more than five years from the date
        of
        grant thereof. Nothing in the Plan or in any option granted pursuant to the
        Plan
        (in the absence of an express provision to the contrary) shall confer on
        any
        individual any right to continue in the employ of the Company or continue
        as a
        consultant or interfere in any way with the right of the Company to terminate
        his employment or consulting arrangement at any time.

       

      (e)    Limitation
        on Transferability of Options.
        Except
        as provided in this Section 5(e), during the lifetime of an Optionee, options
        held by such Optionee shall be exercisable only by him and no option shall
        be
        transferable other than by will or the laws of descent and distribution.
        The
        Committee may, in its discretion, provide that options held by an Optionee,
        other than incentive stock options, may be transferred to or for the benefit
        of
        a member of his immediate family. For purposes hereof, the term “immediate
        family” shall mean an Optionee’s spouse and children (both natural and
        adoptive), and the direct lineal descendants of his children.

       

      (f)    Adjustments
        for Change in Stock Subject to Plan.
        In the
        event of a reorganization, recapitalization, stock split, stock dividend,
        combination of shares, merger, consolidation, rights offering, or any other
        change in the corporate structure or shares of the Company, the Committee
        shall
        make such adjustments, if any, as it deems appropriate in the number and
        kind of
        shares subject to the Plan, in the number and kind of shares covered by
        outstanding options, or in the option price per share, or both, and, in the
        case
        of a merger, consolidation or other transaction pursuant to which the Company
        is
        not the surviving corporation or pursuant to which the holders of

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

       

      outstanding
        Stock shall receive in exchange therefore shares of capital stock of the
        surviving corporation or another corporation, the Committee may require an
        Optionee to exchange options granted under the Plan for options issued by
        the
        surviving corporation or such other corporation.

       

      (g)    Treatment
        of Options Upon Occurrence of Certain Events.
        The
        Committee may, in its discretion, provide in the case of any option granted
        under the Plan that, in connection with any merger or consolidation which
        results in the holders of the outstanding voting securities of the Company
        (determined immediately prior to such merger or consolidation) owning, directly
        or indirectly, less than a majority of the outstanding voting securities
        of the
        surviving corporation (determined immediately following such merger or
        consolidation), or any sale or transfer by the Company of all or substantially
        all its assets or any tender offer or exchange offer for or the acquisition,
        directly or indirectly, by any person or group of all or a majority of the
        then
        outstanding voting securities of the Company, such option shall terminate
        within
        a specified number of days after notice to the Optionee thereunder, and each
        such Optionee shall receive, with respect to each share of Stock subject
        to such
        option, an amount equal to the excess, if any, of the Market Value of such
        shares immediately prior to such merger, consolidation, sale, transfer or
        exchange over the exercise price per share of such option; and that such
        amount
        shall be payable in cash, in one or more kinds of property (including the
        property, if any, payable in the transaction) or a combination thereof, as
        the
        Committee shall determine in its sole discretion. 

       

      (h)    Registration,
        Listing and Qualification of Shares of Stock.
        Each
        option shall be subject to the requirement that if at any time the Board
        of
        Directors shall determine that the registration, listing or qualification
        of the
        shares of Stock covered thereby upon any securities exchange or under any
        federal or state law, or the consent or approval of any governmental regulatory
        body is necessary or desirable as a condition of, or in connection with,
        the
        granting of such option or the purchase of shares of Stock thereunder, no
        such
        option may be exercised unless and until such registration, listing,
        qualification, consent or approval shall have been effected or obtained free
        of
        any conditions not acceptable to the Board of Directors. The Company may
        require
        that any person exercising an option shall make such representations and
        agreements and furnish such information as it deems appropriate to assure
        compliance with the foregoing or any other applicable legal
        requirement.

       

      (i)    Other
        Terms and Conditions:
        Lock-Up
        Period
        -
        Without the consent of the Company an Optionee may not sell more than fifty
        percent of the shares issued under the Plan for a period of two years from
        the
        date that the optionee exercises the option. The Committee may impose such
        other
        terms and conditions, not inconsistent with the terms hereof, on the grant
        or
        exercise of options, as it deems advisable.

       

      6.    Additional
        Provisions Applicable to Incentive Stock Options.
        The
        Committee may, in its discretion, grant options under the Plan to eligible
        employees which constitute “incentive stock options” within the meaning of
        Section 422 of the Code; provided, however, that (a) the aggregate Market
        Value
        of the Stock with respect

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

       

      to
        which
        incentive stock options are exercisable for the first time by the Optionee
        during any calendar year shall not exceed the limitation set forth in Section
        422(d) of the Code; and (b) notwithstanding anything to the contrary in Section
        5, if the Optionee owns on the date of grant securities possessing more than
        10%
        of the total combined voting power of all classes of securities of the Company
        or of any parent or subsidiary of the Company, the price per share shall
        not be
        less than 110% of the Market Value per share on the date of grant and the
        period
        of exercise shall not be longer than five years from the date of
        grant.

       

      7.    Amendment
        and Termination.
        No
        option shall be granted hereunder after June 30, 2011; provided, however,
        that
        the Board of Directors may at any time prior to that date terminate the Plan.
        The Board of Directors may at any time amend the Plan or any outstanding
        options. No termination or amendment of the Plan may, without the consent
        of an
        Optionee, adversely affect the rights of such Optionee under any option held
        by
        such Optionee.

       

      8.    Stockholder
        Approval of Plan.
        The
        establishment of the Plan shall be subject to approval by a majority of the
        votes cast thereon by the stockholders of the Company at a meeting of
        stockholders duly called and held for such purpose or by a method and in
        a
        degree that would be treated as adequate under the applicable law of the
        Company’s state of incorporation, and no option granted hereunder shall be
        exercisable prior to such approval.

       

      9.    Withholding.
        It
        shall be a condition to the obligation of the Company to issue shares of
        Stock
        upon exercise of an option, that the Optionee (or any beneficiary, transferee
        or
        person entitled to act under Sections 5(d) or 5(e) hereof) pay to the Company,
        upon its demand, such amount as may be requested by the Company for the purpose
        of satisfying any liability to withhold federal, state or local income or
        other
        taxes. If the amount requested is not paid, the Company may refuse to issue
        such
        shares of Stock.

       

      10.    Issuance
        of Certificates; Legends.
        The
        Company may endorse such legend or legends upon the certificates for shares
        of
        Stock issued upon the exercise of an option granted hereunder and may issue
        such
“stop transfer” instructions to its transfer agent in respect of such shares as,
        in its absolute discretion, it determines to be necessary or
        appropriate.

       

      11.    Correction
        of Defects, Omissions, and Inconsistencies.
        The
        Committee may correct any defect, supply any omission, or reconcile any
        inconsistency in this Plan in the manner and to the extent it shall deem
        desirable to carry this Plan into effect.

       

      12.    Other
        Actions.
        Nothing
        contained in this Plan shall be construed to limit the authority of the Company
        to exercise its corporate rights and powers, including but not by way of
        limitation, the right of the Company to grant or assume options for proper
        corporate purposes other than under the Plan with respect to any employee
        or
        other person, firm, corporation or association.

      
        
          
          

        

        -5-

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